What Benjamin Graham Taught Warren Buffett About Investing (2024)

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What Benjamin Graham Taught Warren Buffett About Investing? ›

Buffett has those rules because the value investing approach he learned from Graham follows three core, risk-mitigating principles: Always analyze the long-term evolution and management principles of a company before investing. Always protect yourself from losses by diversifying.

Graham wrote that "investment is most intelligent when it is most businesslike." By that he meant that investing, like running a business, is a systematic effort to maximize the likelihood of earning a reasonable return and to minimize the probability of suffering a severe loss.

Mr. Market is an imaginary investor devised by Benjamin Graham and used as an allegory in his 1949 book “The Intelligent Investor.” Value investors like Warren Buffett select undervalued stocks trading at less than their intrinsic book value that have long-term potential.

Graham pushed the idea of buying stocks at a discount from their intrinsic value. He named the discount the "margin of safety" and considered it an important protective measure. If the stock were already undervalued, it would be less likely to experience major declines.

Key Takeaways. Warren Buffett started investing at a young age, buying his first stock at age 11 and his first real estate investment at age 14. Buffett studied under the legendary value investor Benjamin Graham while pursuing a business degree at Columbia University (Harvard had rejected him).

After graduating, Buffett attended the New York Institute of Finance. The basic ideas of investing are to look at stocks as business, use the market's fluctuations to your advantage, and seek a margin of safety. That's what Ben Graham taught us.

Buffett was a student of Benjamin Graham at Columbia University and under Mr. Graham's guidance he learned his Value Investing skills.

Graham says to stay within the range of 25/75 to 75/25: We have suggested as a fundamental guiding rule that the investor should never have less than 25% or more than 75% of his funds in common stocks, with a consequent inverse range of between 75% and 25% in bonds.

Benjamin Graham advised buying companies with Total Debt to Current Asset ratios of less than 1.10. In value investing it is important at all times to invest in companies with a low debt load. Total Debt to Current Asset ratios can be found in data supplied by Standard & Poor's, Value Line, and many other services.

What is the Warren Buffett 70/30 rule? ›

A 70/30 portfolio is an investment portfolio where 70% of investment capital is allocated to stocks and 30% to fixed-income securities, primarily bonds.

Buffett follows the Benjamin Graham school of value investing which looks for securities with prices that are unjustifiably low based on their intrinsic worth. Buffett looks at companies as a whole rather than focusing on the supply-and-demand intricacies of the stock market.

An investment, according to Graham, is based on thorough analysis that promises both safeties of principal and an adequate return. Three components of this definition are essential: Base purchases on a thorough analysis of a company's underlying businesses. Focus on preventing severe losses.

An investment philosophy is a set of beliefs and principles that guide an investor's decision-making process. It is not a narrow set of rules or laws, but more a set of guidelines and strategies that take into account one's goals, risk tolerance, time horizon, and expectations.

Value investing - The concept of investing is that it seeks out businesses that are undervalued and have the potential to grow. Long-term investing - Graham argues for staying in the market rather than buying and selling stocks.