of course, in accord with investment conditions, but in general, as this table has been arranged, these yields increase from top to bottom. Since there are various grades of issues in the subgroups of this list, the investor should secure from reliable financial publications and institutions the more detailed information needed at the time of purchasing. II. Buying Periods and Selling Periods It is wise to shift from one type of security to another as prices fluctuate. A comparison of the various grades of securities shows that, whereas all securities fluctuate in price, certain classes fluctuate much less violently than others. Giltedge bonds depreciate but little as a rule during a panic whose violence causes fluctuations of perhaps $30 to $50 per share in the common stocks of mining and industrial companies. The average investor pays little attention to these price. changes, his usual practice being to place his securities in a safe-deposit box until they mature or to sell them when alarmed over the business outlook or in need of money. Nevertheless, the plan of selling out during a bull period his lower grade securities and investing the proceeds in the giltedge division and during the following period of depression reversing the process, is entirely feasible and wil net the investor a profit well worth his consideration. III. Do Not Speculate The investor who with discretion changes from one type of security to another when prices fluctuate is certain to profit. Yet he runs the risk of becoming so impressed by the swing of prices that the sense of ownership and the self-control which accompanies it are lost and he becomes an out-and-out speculator. The investor's attitude toward his securities is that of ownership; the speculator is interested primarily in taking advantage of price fluctuations and he cares little or nothing for permanent ownership. An abundance of experience has proved this statement true: Speculation is the business of persons who know and the amateur who tries to play it without experience and careful study will lose. The business man could learn to speculate, and no doubt successfully, but he already has chosen his occupation and changing to a career on Wall Street would scarcely be worth his while. Let him stick to his own line and, be it in merchandising, railroading, or manufacturing, as an expert there take shrewd advantage of those changes which yield profits. In the field of the skilled speculator, which is outside his specialty, let him maintain self-control and refuse to stake hard-earned money on his ability to play another man's game. The lamb in Wall Street is attempting against heavy odds to play another man's game, which explains why, sooner or later, he always is shorn. IV. Slow but Sure Investments The itch for high yields has cut short many an investor's career, because it emphasizes haste at the expense of orderly progress. Consider a compound interest at four per cent: 'Ten dollars deposited weekly in a savings bank will earn at four per cent $7.80 in interest, making a working capital of $527.80 at the beginning of the second year. If the plan is continued, at the end of the second year the total has become $1,076.70; at the end of the fifth year $2,858.60; at the close of the tenth year $6,336.50. In fifteen years this steady saving of ten dollars a week amounts to $10,567.90; in twenty years $15,715.90; in twenty-five years $21,979.20. This sum in itself even though no further deposits were made would earn $879.10 a year. Yet forty dollars a month saved would represent no serious effort on the part of great numbers of men. Supposing the diversified investment that has been recommended yields only five per cent and that nothing additional is gained through appreciation, a young man who commences at the age of twenty-five to invest $1,000 annually will build up the following snug fortune: Theoretically, get-rich-quick methods are an easy road to wealth. Actually, the amateur who attempts such methods is shorn of his savings while the less spectacular but systematic investor builds up a comfortable competence. When tempted to "take a flyer" put compound interest to work! V. Avoid All Get-Rich-Quick Schemes The post office department estimates that for a long time the people of the United States have lost by fraudulent schemes carried on through the mails $100,000,000 annually. Worthless real estate developments, fake oil wells, "worldbeating" inventions, "bonanza" mines, and the like, with gaudy prospectuses and extravagant claims, have duped generations of credulous investors. In their attempts to get something for nothing these victims of the get-rich-quick schemer, it is needless to say, have ignored sound information, for the truth as it is never stirs the fancy of such gullible people. They are the dupes in reality of their own cupidity and ignorance. The more experienced the investor the better qualified he is to deal in speculative issues such as industrial common stocks, junior bonds, securities undergoing reorganization, and mining stocks. Yet strange as it may seem such skilled investors are most in the habit of buying issues of high grade, whereas the unskilled are found putting their money into the most risky issues. It seems to be a case of fools rushing in where wise men fear to tread. Occasionally the rash speculator will quite by accident make a considerable winning, but the chances are hopelessly against him and in the long run it is not he but the conservative investor who amasses a competence. EXERCISES Some Personal Questions as to Investing Money George Horace Lorimer in "Letters from a Self-Made Merchant to His Son," says, "Whenever anyone offers to let you in on the ground floor, take an elevator to the roof at once." How much have you lost so far by investing in mines, patents, rubber plantations, etc.? Have you personally known anyone who has so parted with his money? Have you personally known anyone who made a profit on such ventures? Is it wise to try to buy when the market is low and sell when it is high? How much time should be devoted to watching the markets for this purpose? Would a man's employer be favorably impressed by this outside interest? Why not? Enumerate some investments that are safe. Some that can be readily turned into cash. How high a rate of interest or of dividends can be had in moderately safe securities? What is the objection to putting money into mortgages on real estate? Into loans on collateral? Into investments on real estate? In Francis Cooper's work on "Financing an Enterprise" a chapter is devoted to "The Investor's Questions." These questions are comprehensive and are planned to cover broadly all those points upon which the investor has a right to be informed. Lack of space precludes their inclusion here, but it may be said that anyone reading that chapter before investing will be astonished to find how much he should know and how little he has been told of the essential matters relating to the proposed investment. What are the advantages of so-called "slow investments"? CHAPTER XXII THE FINANCING OF A BUSINESS The ideal conditions for the financing of an enterprise involve a good proposition, well presented at the right time to people who have money to invest, by a man who commands their business and personal confidence.-FRANCIS COOPER. Where the Real Profits Are The chapters which have preceded deal with matters which while essential are often merely stepping stones toward that all-important matter for the young business man, i.e., the financing of a business. The three essentials of a successful enterprise, it may be recalled, are: I. A sound undertaking. Having schooled himself in the A B C's of finance—the careful saving, thrift, and scrutiny of expenditures—and having learned the investor's viewpoint through first-hand experience, the young business man now turns to the problem of obtaining sufficient capital with a considerably increased as surance. Methods of Financing When a business man has the means it would seem natural for him to finance out of his own funds any enterprise in which he is interested. Yet cautious and conservative business men do not always care to do this. A man may believe in a proposition, and he may feel sure the chances are all in its favor. He knows, however, that the best laid plans of men and mice |