The Intelligent Investor

Graham turns his attention to the “enterprising investor,” whom he defines as someone willing to dedicate time and effort to their investment activities. He says that the foundation of the enterprising investor’s portfolio should be similar to that of the defensive investor with a “division of his funds between high-grade bonds and high-grade common stocks bought at reasonable prices” (133). Beyond that, the enterprising investor has a wide choice of additional investment options.

Graham argues that the best way to regard these other options is through a “negative approach” (133). That is, his advice centers around categories of securities that the enterprising investor should avoid. These include preferred stocks, low-grade bonds, and foreign bonds. He also advises caution when considering new issues, initial public offerings (IPOs), and speculative stocks.

When considering low-grade bonds and preferred stocks, Graham warns the enterprising investor about the risks involved. He argues that “it is bad business to accept an acknowledged possibility of a loss of principal in exchange for a mere 1 or 2% of additional yearly income” (117). He stresses the importance of obtaining a sufficient

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