THE INVESTOR AND HIS NEEDS
NOT long ago a reader of The Spectator in a British colony wrote expressing a desire for guidance regarding the investment of his savings in securities which, while not of a speculative order, would give a better return than Government or municipal stocks What was asked for specifically was "some quite precise facts and hints about good investments to put money in." It is a reasonable request, which does not stand alone, and since it suggests a service which a paper like The Spectator can and should render, we have arranged to render it in future. The City articles in this journal week by week are, it can be claimed without fear of contradiction, second to none of their kind in reliability and prudence. They have dealt, and will deal, mainly with such questions as banking, public finance, money and currency problems generally. "Precise facts and hints" about investment stand in a different cat- egory, and demand different treatment. . Their writer must be a specialist concentrating on this field alone, and with some clear conception of the type of investor he . will find among his readers. All these considerations have been taken into account in arranging the artieleg which will appear as a regular feature in our columns, beginning in next week's issue, the first of 1987.
-Investment is a wide term, used too often to cover operations which deserve no better .description than siieetilation, though to determine the precise point at which the one runs into the other is an achieve- ment beyond human capacity—unless indeed the term investment is to be confined to securities bearing a fixed rate of interest and with such a backing behind them that loss or even i serious depre- ciation of capital can be ruled out of account. But legitimate investment covers a wider field than that, and it is fortunate both for lenders and for borrowers that it does. Most salary-earners very rightly make it their practice to live well within their income, and in the main they desire to do something more enterprising with their savings. than leave them on deposit at a low rate of interest in . their banks. The invention of the:joint-stock com- pany, with limited liability has . given them their opportunity, and they very wisely, take advantage of it. .Industrial enterprises great and small today are run on borrowed money, and even the man with a very few hundred pounds of capital is enabled to share in the prosperity of some sound enterprise at home or abroad in which -he may decide' to invest.
His problem, of course, is to decide what is a sound enterprise. In regard to almost every industrial concern there Must always be some speculativ. e clement, however insignificant, for no one' s, in a position to predict• what its next year's profits may be in View of the variety of factorsa strike, foreign tariffs, a change in the public ,taste---that may affect them. The ordinary investor's difficulty is. that he rarely has sufficient knowledge of the potentialities of the various investments into which his money may be put, and he is often left with the choice between taking the well-meant but unreliable advice of some personal acquaintance, or leaving the whole matter to his broker, or (in recent years) putting his money into one or other of the so-called "fixed trusts," which by enabling the small investor to Spread his- funds over a number of selected securities —in other words to put his modest eggs into a number of different baskets—do undoubtedly render him ,a real service. Of these three possibilities the first is clearly the most unwise. The second_ is more likely to bring him gain than loss, but the, average broker cannot be expected to be constantly.reviewing a small client's holdings and advising him how he may alter them to his advantage. The fixed trust meets the requirements of the man or woman who desires to put a small. capital where it will be reason- ably safe and bring in a reasonable return, and can be, safely left and' forgotten.
But there are . many small investors who like to take an intelligent interest in their . investments, watching the progress of the concerns in .which they have money and deciding when it is wise to MONT out of one into something else. Provided they stop short of imprudent adventures they are- treating investment as it should be treated.' On such a matter there can of' course be no geniialisation. The needs and the aims of the most judicious investors—to leave frank speculation, completely out of account—are, of the widest variety. Theie are trustees whose . field of investment is rigidly limited but yet covers sonic stock distinctly more lucrative than others ; there are persons living solely on invested _capital, who therefore are justified in taking no appreciable .risks but at the same time need, any increased return that may be consistent with safety ; • them, are those who, living mainly on earned incomes, • can legitimately be rather more venturesome. None of them could or should place their money at random or on the strength of un- qualified advice. Such advice as may be given in The Spectator will be supported by citation of the facts on which it is based, and the recommenda- tion of shares promising inflated dividends or swift appreciation will be left to other . journals. The man with money to invest may be well satisfied if he can get reasonable security and a 5 per cent. return in present conditions.
There is one field in which the average investor stands in particular need of expert guidance. If he is wise he will both grade his investments— putting a portion of his money into gilt-edged, a portion into safe debentures or preference shares and a certain residue into something more .specula- tive—and spread them geographiCally. There is nothing unpatriotic in foreign .lending. On the contrary, the British export trade very, largely depends on it. British money lent tobnild Argentine railways and develop Argentine estates ,.has been the„basis of our trade with that country... Still less. can there be any • reason for avoiding. Dominion investments. The vast unreclaimed areas in Canada and South Africa and Australia 'need money to develop them, and in those and Other Dominions- and Colonies Many industrial concerns atso haVe-hopefutpropeets before them as the general purchasing-power of the population grows. But the investor must choose wisely here, and he rarely has - the requisite know- ledge. In this field particularly notes on the possi- bilities of the moment should be of value. Such notes we shall include from time to time in our weekly articles, with one guiding principle governing them all—the provision of information designed to enable the average reader of The Spectator to combine reasonable security with a reasonable return. Their writer has neither the qualifications nor the desire to indicate short cuts to sudden wealth.
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