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In his book ‘The
Intelligent Investor, published in 1949, Benjamin Graham made a
calculation based upon investing in the American share index, the Dow
Jones Industrial Average (DJIA) over a period of twenty years.
According to his estimation, if one had begun investing monthly savings
of $15 in 1929, by the beginning of 1949 the total savings of $3,600
would- despite the stock market crash, global economic crisis and the
resulting 2nd World War- have increased to a sum of $8,500. Going by
this method, the achievable rates of return would be, on average, just
over 8% a year. It should also be noted that during the investing
period, the DJIA dropped from 300 points in January 1929 to 177 points
towards the end of 1948.
Every investor’s goal should be to exceed the benchmark rate of return
by at least a few percent. However, many aim to simply replicate the
market rate of return by investing regularly in the index whilst
minimising transaction costs. The following overview of investors, who
have proven their investment capabilities over the years, show what
kind of returns are possible on a long-term basis. These essentially
distinguish themselves through the main thing they all have in common
(See also: The Super Investors by Graham-and-Doddsville); all the
investors believe that the advantage lies in the difference between the
intrinsic value of a company and its market price.
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