This could be done, most simply perhaps, by buying the same amounts of all thirty of the issues in the Dow-Jones Industrial Average (DJIA)." Chapter 14: Stock Selection for the Defensive Investor, The Intelligent Investor. "In the first he acquires a true cross-section sample of the leading issues, which will include both some favored growth companies, whose shares sell at especially high multipliers, and also less popular and less expensive enterprises. This is something that can be done a lot more easily today, by simply investing in an index fund. He thus recommended that the first strategy for any investor - one that required nearly no effort - was to proportionally invest in Blue Chips, or stocks that comprise one of the Indices. Graham often emphasized that most mutual funds did not beat the market average, as measured by the indices. Strategy 1: Zero Effort - Blue Chips / Index Funds In this article, we will look at each of these Value Investing strategies in turn, and see how one can implement them today. He thus recommended various investing strategies that offered differing returns, and required varying degrees of due diligence. Graham taught that the returns an investor could expect were not proportional to the risk he was willing to assume, but rather, to the effort he was willing to put into his investments. The rate of return sought should be dependent, rather, on the amount of intelligent effort the investor is willing and able to bring to bear on his task." Chapter 4: General Portfolio Policy, The Intelligent Investor. "There has developed the general notion that the rate of return which the investor should aim for is more or less proportionate to the degree of risk he is ready to run. The chapter on Margin of Safety in Graham's book is also the one most highly recommended by Buffett. Greater Effort, Greater ReturnsĬontrary to common thinking that greater profits require greater risks, Graham said that if he had to distill the secret of sound investment into three words, they would be Margin of Safety.
In the preface to Graham's book, The Intelligent Investor, Buffett calls it "by far the best book about investing ever written".
In fact, Graham had such an overwhelming influence on his students that two of them - Buffett and Kahn - named their sons after him. Schloss and other famous Value Investors at Columbia Business School.īuffett, who credits Graham with grounding him with a sound intellectual investment framework, describes Graham as the second most influential person in his life after his own father.
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Benjamin Graham was an economist and professional investor who mentored Warren Buffett, Irving Kahn, Walter J.
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