How to invest like ... Sir John Templeton

He believed in buying shares at the point of maximum pessimism. For example, when the Second World War broke out, Templeton, who was born in America, used borrowed money to buy shares in more than 100 US companies.

Only four turned out to be worthless, and he made large profits on the others.

Buying when other investors are selling was only one aspect of his belief that the only way to succeed as an investor was to do the opposite of what others were doing.

He was the first Western investor to see the potential of Japan's post-war economic miracle. When he first invested there, in the Sixties, Japan was in effect an emerging market and the dynamism of its economy was not being reflected in the stock market.

Gradually the rest of the world woke up to what was happening in Japan and the stock market soared. But Templeton was once more ahead of the game. He had just 3pc of his money in Japan by the peak of its stock market bubble in 1989 because he had identified the US market as the next one due to recover.

How to invest like...Benjamin Graham

While some academics think markets are always “efficient”, investors such as Graham rely on the opposite belief: that investors are driven more by sentiment than reason and that their herd-like behaviour can lead them to sell shares in perfectly good companies, allowing more individualistic investors such as Graham to snap them up at bargain prices – only to sell them later at a profit when market sentiment has swung the other way.

But Mr Market, Graham said, is something of a manic depressive and the price he quotes for the shares in your business swing wildly from one day to the next. In particular, they often bear no relation to the state of the underlying business.

So one day he may be in a depressed mood and quote you a price that significantly undervalues the business, in which case you may decide to buy his shares and increase your stake on the cheap.

But on another day Mr Market may be feeling irrationally optimistic and decide that your shares are worth far more than what you regard as their true value. This time you may decide to sell them to him for a handsome profit.

How to invest like Warren Buffett

1. The key to investing is found in this rule: buy a share as though you were buying the whole company.

To do that, you have to know what the enterprise is worth. Therefore, the investor should live in the world of companies, never of mathematical formulae.

2. A recent heresy is that market volatility equals risk. Quite the contrary!

For a serious investor, volatility creates opportunity. To use my own language, investment opportunity consists of the difference between reality and perception. High volatility increases that difference, and thus increases opportunity for the knowledgeable investor.

Mr Buffett says sardonically that he favours the dotty "efficient market theory" because it creates more opportunities for him.

The easy way to invest like the gurus

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