fall below 92. The speculator who held them might have to raise another $2,500 of margin. He might be forced to sell a part of his holdings to get the necessary margin to protect the remainder, but his loss need not be total. So long as interest on the debentures is earned, the fear of bankruptcy to follow the non-payment of interest will constrain the directors to protect the bonds. So the price of the debentures, as I have said, will not get down to 90, although the stock might fall to 45 or even lower.

Another method may be suggested whereby the spice of speculation may be injected into the nourishing but less appetizing dish of investment. This is the instalment plan of purchasing stocks. By this method, assuming that in three years you can save $15,000, and that you consider a certain stock, Erie 2d preferred, for example, an attractive purchase at 40. You believe, from study or advice, that within three years Erie 2d preferred will go to $70 per share. You want to profit by your conviction, to make the largest possible profit consistent with safety. You want to invest in Erie 2d preferred on margin, but you do not want to risk the loss of your capital. Assume that you have $1,500 to start with, and that you can save

$13,500 more in three years, at the rate of $375 a month. You make a contract with your broker to buy 375 shares of Erie 2d preferred at $40 a share, $1,500 down, and $375 a month for 36 months. When the broker makes this contract with you, you are safe against being sold out, so long as you keep your agreement. Erie 2d preferred may drop to 30 the day after the contract is signed, but the broker must hold the stock for you and deliver it to you when you pay $13,500, either in the instalments stipulated or in larger sums.

Now suppose the Goddess of Chance, not being able to get at you, sheltered behind your instalment contract, to do you harm, turns propitious and Erie goes up to 50 the month after your contract is signed. You have more than doubled your money, for you can sell your 375 shares for $18,750, pay your broker the $13,500 you owe him, plus commission and interest, and have about $3,500 in place of your original $1,500. If this method is applied to the purchase of dividendpaying stocks which will produce an income to offset the interest, stocks which have a solid basis in assets and earnings, and which you would be glad to hold as permanent investments, there is no valid criticism to be made against it.

II

STOCKS OR BONDS

WE turn now from the subject of speculation, the purchase or sale of securities to make a profit from their rise or fall, to the subject of investment, the purchase of securities to receive the interest or dividends which they pay, and the first question which we encounter is the choice of securities. Shall the investor buy stocks or bonds?

"Give me a seat in the front row," said an investor to his banker. "No stock, no real estate, no equities, for me. I do not want to look over the shoulders of the audience. I want the front row. Put my money into bonds."

This is the richest nation in the world, and, next to France, the most thrifty. In a normal year the net income of the American people, after paying most liberal living expenses, is far in excess of their operating expenses. An enormous amount remains for investment. What becomes of this money? A large amount of this money is put into savings banks. A large amount goes into insurance. A

still larger sum is put into enterprises of various kinds which have stock for sale. Some goes into real estate, and a constantly increasing fraction into bonds.

It has been estimated that on the average a quarter of a billion dollars a year, and the real figures are probably higher, is lost in bad investments; sunk in margins on the stock exchange; donated to the brood of mining and industrial schemes whose promises are gold, and whose performances are chaff and stubble; invested in town lots in some "thriving industrial suburb"; or even used to purchase on margin standard railway and industrial stocks, which seem to advance only long enough to inflict heavy losses upon those who purchase them for still further gains. These are the vast losses in the game of business hazard, where the dice are always loaded and the cards are always marked.

On the other hand are the timid ones, who buy the obligations of the government, who put their money into savings banks or into life insurance, whose most daring flights are the purchases of the homes in which they live. These are recruited either from the anæmic or the dyspeptic, or from the burnt children who, as a result of sad experi

ence, dread the fire. Between these two classes are the institutional buyers of bonds; the insurance companies; savings and commercial banks, who purchase as trustees for their policy-holders and depositors, taking a liberal toll for their service; and the individual bond-buyer, the man who is intelligent enough to buy his investments at first hand, and, at the same time, sufficiently conservative to decline to participate in the risks of business.

"What is a bond? How does it differ from a share of stock? Why does it offer a safer place for my savings than a savings bank or a trust company, while at the same time allowing me a moderate share in the profits of business?" These are questions often heard, but seldom clearly answered.

A bond is a promissory note, a contract to pay money, executed and issued by a corporation, either public or engaged in private business, and bearing interest at 4, 5, or 6 per cent., according to the location of the borrowing company or the business in which the corporation is engaged. The payment of this promissory note is usually secured, principal and interest, by a second agreement, executed between the borrowing company and a