Benjamin Graham (Benjamin Graham) — a well-known economist and professional investor. He is often called the «father of value investing based on» (value investing). Currently, he is widely known for his frequent references to Warren Buffett, who once studied under the authority of Graham at Columbia University, New York. Buffett said that Graham had laid in it, through good investment, and describes him as a person who had the biggest impact on the lives of Figaro after his father.
Benjamin Graham was born May 8, 1894 in London, his real name was Grossbaum (Grossbaum). When Graham turned one year old his family immigrated to the United States of America. In New York, father of Benjamin opened the firms involved in import of porcelain, ceramics and antiques from Austria and Germany. When Benjamin was nine years old his father died. Personality Benjamin Graham cemented infused poverty upbringing in New York, where the survival on the street he was supposed to make more use of their brains than brawn. Years of poverty, said Graham, «Is it my nature to a serious attitude toward money, willingness to work hard for small amounts and extraordinary conservatism at all costs. In 1914 he received a bachelor’s degree from Columbia University, New York. After graduating from Columbia University’s Benjamin Graham offered teaching positions at three of its faculties: literature, mathematics and philosophy. However, he had to support a family, so he hired a firm Newburger, Henderson and Loeb on Wall Street for the post of the student in Department of bonds.
In 1920, at the age of 26, Benjamin Graham was a partner in Newburger, Henderson and Loeb. Now, in addition to salary, he received another 2.5% of the profits. Graham had already approached the understanding of the principle, which later shared with his disciples: the stupider the behavior of the market, the more opportunities for professional investors.
In 1923, a group of clients and friends, admiring the success Graham, offered to establish an investment fund with assets of $ 250,000 with the condition that he will receive $ 10,000 per year plus 20% of the profits. As a result, the age of 29 Benjamin Graham founded his first independent venture, Grahar Corporation, whose operations began June 1, 1923. The name was drawn from the names of Graham and Louis Harris (Louis Harris), the owner of warehouse and one of the main investors. Benjamin Graham managed to attract to the fund about $ 500,000. He was not a major shareholder, but controlled the investment policy of the company, focusing on finding highly undervalued stocks overvalued shares, Speaker I for «short» sales, or profitable arbitrage. In 1925 the company ceased to exist, and Graham founded the Benjamin Graham Joint Account, whose average yield in the period between 1925 and 1928. amounted to 25,7%. Business is expanding so quickly that soon after its discovery by Benjamin Graham needed a partner who would take over administrative functions. He invited Jerome Newman, brother of his childhood friend. Thus was born Graham Newman Investment Fund.
Since the late 20’s. increased popularity of mutual funds, Benjamin Graham, set about organizing a trust fund Hentz-Graham, who intended to start in September 1929 but by that time the stock market began to «bulge at the seams,» and soon Graham was not until the new fund. He also rejected the proposal of a partnership with Bernard Baruch (Bernard Baruch).
During 1929 and 1930 professional investor and trader Benjamin Graham has lost more than half of the fund. Draw appropriate conclusions and abandoning the most aggressive and high risk trades, his company managed to survive the Great Depression. Average yield of the company for the period from 1929 to 1956, when Graham retired from business, amounted to about 17%.
In 1934 he published the book «Analysis of Securities» ( «Security Analysis»), written by Benjamin Graham co-authored with David Dodd (David Dodd). «Analysis of securities» is still considered the «bible» for investors and traders of the world, it laid the principles of «value» investing, based on the use of basic indicators in the evaluation of shares. Graham and Dodd for the first time introduced the concept of «intrinsic value» (intrinsic value).
In 1949 was published the book «Intelligent Investor» ( «The Intelligent Investor»), in which Benjamin Graham to the position of a professional investor explained how a rational approach can outpace the market. He also showed what principles should guide the investors and traders, and how you can determine that the shares are undervalued. Warren Buffett thinks the book by Benjamin Graham «Intelligent Investor» the best book on investment ever written.
Benjamin Graham died last night on Sept. 21, 1976, at the age of 82.
Graham called for the investment community to undertake a fundamental distinction between investment and speculation. Professional investors he defined as people who carry out transactions based on careful analysis of facts, perspectives, security, investment and sufficient income. Everything else is recognized speculation.
Benjamin Graham wrote that the professional investor and the shareholder must treat them primarily as to their share in the business. With that 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 is behaving like a «balance» — the internal value of shares ultimately reflected in its price.
He recommended that professional investors to concentrate their efforts on the analysis of financial condition of companies. When shares are sold on the market at prices below their intrinsic value, there is the so-called. safety margin (margin of safety), which makes them attractive for investment.
Benjamin Graham wrote that the investment is most intelligent when it is most similar to the business enterprise. These words of Warren Buffett said as the most important ever written on investing. Graham said that matters are properly carried out an analysis based on sound evidence, and agreement or disagreement of other investors again.
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