Broader implications of adopting a sound investment policy

Investment policy, as it has been developed and taught by Benjamin Graham, depends in the first place upon a choice by the investor of either the defensive (passive) or aggressive (enterprising) role.

The aggressive investor must have a considerable knowledge of security values - enough, in fact, to warrant viewing his security operations as equivalent to a business enterprise.  

There is no room in this philosophy for a middle ground, or a series of gradations, between the passive and aggressive status.

Many, perhaps most, investors seek to place themselves in such an intermediate category; in our opinion that is a compromise that is more likely to produce disappointment than achievement.

It follows from this reasoning that the majority of security owners should elect the defensive classification.

• They do not have the time, or the determination, or the mental equipment to embark upon investing as a quasi business.   
• They should therefore be satisfied with the reasonably good return obtainable from a defensive portfolio, and they should stoutly resist the recurrent temptation to increase this return by deviating into other paths.

The enterprising investor may properly embark upon any security operation for which his training and judgement are adequate and which appears sufficiently promising when measured by established business standards.


Benjamin Graham
The Intelligent Investor