Investors and Their Investments

SOME folks think we are no better off now when there are so many different forms of investments than when there were only “governments” and “rails.” They were the “good old days.” Fortunately most of the investors of to-day don’t know too much about those times.These are the good days, because these are the days of wide-spread information. There is no secret path to the rudiments, at least, of investment knowledge. It is an open road. Any one who is willing to study can travel it.

Among our many modern forms of investment, there are United States and foreign government bonds. There are state, county, and city bonds. There are corporation bonds and stocks in the industrial group. There are the newer public utility securities. There are the old-fashioned real estate mortgages and the newer-fashioned real estate bonds. Also, there are the still newer investment trusts. Along the road are “service stations” of both information and advice. As examples, see the financial advertisements in this magazine. These advertisements are the outward and visible sign of the change that has come over the investing of money. First one went to one’s lawyer or local banker for all kinds of advice, including investment logic. Each made a brave effort to serve. Meantime the financing of businesses through stock and bond issues grew apace and then investing of money gradually became a business of itself. Lawyers largely dropped out of the picture and became valuable clients themselves of the specialists in bonds. Some bankers pondered over the bond business, and hesitated to go in, fearing a drain on deposits. Individual bond houses multiplied here and there. The bond salesman became a factor. The larger banks went right in and organized their own Bond Departments. Some established large subsidiary investment companies. To-day investment banking is one of the country’s most attractive businesses and makes a stronger appeal to young men than almost any other. In a recent address President Hayes of the Investment Bankers Association referred to his business as “the investment banking profession.”

Just look at the development of the machinery for investment making. The New York Stock Exchange has 1,100 members. Those men, closely knit, highly disciplined, carefully watched, control the destinies of over 600 firms,—473 in New York City and 131 elsewhere. Their activities scatter out still farther through 962 branch offices in 292 cities in 41 States and territories and four foreign countries. This Exchange is certainly the most highly organized distributing machine in existence. Its “merchandise” (of course, it has nothing to sell—it is only a market-place) consists of some 2,500 stocks and bonds, which are “ listed ” for trading. In about one-third of these securities there is more or less of a market day after day. They count it a rather poor five-hour session, which does not record transactions in more than 2,000,000 shares of stock, and the total daily bond sales are likely to go over $10,000,000.

The investment business, as distinguished from the trading activities of the Exchange, was unorganized until the Investment Bankers Association of America was formed in 1912. Its more than 700 member houses handle the bulk of the investment business of this country, and figure seriously in much of the rest of the world’s financing. It is a studying and a working organization. It has some 20 standing committees, consisting of 225 active investment bankers, considering every phase of the problems of origination and distribution of securities. It is one of American business men’s most effective and intelligent organizations.

The announcements of banks and bond houses which offer their service in the investment of money are included in this magazine by way of suggestion to readers.

No. 6 in this series will be “How to Buy Securities by Mail