Table of contents:
- The beginning of an investor's career
- Private life
- Graham Investment Funds
- Difficult times
- Climbing to the heights
- Writing activity
- Declining years
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 man who gave the world the science of long-term value investing. He showed in practice what heights a reasonable investor can achieve.
Benjamin Graham was born on May 8, 1894 in London. His parents were Jews. The original name of the future great investor is Grossbaum. At the age of one year, his family, in which there were also two boys, emigrated to the United States of America. Subsequently, Graham said that despite the fact that he left the UK in infancy, he retained British character traits - pedantry, restraint in emotions, and a penchant for English humor.
After settling in New York City, his father began importing china and antiques from Germany and Austria. However, he did not achieve serious success, he died a few years later. His wife and three children found themselves 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 had to actually drag out a beggarly existence.
It was the need that accompanied Benjamin's childhood that had a great influence on his development in life. Learned how to use my head. Subsequently, Graham spoke about these years, it was they that allowed him to develop a serious attitude to finance, a willingness to work for small amounts, save on everything.
The beginning of an investor's career
In 1914, Benjamin Graham graduated from Columbia University. There he was seriously interested in the study of mathematics, philosophy, English, Latin and music. According to the results of the final exams, he became the second in the course. He was asked to stay at the university and work as a teacher. However, the need to earn more money to support the needs of his family led him to decide to start as an apprentice in the bond department at Newburger, Henderson and Loeb (Wall Street, New York).
While working at this company, Graham made deals for himself, his relatives, and also for friends. He also began writing articles for publications specializing in financial matters. This led to him gaining notoriety among the clients.
At the same time, despite being very busy at work, he sought to create his own family. His brother introduced him to the sociable and purposeful girl Hazel Mazur. At that time she workeddance 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, father's idol. At the same time, Graham was granted American citizenship. In 1921, they had a second child, a daughter, Marjorie, however, despite the fact that her mental abilities were no less than those of her brother, for Benjamin she always remained a girl. 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 a group of admirers to ask him in 1923 to set up an investment fund with assets of $250,000. Graham agreed to the proposal, especially since an annual income of $ 10,000 was offered for the work, as well as 20% of the company's profits. So, at the age of 29, he becomes the founder of his first business - the Graham Corporation, which was founded on 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 himself.
In a short time, Benjamin managed to increase the fund's assets by $500,000. The main goal was to implementinvestment policy. He searched for undervalued securities to purchase, as well as the purchase of overvalued for the so-called "short" sales. Since then, many in Wall Street business circles began to understand that Benjamin Graham is a smart investor.
It was at this time that Graham realized the principle - the goofy behavior of the stock market provides investors with a very big opportunity. Subsequently, Benjamin brought these conclusions to his students constantly.
In 1925, Graham closed his first fund and established a new one - Benjamin Graham Joint Account with partner Jerome Newman. This new enterprise from the very first days of its existence has demonstrated high profitability - about 25.7 percent per annum.
Benjamin Graham's condition by the beginning of 1929 was very significant. His Joint Account returned nearly 60% in 1928, and Benjamin himself earned over $600,000.
However, the difficult times that followed, which led to the collapse of the stock market in 1929, led to the fact that Graham began to save what could be saved.
At the end of 1929, as the markets calmed down and stock prices went up, many financial investors began to believe that the trouble was over. Among them was Benjamin. During this period, he risky made large investments, having previously borrowed significant funds. But the coming 1930 brought him the strongest disappointment, becoming the worst in his career. Joint companyAccount lost almost 50% of its capital in a year.
In this regard, many of Benjamin Graham's investors wanted to save their funds by demanding their return. The financial situation of the partners became very difficult. However, his partner's father-in-law helped by providing 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 of Graham and Newman tried to break into the number of prosperous structures. During this time they did not receive any remuneration. Difficulties in the financial situation led to the fact that Benjamin's wife began to work again as a dance teacher.
Climbing to the heights
Gradually, the company returned their investments to creditors, difficult times are over. However, Graham himself learned for himself that it is always necessary to avoid aggressive, high-risk trades. The troubles he experienced became a valuable lesson for him, served as an impetus for the development of his most famous investment theories. Made it possible to achieve outstanding success in subsequent practical activities.
The individuals who entrusted Graham and Newman with funds never again had to face the loss of their finances. Moreover, they always received a solid addition to their deposits. The average annual return to the Graham and Newman structures (which remained partners until 1956) was about 17% per annum.
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 lecturer at the Financial Institute, a structure of the New York Stock Exchange. Teaching has helped Benjamin structure his thoughts and put his own ideas into practice.
His follower David Dott, present at almost all of Graham's speeches at Columbia University, took notes of his reasoning. Subsequently, they became the basis of the book - "Securities Analysis", which Benjamin Graham, together with Dott, published in 1934.
In this book, the authors came to the conclusion that only a rational approach to investing in stocks can bring success. "Securities Analysis" has been reprinted many times. It has been recognized as a classic in finance and investment.
The next work was published by the author in 1937. It was called "Interpretation of Financial Statements". In this book, Benjamin Graham continued to develop the idea of using economic fundamentals to value stocks. He showed in detail the basics of balance sheet analysis in reports, analyzed the meanings of financial terms used in market investments. The book is also remarkable in that Graham wrote it with a great sense of humor.
In the same year, Benjamin released another work called "Reserve and Stability". In it, he comes to the conclusion that it is necessary to create and maintain commodity reserves that can fulfillthe role of buffer stocks, positively affecting price deflation.
In the next book called "World Commodities and World Currency", which Benjamin Graham published in 1944, he proposed to introduce into international circulation, the so-called "commodity standard". This, in his opinion, would give impetus to the new macroeconomic policy in the conditions of abandoning the gold standard.
In 1949, a new book by Benjamin Graham, The Intelligent Investor, was published. This work, according to recognized experts in the field of finance, is the best book on investing. In it, Benjamin made an analysis over time of the state of the stock markets, their ups and downs. Moreover, the book is provided with instructive examples from practice. The "smart investor" Benjamin Graham clearly explained how to be ahead of the market using rational approaches.
Graham's latest work, Reminiscences of a Wall Street Elder, was published after his death.
Retiring 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 an intelligent man with an amazing sense of humor, but also an indefatigable red tape. However, he did not recognize women's equality. His love affairs have caused serious conflict in his family.
Intellectual investor Benjamin Graham was a very rich man, but he did not aspire to luxury. He preferred a fairly modest lifestyle. But he was also very efficient. He was celebrated as a borna teacher who is always ready to share knowledge and experience with those who would like to receive it.
Benjamin Graham died 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.