The aim of this book is to present in clear form the simple principles of investment, and to afford the reader a working knowledge of the various classes of securities which are available as investments and their relative adaptability to different needs. The book is an outgrowth of the writer's personal experience as an investment banker. Most of the matter which is presented has appeared in the pages of "System" Magazine, through the courtesy of whose editors it is now rearranged and consolidat

With the immense increase in wealth in the United States during the last decade and its more general distribution, the problem of investment has assumed correspondingly greater importance. As long as the average business man was an habitual borrower of money and possest no private fortune outside of his interest in his business, he was not greatly concerned with investment problems. The surplus wealth of the country for a long time was in the hands of financial institutions and a few wealthy cap

A railroad bond is an obligation of a railroad company (usually secured by mortgage upon railroad property) which runs for a certain length of time at a certain rate of interest. It is apparent, from this definition, that the price of a railroad bond, as distinct from its value, is affected by two accidental conditions quite apart from the five determining qualities described in the preceding chapter. These accidental conditions are the length of time that the bond has to run and the rate of int

As its name implies, an equipment bond is one issued by a railroad to provide funds with which to pay for new rolling stock—cars and locomotives. The issues are variously described as car trust certificates, equipment bonds, or equipment notes. They conform in general to one of two standard forms: (1) The conditional sale plan: In accordance with specifications furnished by the railroad, the trustee selected (usually a trust company) contracts with the builders for the purchase of the equipment.

In the preceding chapter the discussion of railroad bonds was brought to a close. Before passing to the consideration of real-estate mortgages, which is the next form of investment to be taken up, it may be well to review briefly the general principles advanced in the first chapter of this book, in order that the reader may have clearly in mind the main points upon which judgment of the value of investments should be based. There are five chief points to be considered in the selection of all for

Industrial bonds include the obligations of all manufacturing and mercantile companies, and miscellaneous companies of a private character. They form a class quite distinct from railroad bonds or public-utility bonds. I. Safety of Principal and Interest. The safety of industrial bonds, in common with the safety of all forms of investment, depends upon the margin of security in excess of the amount of the obligation. In the case of industrial bonds the amount of this margin is not always easy to

It was a common saying among bond-dealers a few years ago that the day of the municipal bond had passed, the day of the railroad bond was passing, and the day of the public-utility bond was to be. Municipal bonds were selling at fancy prices in consequence of the low rates for money which then prevailed, and railroad bonds appeared to be following in their wake. Public-utility bonds alone afforded a satisfactory yield, and it was felt that the investing public would be forced to turn to them. Th

The previous chapters have considered, in turn, the investment value of railroad bonds, real-estate mortgages, industrial bonds, and public-utility bonds. The desirability of each of these different classes of security has been judged in accordance with the general principles laid down in the introductory chapter; that is to say, each class has been analyzed in relation to safety, rate of income, convertibility, prospect of appreciation in value and stability of market price. The same determinin

Passing to the consideration of stocks as investments, it is necessary at the outset that the reader should have clearly in mind the fundamental difference between stocks and bonds. This distinction was drawn in the introductory chapter, but it will be well to amplify it here, even at the risk of carrying the reader over familiar ground. The distinction between bonds and stocks is that between promises to pay and equities . Bonds, loans on collateral, and real-estate mortgages represent some one

There is no question connected with the investment of money more important than the ability to judge whether general market conditions are favorable for the purchase of securities. After learning how to judge the value of every form of investment, a man may still be unsuccessful in the investment of money unless he acquires also a firm grasp upon the general principles which control the price movements of securities. By this it is not meant that a man needs to have an intimate knowledge of techn