Benjamin Graham (born Benjamin Grossbaum) (London, May 8, 1894 – September 21, 1976) was an investor, author and professor. He was known as The Dean of Wall Street. Graham is considered the father of Value Investing, an investment strategy that he began to teach at the Columbia Business School in 1928 and whose term later refined throughout the editions of his famous Book Security Analysis, co-authored with David Dodd. In addition, he is also recognized as the father of stock activism.1 Among Graham’s disciples are Charles Brandes, Tom Knapp, Warren Buffett, William J. Ruane, Irving Kahn6, and Walter J. Schloss. Recognizes that Graham was the one who provided him with a solid intellectual structure for investment and describes him as the person who most influenced his life after his father. In fact, Graham had such an influence on his students that two of them, Buffett and Kahn, named their children, Howard Graham Buffett and Thomas Graham Kahn, in their honor.
Benjamin Graham was able to model an investment method based on logic, critical reasoning and financial analysis, known as value investing. Not only that, in addition this method was very profitable in practice, in fact it would become the most effective in the history of investment. Graham also participated in the creation of the Securities Act of 1933, which helped to increase transparency and public information to regain confidence after the famous crash of 29.
Benjamin Graham was able to put his investment method into practice. He set up his own company, the Graham-Newman Partnership, along with Jerome Newman, another great investor at the time, managing an open-end investment fund.
Unfortunately, there is currently no record of the returns earned by Graham throughout his career as an investor. However, it is estimated that the average annual profitability was between 15 and 20% between 1,936 and 1,956 during his time as manager at the Graham Newman Partnership.
The principles of Benjamin Graham’s investment:
1.- An action is not a simple symbol in a quote table. Shares are real stakes in the ownership of a real business, with an underlying value that does not depend on the share price.
2.- The market is a pendulum that constantly oscillates between an unsustainable optimism (which makes the actions too expensive) and an unjustified pessimism (that makes the actions are too cheap).
3.- The future value of all investments is a function of their current price. The higher the price you pay, the lower the profitability you get.
4.- As careful as it may be, the only risk that any investor can completely eliminate is the risk of making a mistake.
5.- The secret of financial success lies within the person. If you become a critical thinker who does not accept any “fact” of the stock market as an article of faith, and if you invest it with patient confidence, you can get a good game on a sustained basis, even in the worst bearish periods of the market.