John Templeton's 1939 bet: buying at maximum pessimism
In September 1939, war broke out in Europe and fear gripped markets. A 26-year-old named John Templeton borrowed $10,000 and told his broker to buy 100 shares of every stock on a US exchange trading under $1. About a third of those companies were bankrupt.
Who they were
John Templeton was born in 1912 in the small town of Winchester, Tennessee. His family didn't have much money, especially after the Great Depression hit.
He paid his way through Yale, graduating in 1934, then won a Rhodes Scholarship to study at Oxford. After that he traveled the world on a tight budget, then came home to start a career in investing in New York.
What happened
The 1939 order
In 1939, World War II began in Europe. The US hadn't entered yet, but American stock prices were very low and fear was high. Many companies had barely survived the Depression.
Templeton's reasoning was simple. A war would mean factories running flat out. Even weak companies might recover. And the cheapest, most hated stocks had the most room to rise if things got even a little better.
He borrowed $10,000. Then he placed an unusual order: 100 shares of every stock on a US exchange trading for less than $1.
He ended up owning pieces of 104 companies. By most accounts, 34 of them were bankrupt or close to it when he bought.
The result
He held them for about four years. By most accounts, only four of the 104 became worthless. Sources differ on the exact result, but most say his stake grew roughly four- to five-fold.
A global investor
In 1954 he started the Templeton Growth Fund. He was one of the first well-known US managers to search the whole world for cheap stocks, including in Japan when few Americans looked there.
He later moved to the Bahamas and became a British citizen. He was knighted in 1987, becoming Sir John Templeton. He sold his fund business in 1992 and spent much of his later life on charity. The Templeton Prize, which he created in 1972, honors work on spiritual questions. He died in 2008, at 95.
The moment everyone remembers
The 1939 order is the moment: a young man buying everything nobody wanted, on the day the news was worst.
He summed up his thinking in a line he wrote years later, and it's one of the most quoted in investing:
"Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria."
He also liked to say that the time of "maximum pessimism" is the best time to buy. That phrase is so linked with him that it's often called his rule.
What it teaches
1. Spread small bets when you're uncertain
People remember the boldness. They forget the structure. Templeton didn't bet on one cheap stock. He bought 104 of them, in small, equal pieces. He expected some to fail, and they did.
That's Diversification: no single failure could sink the plan. A trader's version is fixed, small risk on every trade, about 1%, so no one loss matters much. The position size calculator does the math.
2. Fear on the news isn't the same as a plan
When the news is scary, the urge is to freeze or run. Templeton had worked out his reasons in advance. A written plan helps you act on reasons, not on the mood of the day. See fear of losing in trading.
3. Borrowed money is a risk, not a detail
Templeton's bet was made with borrowed money. If the stocks had kept falling, he'd still have owed the full $10,000. It worked out. It might not have.
Borrowing makes both wins and losses bigger. Our guide to leverage and margin explains how fast that can go wrong.
4. Patience is part of it
He held for about four years. In trading terms, the lesson is to let a good plan play out instead of jumping at every move. See patience in trading.
What it doesn't mean
It doesn't mean "buy whatever crashes." Templeton bought at a moment of extreme, widespread fear, after years of falling prices, with a clear reason to expect recovery. Many stocks that crash keep falling, and some go to zero.
It doesn't mean his result is repeatable. 1939 was a rare moment, and he was fortunate that war production lifted so many weak companies at once. We remember the investors whose bold bets worked.
And it doesn't mean going against the crowd is always right. Sometimes the crowd is scared for good reasons. What carries over is the method: have a reason, spread the risk, and don't let fear alone make the decision.
Timeline
| Year | What happened |
|---|---|
| 1912 | Born in Winchester, Tennessee |
| 1934 | Graduates from Yale; goes to Oxford as a Rhodes Scholar |
| 1939 | Borrows $10,000; buys 100 shares of 104 stocks under $1 |
| c. 1943 | Sells out, by most accounts with a gain of roughly four- to five-fold |
| 1954 | Starts the Templeton Growth Fund |
| 1972 | Creates the Templeton Prize |
| 1987 | Knighted |
| 1992 | Sells his fund business |
| 2008 | Dies at 95 |
Questions
What did John Templeton buy in 1939?
He borrowed $10,000 and bought 100 shares of every stock on a US exchange trading under $1. That came to 104 companies, about a third of them bankrupt or nearly so.
How much did Templeton make on his 1939 trade?
Sources differ. Most say his stake grew roughly four- to five-fold in about four years, and only four of the 104 stocks became worthless.
What does "maximum pessimism" mean?
It's Templeton's idea that the best time to buy is when fear is at its worst and almost everyone is selling. It's a long-term investor's idea, and many crashing stocks keep falling, so it's not a rule to buy any dip.
What is John Templeton's most famous quote?
"Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria." It describes how crowd mood changes over a market cycle.
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