Investment: Four Benjamin Graham business principles

“Investment is most intelligent when it is most businesslike,” Benjamin Graham said in his book The Intelligent Investor.

“If a person sets out to make profits from security purchases and sales, he is embarking on a business venture of his own, which must be run in accordance with accepted business principles if it is to have a chance of success,” said Benjamin Graham, the father of value investing.

So what are the four sound business principles?

(a) “Know what you are doing – know your business “

(b) “Do not let anyone else run your business, unless (1) you can supervise his performance with adequate care and comprehension or (2) you have unusually strong reasons for placing implicit confidence in his integrity and ability” For the investor, this rule should determine the conditions under which he will permit someone else to decide what is done with his money.

(c) “Do not enter upon an operation – that is, manufacturing or trading in an item – unless a reliable calculation shows that it has a fair chance to yield a reasonable profit.”

(d) “Have the courage of your knowledge and experience. If you have formed a conclusion from the facts and if you know your judgment is sound, act on it – even though others may hesitate or differ.” In the world of securities, courage becomes the supreme virtue after adequate knowledge and a tested judgment are at hand.