BY FILIPE R. COSTA
How to Invest Like...
Benjamin Graham "People who invest make money for themselves; people who speculate make money for their brokers." — Benjamin Graham, The Intelligent Investor
Are You an Investor? Investment, speculation and gambling reflect three different approaches towards the equity market that often end with a similar outcome: the enrichment of the broker that makes all the trading involved possible. No matter how a trader positions himself in the market, he often ends up placing random trades, following the crowd, being too concerned with short-term price volatility, trading on others' advice, failing to diversify sufficiently, knowing nothing about the real businesses behind his paper trades, being passive regarding his ownership, and getting seduced by others' optimism and scared away by others' pessimism. But, according to Benjamin Graham, "an investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return". Most activity fails to meet these simple criteria and is in fact just speculative. Additionally, Benjamin Graham be-
lieved that investing is a solitary activity that involves profound research and deep patience; one that involves buying from pessimists and selling to optimists; one that involves disregarding the trend-following market consensus and replacing it with realistic historical value and real capability. In this inaugural instalment of our new feature, "How to Invest Like…", we are going to travel back in time to meet the father of value investing, Benjamin Graham.
The Father of Value Investing When the concept of value investing comes to mind, the first name that
pops up is Warren Buffett and his immortal buy-and-hold strategy. But, while Buffett should be praised for his own investment success that led him to a personal net worth near £50 billion, the chief credit should be attributed to the most influential man in his investment career, Benjamin Graham. The British-born economist, professional investor and academic was so influential in Buffett's life that Buffett named one of his sons Howard Graham Buffett in honour of his mentor. Born in London, Benjamin Graham moved to New York City when he was just one year old. He graduated from Columbia University with distinction at the age of 20 and landed a job on Wall Street. In 1928 he began teaching at the Columbia Business School, during which time he came to be known, along with David Dodd, as one of the most influential figures in value investing. At the time when Graham started out, trading was mainly speculative and/or based on insider information. But Gra-
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