Benjamin Graham: Value Investing

An article that looks at the life of the great investor Benjamin Graham and how his ideas can be utilized in your own investments. I will follow this with another post on how to Value Invest like Benjamin Graham:


Benjamin Graham: Who?


For those of you who haven't heard of Benjamin Graham, you've definitely heard about his influences. Benjamin Graham was essentially the creator of Value Investing and many investment ideas that we still use today. Value Investing used the idea of working out the net asset valuation per share and determining whether the current share price was a fair reflection of that. Graham's ideas on Value Investing is something I will write about in an upcoming post. Graham's books 'Security Analysis' and 'The Intelligent Investor' are still regarded today as some of the greatest investment books around. Graham is famous for having been a big influence on the ideas and investing strategies of the great Warren Buffett.

Benjamin Graham: Early years

Benjamin Graham was born in 1894 in London but moved to the US when he was one. After Graham's father died and in the stock market crash of 1907, his mother lost almost all the family's wealth through speculating in shares. Graham was an extremely gifted student, however upon graduation from the University of Columbia in 1914, and despite being offered  three teaching places, Graham chose to work on Wall Street.

Benjamin Graham: Making his mark

After making partner Graham decided to join a few of his former classmates to form the Graham Corporation in 1923 where salaries included a percentage of the profits made from trading shares. After a disagreement about his pay (Graham considered that he should be paid not by a salary, but by a portion of profit), Graham left to form the Benjamin Graham Joint Account in which Graham was paid via a percentage of the companies profits based on a sliding scale (20%-50%). Graham provided the $400,000 capital which in six years he turned into $2.5 million.
Along with a law graduate, Jerome Newman, Graham transformed the Benjamin Graham join Account into the companies: the Graham-Newman Corporation and Newman & Graham. Through these companies Graham developed his investment philosophy, accurately valuing and buying undervalued shares.
Everything was a learning experience for Graham. Even in the great crash of 1929-1932, when Graham lost 70 percent of his wealth he still used this as a time to learn from his mistakes. In 1933, with $375,000 he began to rebuild. Armed with his new knowledge he retired in 1956 with a track record of 20% return per year.

Benjamin Graham: What we can learn?

  • Stick to your goals by incentivising yourself, for Graham this was through his salary being linked to the companies profits
  • Don't take downfalls too personally
  • Learn from your mistakes
  • Value Investing has a track record of success when implemented properly
Whilst Graham only amassed a wealth of £3,000,000 by his death, he is in my opinion one of the greatest investors of all time. There is much we can learn from his life and ideas. Lookout for my upcoming post on Graham's Value Investing technique.

What do you think? Who is the greatest investor of all time and why?

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