Graham's position in value investment is equivalent to Einstein in physics and Darwin in biology. As the founder of value investment theory, people call him "the originator of value investment".
He has written Securities Analysis (1934) and Smart Investor (1949) for almost a century, and they are still the best-selling investment bibles in the investment community.
As a grandmaster, his thoughts had a great shock in the field of investment, and influenced three generations of top investment masters in the world, including Warren Buffett, John Naif and John Berg.
Nowadays, dozens of hundreds of millions of investment managers active on Wall Street claim to be Graham's followers, which is why he is also known as the "godfather of Wall Street". Even Warren Buffett once said, "80% of my blood is Graham's." It can be seen that Graham's influence on him is really profound.
The originator of value investment has been engaged in investment for nearly 42 years. Graham Newman Company, founded with friends, has an average annualized income of 265,438+0% during the 20-year investment period from 65,438+094,654,38+0 to 65,438+0. Well, yes, it's similar to Buffett's performance. I guess the long-term annualized rate of more than 20% is an important criterion to measure whether a person is a stock god.
Every investment guru has a legendary life behind him, and Graham is no exception. His "value investment" theory has two key points, one is to pay attention to the margin of safety, and the other is to pay attention to the investment value, both of which are related to his personal experience.
A friend's professional experience is like this: in the big bull market ten years ago, their family traded stocks and then lost all their savings. So the parents learned from their mistakes and decided to let their son study finance, hoping to get out of his mistakes in the future and help his son earn back the lost money.
Graham's experience is similar. He lost his father and went bankrupt when he was 9 years old. His mother had to do odd jobs to support her family.
However, when he was 13 years old, his mother suddenly became addicted to stock trading and took out her family's savings for many years, so Man Cang entered the stock market. Unfortunately, as soon as she bought the stock, the stock market plummeted by nearly 50%. She lost all her savings in the American steel company and owed a lot of debts.
This childhood experience caused Graham's "shadow" on the stock market and directly influenced the formation of his investment philosophy. Some later generations have analyzed that the concept of margin of safety is not so much to make money as to ensure the safety of the principal as much as possible and minimize losses.
Since then, the financial crisis experienced after joining the stock market has once again proved the importance of "strictly observing the margin of safety". After graduating from Columbia University, a famous American university, Graham worked as an information officer in a company on Wall Street. 1923, he set up his own fund (equivalent to the current private equity fund) with a capital scale of only $500,000.
Times make heroes, this sentence is the best way to describe Graham. 19 14~ 1929 is the craziest bull market in American stock market. Someone once described the market at that time: a crazy passenger angrily accused the US government of not installing teletypewriter quotation machines in every train car; In a factory in Boston, there are big blackboards in all workshops, and a clerk records the latest market of the exchange with chalk every hour; On a ranch in Texas, cowboys know every minute of the market by turning on the loudspeakers of radios installed in the ranch and barn.
By 1929, Graham had $2.5 million in his joint account.
However, there is always no warning before the storm. 1929101On October 24th, the worst stock market crash in human history came! From September 1929 to the bottom of the Great Depression 1932, the Dow Jones Industrial Average shrank by about 90%, and many people lost their money. But out of concern for the safety of the principal, Graham didn't lose much.
After the crash, investors became disgusted with the stock market. Many people find the stock market extremely risky and condemn it as "absurd and deceptive".
It is in this case that Graham finally completed his long-simmering securities analysis at the end of 1934, and the "value investment" theory that will almost rule the entire investment community in the next century was born!
This book summarizes the stock market crash in the United States, guides people to invest rationally, and emphasizes that investment is to ensure the safety of principal first, which just caters to the psychology of investors at that time.
After all, not everyone can resist the temptation and keep the fruits of victory in the crazy market. Letting customers lose as little as possible is only the beginning of Graham's counterattack.
He began to look for a truly valuable, cheap and good company, but was killed by mistake in the market decline, and began his real value investment road.
Graham-Newman Company recovered the loss from 1929 to 1930 for customers, and never let customers lose a penny again.
In the past 30 years, Graham has experienced the stock market crash of 1929, the Great Depression and two world wars, and the annualized return on investment brought to customers is as high as 17%, which does not include the profits of the American government employee insurance company. If we only calculate the 20 years from 194 1 to 1960, Graham's average annualized income is as high as 2 1%.
The most famous battle in Graham's investment experience was the American Government Employees Insurance Company. Graham bought the company in the portfolio of 1948. Since the same fund can't hold insurance companies, he has to turn it into a listed company and distribute the original shares to the holders of Graham Newman Fund. The share price of the American Government Employees Insurance Company soared immediately.
As of 1972, the shares of American government employees insurance company have increased by more than 28,000%, which has been passed down from generation to generation by many investors as family heirlooms.
The reason why we can achieve such excellent results is due to Graham's second investment philosophy: attaching importance to investment value.
He believes that investment is the process of value regression or value discovery. This process requires investors to find undervalued stocks through financial analysis and hold them, and then wait patiently until the value is discovered. When the stock price returns to its due value, investors can sell it for profit.
Graham said that price fluctuation has only one important meaning for real investors: when the price drops sharply, the market provides them with an excellent opportunity to buy stocks. 1929 The stock market after the US stock market crash provided him with such an opportunity for value discovery.
In addition to these two core investment concepts, Graham also made an epoch-making contribution to investment, that is, fixed investment.
In his book "Smart Investors", he put forward the "dollar cost average method": investors are required to buy "quality stocks" at a fixed time node.
What is a quality stock? It can be a stock, an index ETF, or a combination of several stocks.
Does that sound familiar? Yes, the dollar cost average method is what we commonly call the "regular quota strategy", and the god operation of fixed investment was first put forward by Graham.
Graham had four very important ideas in his life.
Insist on long-term investment
Pay attention to annualized income
Buy high-quality stocks at fixed time nodes
Funds are a good substitute for stocks.
He used a famous investment saying to string these elements together: the long-term (10 -20 years) fixed investment of stocks/funds is a necessary part of the investment portfolio of ordinary investors.
Graham's value investment theory has influenced three generations of Wall Street. Warren Buffett, John Naif and John Berg are the successors, and they have been regarded as the standard by the global investment community for decades. Later, Graham played an inestimable role behind the brilliant achievements of these investment masters.