How to Buy Securities by Mail

INQUIRIES come to this magazine from readers asking how they may buy bonds by mail.

In answer, emphasis is placed, first, on care in selecting the investment house so as to be sure it comes under Judge Gary’s definition of one which is “well and favorably known,” and, secondly, on the great value in the investors themselves knowing as much as possible about various forms of securities so that they will not approach the buying point without having personally at least some working knowledge of investments, Reading a good book on the subject (like “Principles of Bond Investment”) and then studying the booklets and circulars given freely by the bankers, will be a “very present help” all through one’s investment life.

The need for a relationship with bond houses which can be maintained through correspondence arises from the fact that investment bankers are located chiefly in the larger centers, yet there are many actual and potential investors who live in the smaller cities and towns, which are not usually covered regularly by salesmen. That desk-book of bond houses, “Security Dealers of North America,” lists 650 places as having resident investment dealers, including their branch offices, but there are 775 cities of 10,000 or more population in this country, and there are some 700 others which have from 5,000 to 10,000 people. Fortunately, bond houses already have a large mail clientele and many investors are served in this way who seldom go to bankers’ offices or see salesmen. Many houses have well organized correspondence departments with competent men and women studying the investment problems of particular customers, analyzing their security holdings, keeping them advised of interesting changes in conditions, and trying to visualize those customers as a matter of every day business.

Generally speaking, there are four ways of making purchases by mail: the investor writes either for suggestions for the investment of money, or asks for a specific bond which is desired. In the former case, the bond house sends detailed information. In the latter case, the investor requests a statement of the cost of this bond figured as of a certain date so that there will be time to receive this statement, and send the remittance before that date in order that the accrued interest may be paid as well as the amount of the principal. Upon receipt of this remittance the bankers send the bond by registered mail, insured.

In other cases, the investor desiring a $500 bond sends $515, or some such amount, with his first letter and whatever difference there is in the sum due on the day the bond is delivered is settled by a remittance from the debtor side.

In still other cases, investors request the bond house to send a certain bond to their local bank with draft attached. When the bond reaches the bank, the Cashier notifies the investor, who gives his check for the exact amount required; the banker remits the amount to the city and delivers the security to the investor.

Another method is the partial payment plan. The investor who wishes to buy a $1,000 bond sends an initial payment of $100 to the banker. For nine months thereafter a remittance of $100 is sent each month, and when the final payment has been received, together with the interest as it has been worked out, the desired bond is shipped as in the first case.

As to the actual transfer of the money, usually the investor gets from his local bank a draft on its New York or Chicago correspondent and sends it to investment house. Certified cheeks or United States money orders are, of course, equally acceptable. The chief trouble usually is in knowing exactly how much to remit. After one’s relationship with a reliable house is established the matter of remittance becomes just a detail.

Sixth in a series of articles on Financial Advertising