George Bernard Shaw would have hated Benjamin Graham. The irreverent Irish author had explained the divide between preaching and practising in these famous words: “Those who can, do. Those who can’t, teach.” Just when Shaw was penning these words, across the Atlantic Ocean, Graham was preaching what was to become the holy grail of stock picking — value investing.
Graham, a professor at Columbia University, developed a set of rules for selecting stocks that would give high returns at low risk — something considered near impossible by most retail investors. He spelt out his philosophy and techniques in two best-selling books Value Investing and Security Analysis (reviewed in past issues of MONEY TODAY).
What set Graham apart from most investment gurus was that he practised what he preached. He amassed impressive wealth by picking stocks through his value investing strategy. An impeccable validation of Graham’s methods is Warren Buffett — among the world’s three richest persons — who made a fortune by following those investing techniques.
Buffett was Graham’s student at Columbia, the only one to have secured an A+. Graham proved Shaw wrong by preaching as well as practising, doing so profitably and passing his methods down the generation to Buffett and others.
That includes you. These are just the right times to learn and profit from the investing methods of Graham and Buffett. Even in the best of times most retail investors are unsure of how to pick a good stock or mutual fund. That uncertainty turns into worry in times as these when stock prices are gyrating due to global and local worries on issues as diverse as subprime borrowing and the 123 Agreement.
The volatility has had a see-saw effect in the value of your wealth — the one directly invested in stocks or indirectly through mutual funds and Ulips. The best solution to volatility is value investing, which is the same as intelligent long-term investing. Our cover story package in this issue proves this.
The core of value investing is making the right choices and sticking with them for years. If you go through the rigours of picking “good” stocks, rewards are almost guaranteed— but over time. Here we have explained what these rigours are and demonstrated the rewards of following them.
In a way value investing is like a marriage. Choose your stocks the way you would pick your life partner — and you will live happily ever after.
