Learning to invest in a reward ratio is highly in our favor and all our investments, especially fresh ones have a high margin of safety. Such an investment process is often known as Value Investing and is largely based on principles laid down by legends like Benjamin Graham and Warren Buffett
It is a well-known fact that about 90% of people lose money in the stock market, especially retail investors.
This happens because most people enter stock markets with half knowledge, often inspired by the success stories of others. Also while doing so they never think about the rationale behind their investment decision.
Another important reason for losses is people make investment-related decisions based on human emotions like fear, greed, and ego.
In this series of articles, we shall explain the readers, simple but very effective investing principles of legendary investors like Benjamin Graham and Warren Buffet which, if an investor follows, he can surely create great wealth in long term.
Before we proceed further, I shall give a short introduction about both these legends
Benjamin Graham :
Benjamin Graham, widely known as the "Father of Value Investing" was a British-born American economist, professor and investor.
He is well known for his two books Security Analysis co-authored with David Dodd in 1934 and The Intelligent Investor in 1949. These books are often referred to as 'Bible of Investing'.
After graduating from Columbia University at an age of 20 years, Graham started his career on Wall Street and later on taught his investment philosophy to students of the Columbia University,UCLA Anderson School of Management at the University of California, Los Angeles.
Through out his career, Graham had many notable disciples who went on to receive substantial success in the world of investment, including Irving Kahn, Warren Buffett, Sir John Templeton, Charles Brandes, etc.
In addition, Graham's thoughts on investing have influenced the likes of Seth Klarman and Bill Ackman.
Warren Buffett :
Warren Buffett, widely considered to be one of the greatest investors of all time, is an American investor, business tycoon, and philanthropist. He is the chairman and CEO of Berkshire Hathaway.
As of December 2019, his net worth was US $ 88.9 billion, making him the fourth-wealthiest person in the world.
Buffett developed an interest in business and investing in his youth and started investing at an age of 11 years. He graduated from Columbia Business School where he learnt a lot about investment philosophy and concept of value investing from Benjamin Graham.
He formed Buffett Partnership Ltd. in 1956, became an millionaire by 1962 and by 1965 he gained control of Berkshire Hathaway, a textile manufacturing firm, because according to him the shares of the company were trading way below the value of its fixed assets.
Buffet soon realized that buying a textile business had been his worst trade and he slowly transformed Berkshire Hathaway into a conglomerate with holdings in the media, insurance, energy and food and beverage industries.
In 1978, Charlie Munger joined Buffett and became vice-chairman of the company. Since then both Warren Buffet and Charlie Munger have overseen the growth of this conglomerate to make it one of the largest publicly traded companies worldwide.
Buffett is noted for his adherence to value investing and for his frugality despite his immense wealth. He is a notable philanthropist, having pledged to give away 99 percent of his fortune to philanthropic causes, primarily via the Bill & Melinda Gates Foundation.
From next week onwards, each week I shall try to explain one important investing principle of Benjamin Graham & Warren Buffett.