PREFACE

AMERICAN investors, under our crude and careless methods of finance, have lost incalculable amounts of money by purchasing bad securities. Not alone has the "get-rich-quick" company preyed upon the investor, but hundreds of millions have been lost in the bonds and stocks of railroad, public-service, and industrial corporations-securities often issued under the auspices of responsible and respected banking houses, but which, either because of defects in the securities which a careful preliminary examination would have disclosed, or because of bad financial management, have failed to come up to expectation.

Made wise by costly experience, the American investor has grown critical in recent years. He is disinclined to speculate. He looks for security before income. He asks many questions concerning assets, earnings, the quality of management, the strength of franchises, the extent of monopoly control possessed by the companies into which he puts his money. It is no longer easy to victimize

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him with junior lien mortgage bonds or with inflated stocks.

Investment bankers have also learned that a reputation for sound judgment as to the value of the securities which they offer is their greatest asset. Competition for the investors' money is growing constantly more strenuous. Salesmen are quick to seize upon the weak points in the securities offered by other houses. The banker cannot afford to take chances by selling bonds of whose merits he has not thoroughly satisfied himself.

Out of the growing caution of the investor in buying securities, and the desire of the investment banker to take no chances as to the quality of what he offers, has been developed a body of sound financial knowledge which is constantly being utilized to increase the security of investments. Improvement has proceeded so far that it is now possible to offer the investor thoroughly safe bonds which will yield a much higher rate of interest than was, until recent years, thought consistent with security.

This book, the outgrowth of a series of magazine articles which has followed a fairly consistent plan of arrangement, aims to present some of the

accepted opinions as to what constitutes a safe investment. The author claims no special ability in indicating sound investments, but he is confident that close adherence to the cautions laid down in the following pages will keep the investor from buying investments which are unsound.

PHILADELPHIA, 1914

EDWARD SHERWOOD MEAD