The Enterprising Investor

The determining trait of the enterprising investor is his willingness to devote time and care to the selection of securities that are both sound and more attractive than the average. Over many decades, an enterprising investor of this sort could expect a worthwhile reward for his extra skill and effort in the form of a better average return than that realized by the passive investor.

- Benjamin Graham in The Intelligent Investor

I think of an enterprising investor as entrepreneurial.  A good entrepreneur is a value investor.  He sees value where others do not.

A small business consultant once told me that the job of the entrepreneur is to take risk out of the business.   Entrepreneurs are often thought of as visionary risk takers.  However, that is not necessarily the case if you think about the great entrepreneurs.

Like great entrepreneurs that saw an opportunity where others did not, the enterprising investors sees value where others don’t.

Like the good entrepreneur that reduces risk in his business by being fiscally conservative and focusing on the core business, the enterprising investor can reduce his risk by being fiscally conservative and focusing on deep research.  The entrepreneur is contrarian and the enterprising investor is contrarian.

Like the good entrepreneur that doesn’t limit himself to a desk job at a large corporation, the enterprising investor doesn’t limit himself to a dogmatic investment process.   He adapts.

This doesn’t mean that the enterprising investor neglects his principles.  On the contrary, the enterprising investor conducts his business in a disciplined manner around his principles.  The principle that the value of an investment is determined by its cash flows doesn’t change.  How you determine and arrive at that value can change depending on the circumstances that surround the investment.  Whether the investment is a bond, stock, real estate or a farm, the enterprising investor remains focused on the value principle.  The extra work he puts into determining how to value the investment is worthwhile over time.

Due to the power of compounding, this extra work rewards the enterprising investor that approaches his investments with a disciplined research and valuation framework.

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One Response to The Enterprising Investor

  1. JW says:

    Keyword: discipline. Nice post.

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