Risk Management

Benjamin Graham (May 8, 1894 – September 21, 1976), an American economist and professional investor, first defined risk as a permanent loss of capital. Considered the first proponent of value investing, his 1934 book, Security Analysis written with David Dodd, is considered the bible for serious investors.

Tenets:

• When a company is available on the market at a price which is at a discount to its intrinsic value, a "margin of safety" exists, which makes it suitable for investment

• Market values fluctuate above and below a company’s intrinsic value. Purchases above intrinsic value risk experiencing a permanent loss of capital when the valuation eventually reverts to intrinsic, as it always does

• Risk is inherent in any investment strategy and cannot be eliminated but can be effectively managed

• Our primary goal in the management of risk is to protect the portfolio from permanent impairment