Defensive vs. Enterprising Investor - Graham's Playbooks

Graham's definitions

"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." - The Intelligent Investor, Ch. 6
"The defensive investor... has no special advantages or expert knowledge that he can bring to bear on the market." - The Intelligent Investor, Ch. 4

Graham offered two paths: a simple, quality-first approach for defensives and a work-heavy, selective approach for enterprising investors.

Defensive investor checklist

• Strong financial condition (current ratio, low debt).
• Earnings stability (10-year record).
• Dividend record (10-20 years).
• Moderate growth and valuation (avoid high multiples).
• Diversification across at least 10-30 names.
• Minimal trading; focus on long-term holding.

Enterprising investor checklist

• Willing to research special situations, small caps, and asset bargains.
• Applies margins of safety via NCAV discounts or low multiples on stable earnings.
• Demands balance-sheet strength; avoids heavy leverage and dilution.
• Concentrates more than defensive, but still diversifies (10-20 names).
• Actively rechecks filings, catalysts, and valuation gaps.

Blended approach

• Core: defensive holdings sized for stability.
• Satellite: small enterprising sleeve with strict rules and caps.
• Keep records and reviews separate to avoid rule drift.

Takeaways

• Choose the path that fits your time, skill, and temperament.
• Defensive = quality, fair price, breadth; Enterprising = work, selectivity, safety.
• Mixing is fine if you keep boundaries clear and sizes modest for the enterprising sleeve.