Graham calls the first approach “active” or “enterprising”; it takes lots of time and loads of energy. The “passive” or “defensive” strategy takes little time or effort but requires an almost ascetic detachment from the market.

As the investment thinker Charles Ellie has explained, the enterprising approach is physically and intellectually taxing, while  the defensive approach is emotionally demanding.

If you have time to spare, are highly competitive, think like sports fan, and relish a complicated intellectual challenge, then the active approach is up your alley. If you always feel rushed, crave simplicity, and don’t relish thinking about money, then the passive is for you.

Both approaches are equally intelligent, and you can be successful with either-but only if you know yourself well enough to pick the right one, stick with it over the course of you are investing lifetime, and keep your costs and emotions under control.

Graham’s distinction between active and passive investors is another of his reminders that financial risk lies not only where most of us look for it-in the economy or in our investment-but also within ourselves.

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