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The Story of How Graham's Strategies Became Bulletproof - Views on News from Equitymaster
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  • May 5, 2016 - The Story of How Graham's Strategies Became Bulletproof

The Story of How Graham's Strategies Became Bulletproof
May 5, 2016

You already know that Microcap Millionaires' strategies have been shaped by the teachings of Benjamin Graham. But what shaped Graham's strategies?

His rich and varied experiences, of course.

Graham had many experiences during his lifetime. But one experience from his early years, which I'd like to share with you today, would go on to have a profound influence on how Graham thought, invested, and strategised for the rest of his life. In fact, this experience is at the centre of many Grahamian investing philosophies.

I'm referring to the market crash of 1929.

Graham went to Wall Street in 1914. Remember, this is one clever guy we're talking about here. So not surprisingly, what followed were fifteen years of continuous market success for Graham. Now, fifteen years is a mighty long time. His success shows that the strategies and investing framework he used worked well.

But they were not bulletproof. Not yet.

During the period leading up to 1929, Graham knew stock prices were too high. He stayed away from the speculative favorites of the time. He had good investments. But he made one cardinal mistake: He borrowed money to invest. This meant that even though he made the right moves otherwise, how he had funded that investing turned out to be his Achilles' heel.

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