What are the two main categories of readers for "The Intelligent Investor"?

Hi there, great to chat with you about this book. Right from the beginning of "The Intelligent Investor," Benjamin Graham clearly states that this book is not for speculators, but for genuine "investors." He distinctly divides these investors into two categories, and you can see which one fits your situation.

1. The Defensive Investor

Think of these investors as the “set-it-and-forget-it” crowd.

• Who are they? They are typically people who have demanding primary careers and are very busy, like doctors, programmers, teachers, etc. They don't want to – and don't have huge amounts of time to – watch stock tickers or analyze complex financial statements daily. For them, investing is about safely preserving and growing their wealth with minimal fuss, not the main focus of their life. Their top priority is “safety and peace of mind.”

• What should they do? Graham's advice for them is essentially like a "lazy investor kit":

  • Don't try to predict the market: Don't speculate on market highs or lows.
  • Build a simple portfolio: For example, split investments 50/50 between high-quality stocks and high-quality bonds (the classic 50/50 strategy).
  • Buy stocks of large, well-established companies: Choose industry leaders with solid finances, consistent profits, and a history of dividends.
  • Diversify: Don't put all your eggs in one basket – buy stocks from several different companies.
  • Invest regularly: Commit to investing a fixed sum regularly (e.g., monthly), regardless of stock price fluctuations, and stick with it long-term (commonly known as "dollar-cost averaging").

In summary, the goal of the defensive investor isn't to beat the market, but to obtain a satisfactory, average market return while sleeping soundly at night.

2. The Enterprising Investor

These investors can be seen as the “deep divers”.

• Who are they? They are willing and able to dedicate significant time and effort to investment research. They treat investing as a serious professional endeavor requiring specialized skills, akin to running a business. They possess substantial knowledge, experience, and analytical ability.

• What should they do? Graham believed that achieving above-average returns requires extraordinary effort. Enterprising investors can undertake more complex strategies:

  • Seek "bargains": Look for stocks priced significantly below their intrinsic value – Graham's famous "cigar butt" investment approach.
  • Research secondary companies: Unlike defensive investors who focus only on large blue chips, they analyze smaller companies with growth potential.
  • Focus on special situations: Look for opportunities in events like mergers, restructurings, or spin-offs.

Simply put, the enterprising investor is like a financial detective, relishing the process of unearthing market "gems" through personal analysis and judgment. However, this demands extremely high professional competence and strong psychological fortitude, as you might be isolated for long periods, or even be considered "wrong" by the market.

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To sum it up:

The brilliance of "The Intelligent Investor" lies in the fact that it doesn't give you a magic stock-picking formula. Instead, it first helps you "self-identify".

• If you are the “set-it-and-forget-it” type, be true to it and become a defensive investor, earning steady returns.
• If you are the “deep diver” type, and are willing to put in immense effort, then consider becoming an enterprising investor to pursue higher returns.

The most dangerous scenario is having the capacity and temperament of the "set-it-and-forget-it" type while constantly chasing the returns of the "deep diver." This often leads to failure on both fronts and substantial losses. Understanding which category you belong to is the crucial first step towards truly grasping this book and embarking on a successful investment journey.