Finance
The Hunt for Investments —II
IN endeavouring to prepare any article that shall be helpful to investors in these, difficult times in making a choice of securities to be acquired the writer is more or less handicapped by ignorance of the special circumstances ivhich May surround those who read his article: There. is, ' for example, the case of a head of a fimily_Who is dependent entirely upon a moderate income from investments and to whom it is necessary that not only the maximum income consistent with security should be obtained, but that his capital itself should be safeguarded in the interests of dependants. - And yet again 'this ,particular class might be divided into- two sections where • in the one case the investor has a sufficient knowledge of bu-siness mid finance to be able to watch his investments carefully and perceive those influences likely to affect their market value for good or for ill, while in the other case the-investOr has no -Such knowledge or ability, and, therefore; -simply, relics upon the surety of :the' income 'without any, idea of watching fluctuations in market values. Needless to say, in the former case the- choice of investments is greatly widened, while in the latter case it beeornes - imperative to be satisfied even with a low yield of income so long as there is absolute safety about it.
ACE AND OTHER CONSIDERATIONS.
And yet again there are those who have no dependants in the shape of either wife or children, and in such a case much must depend upon the age' Of the investor. In the case, for example, of anyone over the age of 66 whose capital is small, possibly the best yield of all can be obtained by an annuity from a first-class office, when something like 10 per cent. on the capital may result, while if the individual has sufficient restraint severely to limit his annual spending according to his means, th 're are cases where it might even be advantageous for one-half of the capital to be sunk in an annuity and the other half to be rationed in the sense of the individual drawing a certain amount annually, leaving the principal on deposit in a sound bank. As regards this second half of the capital, it is, of course, a case of the individual living on capital, but I have pre-supposed that there are no dependants and that the one who pursues this course apportions his rationing on a scale permitting him to draw upon his capital for a period very far beyond the Psalmist's allotted span of life. One of the advantages to the individual pursuing this course is that while Income Tax will take its toll on the annuity, no tax will have (at present, at all events) to be paid upon these annual drawings on capital.
THE FAMINE IN INVESTMENTS.
Needless to say, one is driven to writing in this strain by the ever-increasing famine in gilt-edged securities. British Funds are already approaching, and, indeed, in some instances have actually reached, the stage where only a 3 per cent. yield is obtainable, while Colonial stocks, and still more Crown Colony stocks, give only a fractionally_higher yield than British Government stocks themselves, and even India Loans, which by reason of political uncertainties gave until comparatively recently a return of about 1 per cent. higher than British Funds, now give a yield of something less than f per cent. above that obtainable on Government stocks. Inci- dentally, I cannot help recording the opinion that the margin of difference which exists between the yield on British Government stocks and Colonial and Crown Colony issues is too narrow a one and that this fact will one day be discovered, but not, I fancy, for a very long period.
HAVE WE REACHED THE PEAK?
I said in my article last week that " it would be highly convenient for readers if I could give even an approxi- mate date of the probable peak of the rise in gilt-edged securities, but that unfortunately no one is able to give this coveted information." Nor am I in a better position in that respect today than a week ago. At the same time, unless present appearances are misleading, I am inclined to think that the peak has not yet been reached and, therefore, those who are still driven to invest in British Government stocks giving the present low yield may, perhaps, obtain some compensation later by realizing at even a higher figure than that obtainable today.
INDIVIDUAL ADVICE NECESSARY.
Meanwhile, I suggest that those to whom a somewhat higher yield is essential should direct their attention to the prior charges of some of the English railways and to those Preference issues of sound Industrials where the yield at the present price is say, not less than 4 per cent. Investors will also do well to keep a vigilant eye upon new capital issues, for some of these are of a thoroughly desirable nature. During last week, for example, the United Steel Companies made an issue of 4 per cent. Debenture Stock at par, and it is not sur- prising to find that it now stands at about 11 premium because, although not a trustee stock, the security is sufficiently good to satisfy all reasonable demands. Some of the Units of the Fixed Trusts can also be com- mended as offering a reasonably safe return, while those who are desirous of obtaining a somewhat higher yield with a prospec. t of capital appreciation should enquire from their brokers as to the most promising of some of the Foreign Government loans.
In such a case, however, individual advice should be sought, for in many cases the advice of the broker will probably be to purchase a certain stock. but to libld it only for a short period. I know, of course, that -both as regards bankers and_ brokers the value of individual advice- varies considerably according to the individal. but, making all allowance for that fact, I would never- theless strongly recommend the investor to consult one (Continued on page 600.)
Finance
(Continued fiom page 598.) or other of these sources, and I am quite sure that those with even very small banking accounts do not sufficiently realize both the readiness of bank managers to aid them in this matter of investment and the great value of
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