Benjamin Graham

Benjamin Graham was “the father of value investing" as well as the "Dean of Wall Street." Born in 1894 in London, England and raised in New York City, he graduated as salutatorian from Columbia University in 1914 at the age of 20. From there he went to work on Wall Street, where he started the Graham-Newman Partnership.

The Pioneer

He built up a large amount of money over time, but then lost most of his money in the stock market crash of 1929. This led him to drastically rethink and ultimately change his investment techniques. With the help of his new investment strategies, Benjamin Graham's investments have seen an average annual return of approximately 20% in all his years of investing. This was impressive for the time period during which he was active and he was a pioneer of financial analysis.

The Teacher

Benjamin Graham devoted a lot of his time to teaching young investors and in 1928 began teaching at his alma mater, Columbia University in their business school.

The Writer

He has also written several books, two of which are required reading for finance classes and aspiring investors. One of his two most influential books is Security Analysis, which was written with help from David Dodd and published in 1934 and has been hugely influential among investors ever since it was first published. This book discusses the change in his investment strategies after the stock market collapse of 1929. Security Analysis is still used in many finance classes today. His other major influential book is The Intelligent Investor, which was published in 1949.

The Investor

Benjamin Graham had two basic ways to analyze the stock market. His first method was to use market psychology and his second was to invest based on the numbers. One of his major market theories was the idea of "Mr. Market." Graham looked at the stock market like a business partner. Every day this business partner would offer to buy you out or to sell you more of the stock every day. You had the freedom to buy Mr. Market's interest, sell to him, or do nothing depending on how you felt about his current price and he would always come back the next day with a new offer. The idea that an investor could always say no to a trade was vital to Graham's investment strategy.

The Advocate

Graham's other main theory was the necessity of having a margin of safety in your investments. A margin of safety means that you should only buy stock in a business if the price is very far below the business' value. This gives you profit if the market rises, but also protects you if the market gets lower. He was the first advocate of value investing, which is the investing method that is based around his margin of safety idea that you should focus on undervalued stocks when looking to invest. He has influenced many other proponents of value investing such as Warren Buffett, Irving Kahn, Jean-Marie Eveillard, Walter J. Schloss and William J. Ruane.

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