Benjamin Graham is known as one of the most successful professional investors. In the world of finance, he is considered the founder of the science of securities analysis. The person who gave the world the science of long-term value investing. In practice, he showed what heights a reasonable investor can achieve.
Biography
Benjamin Graham was born on May 8, 1894 in London. His parents were Jews. The original surname of the future great investor is Grossbaum. At the age of one year, his family, in which in addition to him there were two boys, emigrated to the United States of America. Subsequently, Graham said that despite the fact that he left the UK in infancy, he remained inherent in British character traits - pedantry, restraint in emotions, and a penchant for English humor.
Having settled in the city of New York, his father began importing porcelain and antiques from Germany and Austria. However, he did not achieve serious success, he died a few years later. The wife and three children were in a very difficult financial situation. Graham's mother - Dora - made great efforts to keep the family business afloat, but she did not succeed. The family actually had to eke out a miserable existence.
It was the need that accompanied Benjamin's childhood, had a great influence on his formation in life. Taught to work head. Subsequently, Graham talked about these years, it was they who allowed him to develop a serious attitude to finance, his willingness to work for small amounts, and save on everything.
Start investor career
In 1914, Benjamin Graham graduated from Columbia University. He was seriously interested in studying mathematics, philosophy, English, Latin and music. According to the results of final exams, he became the second on the course. He was invited to stay at the university and work as a teacher. However, the need to earn more money to meet the needs of the family led him to decide to start working as a student in the bond department at Newburger, Henderson and Loeb (Wall Street, New York).
Working at this company, Graham carried out transactions for himself, his relatives, as well as for friends. He began to write articles for publications specializing in financial matters. This led to the fact that he gained fame among customers.
Personal life
At the same time, despite the great employment at work, he sought to create his own family. His brother introduced him to the outgoing and purposeful girl Hazel Mazur. At that time, she worked as a dance and diction teacher, earning much more than Benjamin. However, she could not resist the charisma of Benjamin, and they got married.
In 1919, their first child appeared in their family - a boy who was named Isaac Newton. The name of the baby was given in honor of the great scientist, the idol of his father. At the same time, Graham was granted American citizenship. In 1921, they had a second child, the daughter of Marjorie, however, despite the fact that her mental abilities were no less than that of her brother, she always remained a girl for Benjamin. He attributed women to overly emotional creatures, which, in his opinion, limits their potential. His son Newton was perceived by him as a true rational thinker.
Graham Investment Funds
It was Benjamin's fame and talents that led him to a group of fans in 1923 to create an investment fund with assets of $ 250,000. Graham answered the offer with agreement, all the more so because for the work an annual income of $ 10,000 was offered, as well as 20% of the company's profit. So, at the age of 29, he becomes the founder of his first business, Graham Corporation, whose founding date was June 1, 1923. The name of the company is a combination of the names of Louis Harris (the main investor of the fund) and Graham proper.
In a short time, Benjamin managed to increase the assets of the fund by $ 500,000. The main goal was the implementation of investment policies. He conducted a search for undervalued securities for the acquisition, as well as the purchase of revalued securities for the so-called “short” sales. Since then, in the business community of Wall Street, many have come to understand that Benjamin Graham is a smart investor.
It was at this time that Graham realized the principle - the stupid behavior of the securities market provides investors with very great opportunities. Benjamin subsequently brought these findings to his students constantly.
In 1925, Graham closed his first fund and founded a new one - Benjamin Graham Joint Account with partner Jerome Newman. From the very first days of its existence, this new enterprise has demonstrated high profitability - about 25.7 percent per annum.
The condition of Benjamin Graham by the beginning of 1929 became very significant. The profitability of his Joint Account in 1928 amounted to almost 60%, and the income of Benjamin himself exceeded $ 600,000.
Hard times
However, the coming difficult times, which led to the collapse of the securities market in 1929, led to the fact that Graham began to save what could be saved.
At the end of 1929, due to the fact that the excitement in the markets subsided, and stock prices went up, many financial investors began to believe - the difficulties were over. Among these was Benjamin. During this period, he risky made large investments, having previously borrowed significant funds. But the coming 1930 brought him great disappointment, becoming the worst in his career. The Joint Account company for the year lost almost 50% of its capital.
In this regard, many investors Benjamin Graham wanted to save their money, demanding their return. The financial situation of the partners has become very difficult. However, his partner’s father-in-law helped by allocating a substantial amount of money to support the fund. But the management had to say goodbye to a large share of their property. After that, for 5 years, the investment company Graham and Newman tried to break into the number of prosperous structures. During this time they received no reward. Financial difficulties led to the fact that Benjamin's wife began to work again as a dance teacher.
Climbing to the peaks
Gradually, the company returned to their creditors their investments, difficult times are over. However, Graham himself realized for himself that it is always necessary to avoid aggressive, high-risk transactions. The troubles experienced by him, became a valuable lesson to him, served as an impetus for the development of his famous investment theories. Allowed to achieve outstanding success in subsequent practical activities.
Individuals who entrusted funds to Graham and Newman never again had to face the loss of their finances. Moreover, they always received a solid addition to deposits. The average annual income in the structure of Grechom and Newman (which remained partners until 1956) was about 17% per annum.
Writing
In the thirties, when the Great Depression reigned in the United States, Graham did not stop his lectures at Columbia University. At the same time, he became a teacher at the financial institution, the structure of the New York Stock Exchange. Teaching helped Benjamin structure his thoughts and put his own ideas into practice.
His follower, David Dott, who is present at almost all Graham's speeches at Columbia University, recorded his discourse. Subsequently, they became the basis of the book - “Analysis of Securities”, which Bejamin Graham, together with Dott, published in 1934.
In this book, the authors came to the conclusion that only a rational approach when investing in stocks can bring success. Securities Analysis has been reprinted many times. She was recognized as a classic in the field of finance and investment.
The author published his next work in 1937. It was called Interpretation of Financial Statements. In this book, Benjamin Graham continued to develop the idea of using fundamental economic indicators to measure stocks. He showed in detail the basics of analyzing the balance in reports, carried out an analysis of the meaning of financial terms used in market investments. The book is also notable for the fact that Graham wrote it with a great sense of humor.
In the same year, Bejamin published another work entitled "Stock and stability." In it, he concludes that it is necessary to create and maintain commodity reserves that can serve as buffer stocks, positively influencing price deflation.
In the next book, entitled “World Commodities and World Currency,” which Benjamin Graham published in 1944, he proposed introducing the so-called “commodity standard” into international circulation. This, in his opinion, would give impetus to the new macroeconomic policy in the context of the rejection of the gold standard.
In 1949, Benjamin Graham's new book, The Intelligent Investor, was published. This work, according to recognized experts in the field of finance, is the best book on investing. In it, Bejamin made a time analysis of the state of stock markets, their ups and downs. Moreover, the book is equipped with instructive examples from practice. Reasonable Investor Benjamin Graham lucidly explained how to get ahead of the market using rational approaches.
Graham's latest work, “Memories of Elder Wall Street,” was published after his death.
In the declining years
Moving away from business in 1956, Benjamin devoted the rest of his life to his famous hobbies, namely women and travel. His contemporaries report that he was not only the smartest person with an amazing sense of humor, but also indefatigable red tape. However, he did not recognize female equality. His love affairs led to a serious conflict in his family.
Intelligent investor Benjamin Graham was a very wealthy man, but he did not seek luxury. He preferred a rather modest lifestyle. But he was also very efficient. He was noted as a born teacher, always ready to share knowledge and experience with someone who would like to receive it.
Benjamin Graham passed away on September 21, 1976, at the age of 82. He was buried in a Jewish cemetery near New York, next to the burial place of his eldest son, Isaac Newton.