“We must learn our limits. We are all something, but none of us are everything.” — Blaise Pascal

From the outset the Hybrid Investor is very similar to the Passive Investor. You leverage the power of Index Funds. Where the two differ is that you are actively pursuing an investment education with the Hybrid approach: teaching yourself finance and business basics, developing a multitude of mental models, devouring countless books and business news. The purpose being to eventually practice a combination of Passive and Enterprising investment; hence the Hybrid Investor.

• Requires time to hone a strong investment aptitude
• Has the potential to never outperform the market
• Has the potential to underperform the market
• Potential for large losses

“The enterprising investor, by definition will devote a fair amount of his attention and efforts toward obtaining a better than run-of-the-mill investment result.” — Benjamin Graham, ‘The Intelligent Investor’

The Enterprising Investor is who many retail investors strive to become and in pursuit deal blow after blow to their financial well being. It is important we draw a bold line between our definition of an Enterprising Investor and what you might deem an Enterprising Investor; as you may be talking about a Speculator.

Benjamin Graham has done such a fine job of explaining what it means to be an investor and what it means to be a speculator, that I am forced to quote him at length.

“An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.”
– Benjamin Graham, ‘The Intelligent Investor’

Compare that with the purchase of a few shares of stock by an inexperienced member of the public who has some largely emotional conviction that they will be able to profit from their “investment”.

“…in the easy language of Wall Street, everyone who buys or sells a security has become an investor, regardless of what he buys, or for what purpose or at what price, or whether for cash or on margin.”

Even if you understand the difference between Investing and Speculating, but still want to speculate, heed to this advice:

“Speculation is always fascinating, and it can be a lot of fun while you are ahead of the game. If you want to try your luck at it, put aside a portion- the smaller the better- of your capital in a separate fund for this purpose. Never add more money to this account just because the market has gone up and profits are rolling in. Never mingle your speculative and investment operations in the same account nor in any part of your thinking.” — Benjamin Graham, ‘The Intelligent Investor’

Now that speculation’s been taken care of, lets talk about becoming a real Enterprising Investor.

“Most of us have no chance of being as good as the average in any pursuit that others practice for hours to hone their skills. Anyone, however can be as good as the average in the stock market with no practice at all.” — JeremySiegel, ‘Stocks for the Long Run’

The passive investor is the ideal investment approach for most of the people reading this. The passive investor will guarantee themselves average returns by investing in Index Funds and therefore will never do worse then the market; but also never do better.