Drowned in the brilliance of Warren Buffett and Charlie Munger, it’s easy to miss the teachings of the most iconic teacher of value investing, Ben Graham.
The reason is not difficult to understand.
The reason is not difficult to understand.
What Graham taught sounds so simple and commonplace that it seems like a waste of time reading his teachings.
It’s like spending ten years learning spirituality and then having somebody tell you that Ten Commandments were all that counted.
It’s like spending ten years learning spirituality and then having somebody tell you that Ten Commandments were all that counted.
The Intelligent Investor and the rest of Graham’s teachings are based on a fundamental set of principles that he believed to be true 70+ years back, and which remain true even today. These principles are something that, no matter what the circumstances, are never to be broken.
The three basic principles of Graham, and you can call them the “golden rules of investing”, are –
1. Look at stocks as part ownership of a business,
2. Look at market fluctuations in terms of his “Mr. Market” example and make them your friend rather than your enemy, and
1. Look at stocks as part ownership of a business,
2. Look at market fluctuations in terms of his “Mr. Market” example and make them your friend rather than your enemy, and
3. Never forget 'margin of safety' – the three most important words in investing – and always build a 15,000 pound bridge if you’re going to be driving 10,000 pound truck across it.
As you can see, none of these three ideas are complicated or require any mathematical talent or anything of that sort. And that, I believe, puts people off in the same way a doctor who would prescribe steam as cure for cold instead of antibiotics would put his patients off.
“Just a steam to cure common cold? No antibiotics?” the patient would wonder. Similarly, a casual reader of Graham’s ideas would say, “Just these simple principles? Nothing else?”
That’s true, dear reader.
In fact, here is what Buffett said on these three ideas of Graham…
That’s true, dear reader.
In fact, here is what Buffett said on these three ideas of Graham…
"I think those three ideas 100 years from now will still be regarded as the three cornerstones, essentially, of sound investment. And that’s what Ben was all about. He wasn’t about brilliant investing. He wasn’t about fads and fashion. He was about sound investing.
"And what’s nice is that sound investing can make you very wealthy if you’re not in too big a hurry. And it never makes you poor – which is even better."
Essentially, Graham’s teachings are ones that help build the character of an intelligent investor. And that’s what a great teacher really does.
You may be disappointed if you go to him with any other expectation.
You may be disappointed if you go to him with any other expectation.
Graham’s core idea is that you as an investor must build a good overall 'character' – which most importantly includes developing self-control and emotional discipline.
Investing is an adventure; the financial future is always an unknown world. With Graham's lessons as your teacher and guide, your lifelong investing voyage should be safe and confident, even if it is adventurous at times.
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