Benjamin Graham American economist and professional investor Date of Birth: 08.05.1894 Country: USA

1. Biography of Benjamin Graham
2. Early Life and Career
3. Graham's Investment Approach
4. Value Investing and Criticism

Biography of Benjamin Graham

Benjamin Graham, born on May 8, 1894, and passed away on September 21, 1976, was an American economist and professional investor of Jewish descent. He is often referred to as the father of modern security analysis and is considered to be the first to propose the concept of value investing. Graham began teaching his investment approach at Columbia Business School in 1928. Later, in collaboration with David Dodd, he refined his work, leading to the publication of his famous book "Security Analysis" in 1934. This edition is regarded as the bible among experienced investors.

Early Life and Career

Benjamin Graham, originally named Benjamin Grossbaum, was born in London and moved to New York with his family when he was only one year old. After the death of his father, Graham experienced true hardship living in poverty. However, he excelled academically and obtained a bachelor's degree from Columbia University in 1914. Despite the tempting offer to work as a teacher of English, mathematics, and philosophy, Graham chose a career on Wall Street. Following the success of "Security Analysis," Benjamin Graham published his second major work, "The Intelligent Investor," in 1949. It was immediately hailed by Warren Buffett, one of Graham's most famous protégés, as the best book on investment.

Graham's Investment Approach

Essentially, Graham urged market participants to distinguish between the concepts of "investment" and "speculation." In "Security Analysis," he provided a clear definition of investment as an operation based on meticulous analysis, facts, and prospects that ensure the safety of the investment. On the other hand, speculation was described as an operation that does not meet these requirements. Graham advised stockholders not to focus on stock price fluctuations but to consider stocks as their share in a business. He emphasized long-term perspective, where the stock market is represented as a scale, with the intrinsic value of a stock reflected in its price.

Value Investing and Criticism

Differentiating between active and passive investors, Benjamin Graham recommended spending time and effort analyzing the financial condition of a company. If a company's stocks were trading on the market below their intrinsic value, it created a margin of safety, making them more attractive for investment. Graham often used the allegory of Mr. Market, who appeared daily at the door of a stockholder, offering to buy or sell stocks at different prices. While Mr. Market's prices seemed plausible, they were often absurd. An investor had the choice to either agree with the quoted prices and engage in trading or ignore them. The essence was not to succumb to the whims of the market but to focus on the real prosperity of the company and the receipt of dividends.

Benjamin Graham criticized those who claimed that certain types of stocks were worth buying at any price due to the prospect of sustainable price growth. According to Graham, doing so without a good analysis of the company's financial condition was at least foolish. These observations remain highly relevant to this day. Furthermore, Graham was also known for his romantic relationships with several women, including the wife of his deceased son.