Finance
Industrial Shares
IT may be doubted whether there has ever been a time when it was more difficult for the investor to determine the probable course of market movements ,and.securities. On the one hand the prospect of anything in the nature of a European conflict involving the Great Powers may well be sufficient to restrain either investors or speculators from opening commitments on the Stock Exchange. On the other hand, apart from , international politics there has seldom been a time when conditions looked more promising for a further rise in many securities and especially perhaps in industrial shares. It is true that many of the leading industrials have already advanced very considerably while gilt-edged securities have reached points during the present year giving a meagre yield to the investor. Nevertheless the forces responsible for the rise which has already taken place continue to be almost as strong as ever.
FAVOURABLE FACTORS.
The rate for Bank deposits is still only per cent., thus driving the investor almost perforce to the stock markets only to find however a great scarcity of securities giving anything like an adequate yearly income. More- over this scarcity of investments has been emphasised by the ban on Foreign Loans of almost all descriptions, while there is even a very considerable control with regard to the volume of new Home securities of the Trustee type. All these influences have combined to favour an upward movement in securities and the con- tinuance of the rise has also been helped by the fairly reasonable prospects of a still further expansion in home trade, and especially in the iron and steel_ in- dustry, to say nothing of the manufacture of aircraft of all kinds. The figures of unemployment continue to be encouraging while, rightly or wrongly, there is a general expectation that the iron and steel and possibly other industries are likely to be quickened by Government orders for " Defence," to say nothing of Housing Schemes. Not only so, but latterly there have been definite signs of better conditions in the United States and any increase of prosperity in that country usually has a stimulating effect in other directions.
' TUE SMALL INVESTOR.
Those who are behind the scenes and -are able, or believe that they are able, to select the shares of under- , takings most likely to be affected by the developments • of the near future are doubtless making their own selec- tions and are hoping for good results either from actual dividends or from an increase in capital values. A vast number of small investors, however, who are not in the way of obtaining special information of this character and who, moreover, are chiefly anxious tQ secure the maximum amount of income consistent with the minimum amount of risk, will probably prefer ti) spread their risks by obtaining interests in more than one industrial concern. In the case of the very.. small' investor, however, this is not an easy matter to accom- plish, for an individual say with £100,, or a very fewy, hundreds to invest would probably find it both cumber... some and expensive to acquire a very few shares in, say, twenty different industrial concerns.
FIXED TRUSTS.
It is, of course, to provide for investors of. this class that the Fixed Trusts—which appear to be growing in popularity—have been formed, and up to the present they seem to have been able to provide the investor with securities giving a yield of from 4 to 5 per cent., ' which in these days must be considered as a fairly satis- factory return combined with reasonable security. I. have on previous occasions explained very fully in these columns the general principles on which these Fixed Trusts are founded. Some of them are concerned with industrial shares, others with a wider range of selection and sonic others with what at one time would have been regarded as purely speculative investments—namely-- mining shares. One and all, hoWever, of the Fixed Trusts have this in common that the investor in them knows the precise securities—usually about twenty or: thirty in number—which are comprised in the Trusts' list of investments, while in nearly all cases one of the big banks or one of the Insurance companies acts in the capacity of trustee.
AVERAGING RISKS.
A point, however, which is sometimes raised by those who enqUire as to the merits of these Trusts is with regard to the risk of fluctuations in quotations of the Trust " units " as compared with the fluctuations in individual securities. That is to say an investor ,wants to know whether if he or she had invested, say, in Courtaulds or in Dunlops and in nothing else, the price fluctuation would have been greater than in the case of a holding of one of the units in the Fixed Trusts. So far at all events as one of these Trusts is concerned, a reply is given in a statement recently issued by Sir Stanford London, the Chairman 'of FiXed TrUsts Invest- , ments, Ltd. In this statement it is maintained that an analysis of recent price fluctuations in the stock markets shows how the investor, whether he operates on a large or a -small scale, may benefit from a wide spread over sound investments, particularly perhaps on a falling market, Sir Stanford then takes as an' example the recent period from August 14th when international disturbances began to affect the stock markets adversely, until the 27th of the month. This analysis shows that for the most part the investor who placed all his capital in one direction fared. less favourably than the investor who had spread his capital over a number of securities.
(Continued on page 411.)
Finance
(Continued from page 410.) SOME EXAMPLES.
It is pointed out that during the period mentioned anyone holding a good dividend-paying gold mining security such, for example, as Geduld Proprietary, would have seen a fall in the market value of his holding up to nearly 11 per cent. Moreover even among the • first class industrial securities Courtaulds fell during this period about 9 per cent., and Dunlops nearly 8 per -e,c.e,H.t., while even in Gilt Edged stocks India 8i per cent. fell 5 per cent. On the other hand these fluctuations Were less marked in the Fixed Trust Securities. The cumulative series of Fixed Trust Investments, Ltd., comprising twenty-five selected companies, declined during the period under review only 4.1 per cent., being identical With the fall in British 8f per cent. Conversion Loan. Of course even a spread of risks over a large area of securities, such as that comprised in Fixed Trusts, Would not enable the holder entirely to escape market fluctua- ti°11s, but both as regards income and capital value the fluctuations should be smaller than when the whole of the capital is placed in one direction. Therefore it would seem to come to this ; if as is popularly supposed, the general outlook for home indus- trial securities is a favourable one, the investor Who cares to take the full risk of large profits or losses will look out for what he conceives to be the share most calculated to give these results, while on the other hand the more cautious investor, who while believing in the favourable prospects for industrial shares as a whole, prefers to minimise his risks, will probably find that the units of some of these Fixed Trusts will serve his purpose. At the same time it must be remembered that just as the share of an individual company has a limit to its rise so the same is true of an aggregate number of shares in different companies. There will come a moment when even the " units " of Fixed Trusts will have reached their maximum height.
ArrituR W. KIDDY.
Previous page
