Book Summaries Business

Chapter 7: Portfolio Policy for the Enterprising Investor: Positive Approach (The Intelligent Investor)

An enterprising investor wants to achieve a higher than average rate of return. There are 4 ways in which this type of investor can go beyond the defensive investor. . Buying in low priced markets and selling in high priced markets, buying growth stocks, buying bargain issues, and buying “special situations”.

The enterprising investor can divide his portfolio differently from the 50 percent stock, 50 percent bond/cash plan of the defensive investor. An equity allocation for the enterprising investor can range from 25 to 75 percent.

Growth stocks are usually many times overestimated by the markets.

To buy bargain issues, the enterprising investor needs to find stocks that are undervalued, due to disappointing earnings or general disfavor. Usually, a good buy is a well-established company priced well below its average historical price and previous average price/earnings ratio.

The final option for the enterprising investor would be to find a special situation, where a small company would likely be acquired by a large company.

In the end, you cannot have it both ways. You must choose, either to be a defensive investor, or an enterprising investors. There is nothing in between.

"A gilded No is more satisfactory than a dry yes" - Gracian

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