Who is your worst enemy in markets? Here’s what Warren Buffett’s mentor Benjamin Graham says

Benjamin Graham, legendary investor and Warren Buffet’s mentor who popularised the concept of “value investing”, said that an investor is himself his worst enemy in markets, as enthusiasm on Wall Street almost invariably leads to disaster.

“The fault, dear investor, is not in our stars—and not in our stocks—but in ourselves,” Graham wrote in his introduction to the book titled ‘The Intelligent Investor’. According to the market expert, conservative investors acquire common stocks and then become exposed to the excitement and the temptations of the stock market.

What can deliver handsome rewards?

“We have seen much more money made and kept by 'ordinary people' who were temperamentally well suited for the investment process than by those who lacked this quality, even though they had an extensive knowledge of finance, accounting, and stock-market lore,” the market expert wrote.


Graham believed that a strong-minded approach to investment, firmly based on the margin-of-safety principle, can yield handsome rewards. He also highlighted the difference between speculation and investment in his book. He explained that while speculation is fascinating, but can be troublesome.

Have separate account just for speculation: Graham

“If you want to try your luck at it, put aside a portion— the smaller the better—of your capital in a separate fund for this purpose. Never add more money to this account just because the market has gone up and profits are rolling in. (That’s the time to think of taking money out of your speculative fund.) Never mingle your speculative and investment operations in the same account, nor in any part of your thinking,” he said.

Unlike an aggressive investor, a defensive investor is interested chiefly in safety plus freedom from bother. The defensive (or passive) investor will chiefly aims to avoid any serious mistakes or losses, along with freedom from effort, annoyance, and the need for making frequent decisions. On the other hand, an aggressive investor devotes his time and carefully selects securities. Graham explained that irrespective of their investment approach, investors need to remember that there are no sure and easy paths to riches on Wall Street or anywhere else.

Who was Benjamin Graham

Benjamin Graham is known as the father of value investing. He focussed on companies or businesses when they were trading below their intrinsic values, had high dividend yields and low PE multiples but had tremendous potential for the future.

He also taught investing for many years at Columbia Business School, where one of his students was the now billionaire Warren Buffett.

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