Intelligent investor: this is an investor "endowed with the capacity for knowledge and understanding."
Intelligent here is not to be taken to mean "smart" or "shrewd" or gifted with unusual foresight or insight.
The intelligence here presupposed is a trait more of the character than of the brain.
For example, a widow who must live on the money left her.
Her chief emphasis will be on the avoidance of any serious mistakes or losses, in the sense of conserving capital.
Her second aim will be freedom from effort, annoyance and the need for frequent decisions.
A woman in this position, with substantial funds, will not be satisfied to leave her financial affairs entirely in the hands of others.
She will want to understand - at least in general terms - what is being done with her money and why.
She will probably want to participate to the extent of approving the broad policy of investment, of keeping track of its results and of judging independently whether or not she is being competently advised.
This will be equally true of men who wish to throw the major burden of their investment operations on the shoulders of others.
For all these defensive investors, intelligent action will mean largely the exercise of firmness in the application of relatively simple principles of sound procedure.
These are not distinguished from the others by their willingness to take risks - for in that case they should be called speculators.
Their determining trait is rather their willingness to devote time and care to the selection of sound and attractive investments.
It is not suggested that the enterprising investor must be a fully-trained expert in the field.
He may derive his information and ideas from others, particularly from security analysts.
But the decisions will be his own and in the last reckoning he must rely upon his own understanding and judgment.
The first rule of intelligent action by the enterprising investor must be that he will never embark on a security purchase which he does not fully comprehend and which he cannot justify by reference to the results of his personal study or experience.