8 Brilliant Lessons From The Investor That Taught Warren Buffett Everything He Knows

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Known to those on Wall St. as the father of value investing, Benjamin Graham’s teachings were critical to the successes of many investors that are now household names— like Warren Buffett.

“Ben was this incredible teacher, I mean he was a natural,” said Buffet, in an interview with the Heilbrunn Center for Graham and Dodd Investing.

Buffett said that Graham’s book, The Intelligent Investor changed his life.

“If I hadn’t read that book in 1949, I’d have had a different future,” he said.

That’s huge coming from an investor with Buffett’s pristine track record. Columbia Business School put together a video of Graham’s most important teachings and we’ve broken them down for you here.

Graham had a keen understanding of how Wall Street worked, though his methods and ideas weren’t always popular.

Once, at a lecture, he was asked if Wall Street professionals were better at forecasting what would happen to market, and if not, then why, and here’s what he said:

“Well, we’ve been following that same question for a generation or more, and I must say frankly that our studies indicate that you have your choice between tossing coins and taking the consensus of expert opinion and the result is just about the same in each case.

Everybody in Wall St. is so smart that their brilliance offsets each other. And that whatever they know is already reflected in the level of stock prices for the much, and consequently what happens in the future represents what they don’t know.”

As Weinberg said in an interview, “Everyone I know that followed Ben had one thing in common, they never lost money. Because we were taught to buy so cheap, that no matter what happened, we were fine.”

Here’s a round up of what Wall Street biggest winners learned from Graham.

1) Never forget to account for the psychology of the investor.

Never forget to account for the psychology of the investor.

“You can have an extraordinary difference in the price level mainly because not only speculators but because investors themselves are looking at the situation through rose colored glasses rather than dark blue glasses.”

— Benjamin Graham

2) Debt be damned.

Debt be damned.

“He believed in cash. He did not like companies that had a lot of bonds.”

— Irving Khan

3) Think long term.

Think long term.

“One sentence changed my life…Ben Graham opened the course by saying: ‘If you want to make money in Wall Street you must have the proper psychological attitude. No one expresses it better than Spinoza the philosopher.’

When he said that, I nearly jumped out of my course. What? I suddenly look up, and he said, and I remember exactly what he said: ‘Spinoza said you must look at things in the aspect of eternity.’ And that’s what suddenly hooked me on Ben Graham.”

— Marshall Weinberg

4) Comb through balance sheets.

Comb through balance sheets.

“I remember years ago that they’d (Ben Graham and Walter Schloss) look through the manuals and tear sheets, it’s not so different from today, for years my dad and I, we’d go through value line and we’d look and try to find the stock that was the best value within each industry group.”

— Edwin Schloss, Walter Schloss’ son

5) Fundamentals…. and forget the rest.

Fundamentals.... and forget the rest.

“(Ben Graham) was a powerful influence on me immediately, which later even (led me) to be an empiricist and look at the data and not be influenced by what you heard around you. That was very clear, just be interested in fundamentals and forget all the rest, and have patience. “

— Marshall Weinberg

6) Diversify your assets.

Diversify your assets.

“He (Graham) bought a little of everything. So he was widely diversified, which was not the style that I would go for.”

— Warren Buffett

7) Be willing to buy something no one else wants, cheaply.

Be willing to buy something no one else wants, cheaply.

“I think he talked about risk based on the fact that he wanted to buy something at less than $0.50 on the dollar. He just wanted to buy something that was undervalued.

He was very aware that he was going against the tide. He was buying companies that were trouble, he was willing to buy something that nobody else wanted.”

—Edwin Schloss, Walter Schloss’ son

8) Be an activist investor.

Be an activist investor.

“He believed that you could become an activist in Wall Street and benefit. A lot of companies were not operating on all their cylinders like they should, and you could push ‘em into doing more which would in itself benefit society.”

— Henry Schneider

9) BONUS: Graham on Wall Street consensus.

BONUS: Graham on Wall Street consensus.

Once, at a lecture, he was asked if Wall Street professionals were better at forecasting what would happen to market, and if not, then why, and here’s what he said:

“Well, we’ve been following that same question for a generation or more, and I must say frankly that our studies indicate that you have your choice between tossing coins and taking the consensus of expert opinion and the result is just about the same in each case.

Everybody in Wall Street is so smart that their brilliance offsets each other. And that whatever they know is already reflected in the level of stock prices for the much, and consequently what happens in the future represents what they don’t know.”

 
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About williamk82

William Kohlmann is a student at Grand Canyon University’s Ken Blanchard College of Business where he is earning his Masters in Business Administration with an Emphasis in Finance while working full-time for a leading financial institution. He is an Eagle Scout from Troop 105 of Stroudsburg, Pennsylvania, aspires to be an entrepreneur, and currently lives in Phoenix, Arizona with his beautiful wife, Krystal.
This entry was posted in Advice, Diversification, Investing, Risk Tolerance, Warren Buffett and tagged , , , , , , , , . Bookmark the permalink.

One Response to 8 Brilliant Lessons From The Investor That Taught Warren Buffett Everything He Knows

  1. Pingback: 8 Brilliant Investing Lessons from the Man Who Taught Warren Buffett : Insider Wealth Alert

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