Benjamin Graham is known as the “father of value investing”. His ideas on investing have influenced the likes of contemporary legend investor Warren Buffett who described Graham as the second most influential person in his life after his own father.
Benjamin Graham wrote two of the first texts in neoclassical investing: Security Analysis (1934) with David Dodd, and The Intelligent Investor (1949).
Graham, born to Jewish parents, moved to New York City from London at the age of one.
His father died relatively young and the family experienced poverty.
Benjamin Graham graduated from Columbia University at age 20, but he would decline an offer to teach English, mathematics, and philosophy and instead took a job on Wall Street.
He would eventually move on to set up the Graham-Newman Partnership where he would hire a young trainee, Warren Buffett who would go on to become the world’s top investor and manager of Berkshire Hathaway.
Benjamin Graham also took up teaching positions at his alma mater, and later at Anderson School of Management, and the University of California, Los Angeles.
Graham would later make a name for himself with “The Northern Pipeline Affair, “which involved John D. Rockefeller.
Benjamin Graham is known as the “father of value investing”
Benjamin Graham was a value investor. His investment decision making was weighted towards fundamental analysis, minimal debt, and diversification. Graham had a contrarian mindset, he would buy within a margin of safety, which he defined as being when a company is available on the market at a price which is at a discount to the value of the stock determined by fundamental analysis (its intrinsic value).
He was also an activist investor and an advocate of buy-and-hold investing. For Benjamin Graham, the true value will be reflected in its stock price in the long run.
“Stock owner should not be too concerned with erratic fluctuations in stock prices since in the short term the stock market behaves like a voting machine, but in the long term it acts like a weighing machine.”
In Security Analysis, Graham also defines investing which he distinguishes from speculation. “An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.”
Investors should profit from market folly rather than participate in it, according to Graham.
Stock owner should not be too concerned with erratic fluctuations in stock prices since in the short term the stock market behaves like a voting machine, but in the long term it acts like a weighing machine – Benjamin Graham
Benjamin Graham’s two books, Security Analysis (1934) with David Dodd, and The Intelligent Investor (1949) defines what it means to be a value investor and are considered by the global investment community as classic investment books.
Warren Buffett describes The Intelligent Investor as “the best book about investing ever written.
I wished every day to do something foolish, something creative, and something generous – Benjamin Graham
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