• Kevin Burrows

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

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