Templeton's investment portfolio and portfolio rebalancing by asset allocation

11) Learn from your own and others’ mistakes. Identify where things went wrong and summarize how to avoid repeating the same errors. 12) Faith aids investing; pray before making investment decisions. He believed that people of faith think more clearly and sharply, thereby reducing the likelihood of error. Remaining calm and resolute enables one to stay unaffected by market conditions. 13) Recognize that outperforming the market is no easy task. 14) Achieving investment success is an ongoing process of seeking answers to new questions—because the economic, political, and investment landscapes are constantly evolving. 15) Never invest based solely on intuition or merely follow analysts’ recommendations or tips. Investment convictions must be grounded in thorough research, enabling sound, fact-based reasoning and conclusions. 16) Do not be frightened or misled by pessimistic sentiment in the media. His investment approach is simple: buy stocks at low prices and hold them until the broader market recognizes their intrinsic value. 2. What does his investment portfolio look like? Templeton championed diversified investing. He believed that—no matter how much research one conducts—one cannot predict or control the future; thus, diversification is essential to mitigate risk. Diversification operates along two primary dimensions: First, asset class diversification—he specifically highlighted cash, bonds, and equities. Second, geographic market diversification—to avoid overexposure to a single country’s market. Thus, Templeton pioneered global investing. What advantages does this bring? It dramatically expands the universe of investment options: while the U.S. offers several thousand stocks, the global market comprises tens of thousands. Valuation disparities across countries make it easier to identify undervalued stocks. It also mitigates country-specific risks, enhancing portfolio stability. So how was his portfolio allocated? Allocation across major asset classes dynamically adjusted according to market valuations. As shown in the table, the equity allocation of the Templeton Fund fluctuated—reaching as high as 100% and dipping as low as approximately 60%, with the remainder held in bonds or cash. The table also shows shifting allocations across regions—including North America, Europe, and Asia-Pacific. Regarding stock selection, he never explicitly prescribed sector classifications; however, holdings were numerically well-diversified. In 1967, the fund held fewer than 30 stocks; as assets grew, holdings exceeded 100 by 1983 and reached 240 by 1994. For example, in 1985, the fund held 115 stocks spanning four continents and 21 industries. Its largest holding that year was a U.S. department store company, accounting for just 7% of the common stock portfolio—indicating relatively low concentration. In 1988, someone asked Templeton what constituted an ideal portfolio. He replied: there is no universal 'ideal' portfolio—it must be continually adjusted based on personal income, assets, tax situation, family responsibilities, and other individual factors—though some general principles apply. That same year, he offered the following guidance for investors with net assets exceeding $1 million—advice still worth considering today: • Maintain a cash reserve (including bonds and other fixed-income assets) equivalent to roughly 25% of annual income; • Allocate more than two-thirds of the portfolio to common stocks; • Allocate the remainder to real estate and life insurance. • Hold at least 10 individual stocks; • Limit exposure to any single industry to no more than 25%; • Limit exposure to any single country to no more than 80%. In summary, his portfolio was equity-centric—typically exceeding 60% in normal valuation environments—with the balance in bonds and cash.

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Data source: Wind. Statistical period: For 2023 data, calculations begin from the fund’s inception date of 2023-04-19; for 2025 data, calculations end on 2025-06-13. From the perspective of post-portfolio-level asset allocation weights, the fund began allocating to U.S. equities relatively early—and did so gradually. It also executed tactical trading in Hong Kong equities: for instance, it increased its HK allocation at the end of 2024, successfully capturing the DeepSeek-related rally in early 2025. Additionally, since the beginning of this year, it has initiated a modest allocation to gold. Below is the fund manager’s summary of overseas allocation strategy, excerpted from the fund’s official reports. Since 2023, the fund has actively pursued diversified overseas equity exposure. As reflected in periodic report summaries, dynamic adjustments have been made—for example, reducing exposure to Southeast Asian markets in Q2 2024. Overall trend in overseas asset allocation: • 2023: Global diversification (new allocations to Vietnam, U.S., and Japanese equities); • 2024: Gradual reduction in Southeast Asian market exposure (per Q2 report); overall overseas allocation decreased in the second half; • 2025: Further reduction in overseas equity exposure. The 2024 Annual Report first flagged elevated valuation risk in U.S. equities: ‘With the U.S. presidential transition, global trade frictions may shift, potentially posing challenges to domestic exports. Overseas equity markets—particularly U.S. equities—are trading at historically high valuations, diminishing their risk-adjusted appeal. In contrast, Chinese equities offer comparatively attractive valuations globally, presenting greater opportunity relative to risk.’ The fund’s portfolio manager is Wu Xian—a name perhaps less familiar to many investors. A quick search reveals his prior experience: researcher at State Street Bank (U.S.), investment advisor at Conter Financial, and later Senior Manager at China Life Insurance Pension Co., Ltd.—giving him both deep expertise in overseas assets and solid familiarity with China’s domestic asset markets. Additionally, Guohai Franklin Templeton Fund Management may also be relatively unfamiliar to many. This firm exhibits a ‘small but excellent’ profile: though its product lineup is compact, its long-term performance has been consistently strong—multiple products from this company appeared in my earlier tracking of fund 885001. Moreover, it is a Sino-foreign joint venture—the foreign shareholder, Franklin Templeton, is a globally renowned asset management firm with over 70 years of investment experience. The fund likely leverages its shareholder’s extensive overseas research and investment resources. Below is Grok’s summary of Franklin Templeton: Franklin Templeton ranks among the top-tier asset managers in the U.S. industry, distinguished by its $1.58 trillion in AUM, global operational footprint, fixed-income expertise, and strategic acquisitions—providing significant competitive advantages. Through innovation and integration, it maintains a robust market position, well-suited to serve diverse investor needs. Key strengths include: • Scale and diversification: Manages $1.58 trillion in assets across equities, fixed income, alternative investments, and multi-asset strategies—offering broad investment choice. • Global reach: Operates in multiple countries, serving both retail and institutional clients—and attracting international investors.

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