Benjamin Graham is a famous American economist who proposed the idea of value-based investment.
Benjamin Graham was born on May 8, 1894 to a Jewish family in London, England. He was only a year old when his family moved to New York. Graham took up his studies only after his father died. The family of Graham lived in poverty, which influenced his desire to study well.
At the age of 20 Graham graduated from Columbia University with a silver medal, which at that time in the US was awarded to the second in the student’s academic performance. He was invited to take the post of teacher of English, mathematics and philosophy, but he refused, since he decided to work on Wall Street. Over time, Graham smiled luck and he founded the company “Graham-Newman Partnership”.
His first book, Analysis of Securities, was co-authored by David Graham in collaboration with David Dodd in 1934. The book addressed the issue of the correct nature of the investor, who studies the company only on its financial statements and who commits a transaction only if it benefits from it, without the risk of suffering financial losses. The book is considered a “bible” for real investors. Warren Buffett – a famous American investor and entrepreneur with billions in his account, was a student and is still a follower of the ideas of Graham and Dodd. Warren Buffett earned a large part of his fortune methodically and with the wisdom of introducing dogmas from the books of Graham and Dodd to life.
In 1949, Graham presented a book called “Smart Investor”, which became as popular as the previous “Securities Analysis”. “Smart Investor” is a widely accepted book on value-based investment and an investment approach. At the Columbia Business School, Graham began to teach a value-based investment course in 1928, and most of the materials from his lectures were then included in the book Investor. His ideas and theories on value-based investment were improved with the help of David Dodd, which resulted in the publication of the book “Smart Investor”. Both books attracted the attention of the financial world. Warren Buffett said that “Smart Investor” is the best book on investments ever made. In it, as in the book with the title ” Graham analyzed the issue of a member of the stock exchange, which should see the difference
between investment and speculation. Graham allowed the world to see the difference between these two concepts more clearly, and more specifically, his books changed Graham’s principle of interaction with the stock exchange and made a revolution in the sphere of income from investments. “In the Analysis of Securities he wrote the following:” Investment is an operation that, due to careful analysis, guarantees the safety and availability of goods but from a perfect operation, “and all operations that do not fit this description, respectively, were recognized in speculation. Graham allowed the world to see the difference between these two concepts more clearly. And more specifically, with his books, Graham changed the principle of interaction with the stock exchange and revolutionized the income from investment. In the “Securities Analysis” he wrote the following: “Investment is an operation that, due to careful analysis, guarantees the security and availability of income from the transaction”, and all operations not suitable for this description were respectively recognized as speculation. Graham allowed the world to see the difference between these two concepts more clearly. And more specifically, with his books, Graham changed the principle of interaction with the stock exchange and revolutionized the income from investment. In the “Securities Analysis” he wrote the following: “Investment is an operation that, due to careful analysis, guarantees the security and availability of income from the transaction”, and all operations not suitable for this description were respectively recognized as speculation.
Graham suggested a very interesting idea of ”Mr. Market” – an imaginary person who could buy and sell business shares in order to make people understand the risks and how to achieve their goals in the investment business. Graham wanted people to understand that investing should be treated like any other business – professionally and efficiently. And this attitude towards investing makes the investment itself much more intellectual. The greatest follower and adherent of Graham’s ideas was Warren Buffett.
Throughout his career, Graham criticized criticized and overdue reports on the financial performance of companies, which at times made it difficult to understand the real affairs of a company. Graham was an ardent supporter of the idea of paying dividends to shareholders, and he never agreed that the company’s profits are recognized as undistributed profits. Graham incredibly criticized the financial advisors who forced to buy shares of their customers only because of their steady growth in price. He argued that the correct financial management is a thorough analysis of current business conditions.
Graham shared his ideas when in the world no one person could act as a teacher in the field of investment and investment. His ideas are still relevant for investment platforms and stock markets. So he was – a genius man who made people look at incomes, markets and investment planning with wide eyes, while focused on the goal.
In the biography of Warren Buffett it is mentioned that Graham had a connection with the girl of his deceased son, Marie Louise Aminguez. Graham often traveled to France to visit her. Graham ceased to live together with his wife in New York, as he wanted to spend six months in New York and six months in France, with which his wife did not agree. And Marie did not experience any problems, living with Graham and not marrying him. Interestingly, Benjamin Graham never divorced his wife until the end of his days.
Benjamin Graham died on September 21, 1976 at the age of 82 years.
Graham’s writings include many good books. Many of them are considered financial directories and “bibles” for investors around the world. Some of his famous books are listed below:
“Securities Analysis”, 1934;
“Smart Investor”, 1949;
“Storage and Stability: Modern Normal Storage of Grain,” 1937;
“Analysis of the company’s financial statements,” 1937;
“Goods and currencies of the world”, 1944;
“Benjamin Graham, Memoirs of the Abbot of Wall Street.”