Ben Graham vs.Harry Markowitz: Battle of the Investing Heavyweights

I am currently in B-School and have studied about investing over the last decade.  I have read all kinds of schemes and theories about investing.  None of which can compare to who I consider the greatest investors and theorists: Benjamin Graham, Warren Buffet, Harry Markowitz, and John C. Bogle.  The first two are the leaders in the value investing strategy (active), while the second set compose of highly regarded as the fathers of index investors (passive).  I believe they are both good strategies to follow and have their place depending on your investing mindset.

For the more "active" investor I would recommend reading "The Intelligent Investor" as you will be following in the foot steps of Warren Buffett.  The basics of value investing is the idea that you find large well established companies that for some reason or another are trading far below their actual value.  I actually stumbled blindly into this strategy when I first started investing in high school.  I had saved up my money and wanted to start investing so my dad setup a Schwab brokerage account.  The first stock I invested in was Nike which had dropped a significant amount.  My strategy at the time was that they were releasing their new ultra light sneakers and the Olympics was coming up soon, which I thought would significantly increase in value.  I well over doubled my money with two years.  The next stock I picked was apple before the 7:1 split which I picked up at what I found at the time to be high, $92/ share.  I kick myself sometimes for selling it after I tripled my money.  Well you get the point.  This is how value investing works and as you can see even a naive kid can stumble into this and perform extraordinarily well.  The major theory behind value investing is buy when people are selling and sell when people are buying or in simple common sense terms buy low and sell high.  Due to the strategy of buying when people are selling and holding the stock until it people realize how cheap it is priced requires an iron fortitude and very little emotion behind the trades.  It is a strategy with a simple basis, but difficult execution.

If you prefer "passive" investing I would refer you to this quick ten minute video and researching more into the strategy.  It is a new strategy I am employing as I have been forced more into a passive investor role as work and school leave little time for hobbies now.  I have found it to be an effective style of trading and can definitely see the benefits.  This is the strategy I would recommend to the majority of the population.  By tracking indexes and employing a predetermined return/risk this is a perfect setup for a 401k account.  If you are choosing and balancing your own portfolio then I would suggest reading more into the Modern Portfolio Theory in order to choose your own desired setup.  Otherwise a target date account such as VFFVX, or using automated traders from Betterment, Future Advisor, Schwab Intelligent Portfolio, or many of the other robo advisors you can read about in this article.

If you are using Motif Investing, which I highly recommend, I have already setup two portfolios employing these strategies called Big Business Dividend and Growth and Dividend Machine for you to see.  I also have this portfolio setup based on a market I see set for exploding: online media.  If you don't have an account if you join using this link you will receive $100 after investing your first $1000.  You can think of it as an automatic 10% return on your money. 

I will make more articles and videos in the future better detailing the fine details of how to select the stocks and analyze them to support these strategies.  For the purposes of this article though I just wanted to provide some background into these theories.

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