Benjamin Graham (investor)
Benjamin Graham, born Benjamin Grossbaum in 1894 in London, is renowned as a pioneering investor and author, often referred to as the "father of value investing." After moving to New York City with his family at a young age, Graham excelled academically, graduating from Columbia University at just nineteen. He began his career on Wall Street at the brokerage firm Newburger, Henderson and Loeb, where he quickly rose through the ranks due to his keen intellect and work ethic. In 1926, he founded his own investment firm, employing innovative strategies that yielded remarkable returns for his clients. Despite facing challenges during the 1929 stock market crash, Graham's diversified investments helped him recover and thrive in the subsequent years.
Graham authored influential books, including "Security Analysis" and "The Intelligent Investor," which outline his investment philosophies and advocate for a methodical approach to investing rather than speculative gambling. His teachings have left a significant mark on the finance world, influencing notable investors such as Warren Buffett, who credits Graham for shaping his own investment strategies. Throughout his life, Graham maintained a private personal life, marrying three times and having several sons. He passed away in France in 1976, leaving behind a legacy that continues to educate and inspire investors today.
Benjamin Graham (investor)
Investor
- Born: May 9, 1894
- Birthplace: London, England
- Died: September 21, 1976
- Place of death: Aix-en-Provence, France
Also known as: Benjamin Grossbaum
Education: Columbia University
Significance: Benjamin Graham was a famous investment broker responsible for teaching responsible investing practices to many of today's leading financial experts. He published several important works on finance, including The Intelligent Investor.
Background
Benjamin Graham was born Benjamin Grossbaum in London, England, on May 9, 1894. His parents, Isaac and Dora Grossbaum, moved to New York City when Graham was just one year old. As a young man, Graham won a scholarship to Columbia University, which allowed him to attend the prestigious school. He graduated with honors and was second in his class at just nineteen years old.
Graham's teachers considered him an incredibly gifted student. Almost immediately after his graduation, Columbia offered Graham a teaching position at the university. Had he accepted, Graham would have taught philosophy, mathematics, and English. However, Graham's father had recently passed away, and his family was facing extreme poverty. Although the teaching position was tempting, it would not pay enough money to allow Graham to both support himself and help his family.
Investment
At twenty years old, Graham joined the Wall Street stock brokerage firm Newburger, Henderson and Loeb. His first job at the firm involved little more than clearly writing stock values on a blackboard for the brokers throughout the day. Nevertheless, Graham quickly impressed his superiors with his intelligence and work ethic. They slowly began to trust him with more responsibilities at the firm. Eventually, Graham's superiors used him to research investment opportunities for the company.
Graham became a full partner at Newburger, Henderson and Loeb in 1920. In his new position, Graham earned a salary of $50,000 a year. This allowed the young investor to support himself while helping his struggling family.
After six years with Newburger, Henderson and Loeb, Graham founded his own firm with his business partner Jerome Newman. Graham used novel and revolutionary financial practices to earn his clients unprecedented returns on their investments. In most cases, investors received a 670 percent return on their initial investment over ten years.
Graham's investment firm quickly became involved with the Northern Pipeline Company, one of the fractured pieces of the Standard Oil Trust. The government had broken up Standard Oil Trust into several unique companies to stop the powerful monopoly the corporation had created. After his personal investigation of the company, Graham realized that Northern Pipeline Company could be issuing far larger returns to its investors. Unfortunately, Graham owned just 5 percent of the company's stock, and few other investors supported his claims.
In an effort to increase investors' profits from Northern Pipeline Company, Graham worked with the Rockefeller Foundation and a number of legal teams to buy more of the company's stock. Once he owned more than one-third of the Northern Pipeline Company, Graham was able to win himself a position on the board of directors. From that position, he was able to redistribute the company's wealth to benefit its investors directly.
While many businesses folded during the 1929 stock market crash that led to the Great Depression (1929–1939), Graham's assets were diversified enough to survive. While his investment firm lost a significant portion of its assets, it later recovered with the rest of the economy. Following the Great Depression, Graham's investment firms remained largely successful for the rest of his life.
Impact
Graham published two major books, both of which are still used to study the economics of investment brokering. His first book, Security Analysis, was published in 1934. It is composed of Graham's thoughts on the general study of investments, and the Great Depression inspired it.
Graham's second work, The Intelligent Investor, teaches his principles of safe investing. Many investors at the time treated stock brokering like a gamble. They guessed at which stock seemed promising and hoped it would succeed. In this work, Graham rails against that attitude. Instead, he discusses ways to minimize the financial risk of investing through the careful study of all potential investments. He also discusses ways to minimize risk by investing in numerous stocks. While Security Analysis was written for professional investors, The Intelligent Investor contains advice that even a novice investor can use.
As Graham became a leader in the investment world, he attracted a number of followers. Many of the modern leaders of Wall Street studied his investment strategies and teachings. In their time, they were revolutionary. Economists and investors still use Graham's works to teach important investment concepts.
One of Graham's most famous followers, Warren Buffett, went on to achieve a similar level of fame in the investment world. His firm, Berkshire Hathaway, owns dozens of international companies, including Geico and Dairy Queen. Buffett used Graham's teachings to become one of the most successful investment bankers in history and one of the wealthiest people in the world.
Other students of Graham include the famed American investor Walter J. Schloss, who directly studied under Graham during his time at the New York Stock Exchange Institute. Graham also influenced investors Irving Kahn, Seth Klarman, and Charles H. Brandes.
Personal Life
Graham married three times throughout his life. The famed investor kept his personal life particularly private. His first wife was a dance instructor, his second wife was an actress, and his third wife was a secretary. Graham had several sons, one of whom served in the US Army. Graham passed away in Aix-en-Provence, France, at eighty-two years old.
Principal Works
Nonfiction
Security Analysis (1934)
The Intelligent Investor (1949)
Bibliography
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Feloni, Richard. "3 Fundamental Lessons from Warren Buffett Learned from his Mentor Ben Graham." Business Insider, 28 May 2015, http://www.businessinsider.com/lessons-warren-buffett-learned-from-benjamin-graham-2015-5. Accessed 6 Sept. 2017.
Lutts, Timothy. "Short Biography of Benjamin Graham." Wall Street's Best Daily, 12 Mar. 2017, https://cabotwealth.com/daily/value-investing/benjamin-graham-a-short-biography/. Accessed 6 Sept. 2017.
Mahapatra, Lisa. "8 Brilliant Lessons from the Investor That Taught Warren Buffett Everything He Knows." Business Insider, 6 Feb. 2013, http://www.businessinsider.com/eight-lessons-from-benjamin-graham-2013-2. Accessed 6 Sept. 2017.
Myers, Daniel. "Benjamin Graham: Three Timeless Principles." Forbes, 23 Feb. 2009, https://www.forbes.com/2009/02/23/graham-buffett-value-personal-finance‗benjamin‗graham.html. Accessed 6 Sept. 2017.
Reiff, Nathan. "The Greatest Investors: Benjamin Graham." Investopedia, 2017, http://www.investopedia.com/university/greatest/benjamingraham.asp. Accessed 6 Sept. 2017.
"Warren Buffett." Forbes, 2017, https://www.forbes.com/profile/warren-buffett/. Accessed 6 Sept. 2017.