Benjamin Graham: The Father of Value Investing (Part 2)

This is the part 2 of the article. Read the Part 1.

Benjamin Graham’s investment principles

Benjamin Graham wrote that “a professional investor and stock owner should treat stocks as his share in business.” With this in mind, investors should not worry about fluctuations in stock prices because in the short term the stock market behaves like a “voting machine”. In the long term, the market behaves like a “weighing-machine” — the intrinsic value of shares is ultimately reflected in their prices.

Graham’s investment principles are alive and relevant for investors even now, especially if investors follow a conservative strategy.

At the same time, Graham does not believe that the market price fluctuations should be completely ignored. They can serve as an indicator that something is wrong with shares (or, on the contrary, the situation has become more favorable). Basically their value, according to Graham, is that “they provide an opportunity to buy wisely when prices fall sharply and to sell wisely when they significantly increase in price”.

Benjamin Graham2.1

Benjamin Graham (right) and Jerry Newman, 1959.

Benjamin Graham died on September 21, 1976, at the age of 82.
For Graham’s followers speculation has turned into a wise investment, and stock selection from the blind game has become the result of scientific analysis. That is why he is still called “the Dean of Wall Street.”

Benjamin Graham’s Quotes
  • Investment is simple, but not easy.
  • In the short run, the market is a voting machine, but in the long run it is a weighing machine.
  • To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks.
  • Those with enterprise lack the money and those with the money lack the enterprise to buy stocks when they are cheap.
  • The individual investor should act consistently as an investor and not as a speculator.
  • If you are shopping for common stocks, choose them the way you would buy groceries, not the way you would buy perfume.
  • Without a saving faith in the future, no one would ever invest at all. To be an investor, you must be a believer in a better tomorrow.
  • A typical investor has a great advantage over the large institutions.