| As an investment category, yes. All sorts of | | | | attraction. The small investment- or bet-of |
| prudent and conservative institutions | | | | $100 may purchase 500 or 1,000 shares which |
| colleges, pension funds, foundations, trust | | | | make a man feel big, whereas the same amount |
| departments invest in stocks. | | | | buys only a fraction more than one share of |
| | | | American Tel and Tel, which is discouraging |
| There is, technically, greater risk in common | | | | and makes a man feel small. Furthermore, a |
| stocks than in the Forex. But as any | | | | penny stock only has to rise a penny to |
| experienced investor can tell you, there are | | | | double in value; AT&T has to go to around |
| many not-unusual situations in which a common | | | | 160; and with the cunning of the ignorant, |
| stock can be viewed as a better safer | | | | even penny-stock investors seem to know that |
| investment than the issues ahead of it. | | | | the rate of movement-up or down-is swifter |
| | | | among low-priced stocks than high. And |
| Or, take the common stocks of corporations | | | | finally-and this is the most insidious |
| like General Electric and Union Carbide. | | | | argument of all-the penny-stock buyer |
| These, as it happens, are the only issues on | | | | persuades himself that the amount of money he |
| the companies' books. Who would argue that | | | | puts up isn't too important; after all, he's |
| the bonds of even a first-class railroad, for | | | | riding a long shot. |
| example, were necessarily safer? | | | | |
| | | | What is wrong with all of this is that at no |
| Safety also depends, to an extent, on the | | | | point does value enter into the calculation. |
| price at which the stock was bought. A | | | | Anyone who does not consider the worth of |
| company may be solid as a rock, but eager | | | | what he is buying is a gambler, not an |
| investors may have bid its stock to an | | | | investor. The sorry result is that a few bad |
| unrealistically high level in terms of the | | | | gambles can sour an otherwise sane person on |
| per-share earnings likely to be attained. If | | | | the true value of investment. |
| a quarterly or year-end earnings statement | | | | |
| does not bear out the optimism of the eager | | | | Beyond this, safety is largely a matter of |
| buyers, they may begin to unload. | | | | sanity. There are many ways of examining a |
| | | | stock and of judging the time to buy it or |
| The man who has bought near the top and wants | | | | sell it. All of them are available to the |
| to hang on may see a dismaying depreciation | | | | average investor. Learn them and use them. |
| in his holdings, even though, by all | | | | You will never get stuck with a poor stock |
| investment standards, he does own a good, | | | | masquerading as a safe one. |
| safe stock. | | | | |
| | | | Hedging Against Inflation: One of the big |
| The point is, some stocks are safer than | | | | arguments in favor of stocks bears on another |
| others, and the value of all stocks may shift | | | | aspect of safety. This is the fact that |
| and vary and thereby alter temporarily their | | | | stocks may frequently act as a hedge against |
| safety-the possibility of cashing them at the | | | | inflation. |
| price paid-for the investor. | | | | |
| | | | Inflation, according to the classic |
| It is not hard to find a safe stock, if by | | | | definition, is the economic condition |
| that you mean one representing a lively, | | | | resulting in a rise in prices and a drop in |
| alert, efficient company that is unlikely to | | | | the purchasing power of the dollar. In |
| collapse and fail. While not every stock | | | | effect, goods are scarcer than money. Thus, |
| listed on the New York Stock Exchange is a | | | | through the operation of the forces of supply |
| daisy, the mere fact that it has met the | | | | and demand, goods become more expensive. |
| requirements for listing says much in its | | | | Dollars, relatively more plentiful, become |
| favor. For one thing, to obtain listing a | | | | cheaper-more of them are needed to buy this |
| company must agree to report its financial | | | | item or that. |
| condition regularly. This alone makes it | | | | |
| possible to evaluate the company's | | | | In the United States, inflation has been at |
| performance and prospects, and thus estimate | | | | work for some time. It is not runaway |
| whether its stock is a good buy. | | | | inflation. Our productivity (goods) is |
| | | | managing to stay fairly well abreast of our |
| This in not to say that unlisted stocks or | | | | prosperity (money). Still and all, since 1939 |
| stocks carried on other exchanges are chancy. | | | | the Consumer's Price Index means of measuring |
| As you can quickly discover, some rather fine | | | | the fluctuation in the prevailing prices of |
| companies are not on the so-called Big | | | | certain basic household commodities--has |
| Board-the New York Stock Exchange. The Great | | | | jumped from 99.4 to 195.7, almost a 100 per |
| Atlantic and Pacific Tea Company, Humble Oil, | | | | cent rise. In the same period, the dollar's |
| and Creole Petroleum are listed on the | | | | value has dwindled from 100 cents to 47.3 |
| American Stock Exchange. Such representative | | | | cents-value, of course, representing what the |
| companies as Anheuser Busch, Eli Lilly, and | | | | dollar will buy. |
| Time, Inc. are unlisted, and traded only in | | | | |
| the over-the-counter market. Few insurance | | | | In a fluid situation like this, safety of |
| companies and no banks both quite stable | | | | investment takes on a new dimension. Many |
| stock categories-are listed on the New York | | | | conventional ways to save through a savings |
| Stock Exchange. | | | | account, an annuity, a Government bond held |
| | | | to maturity can practically guarantee safety |
| Still and all, the new investor will be wise | | | | of principal. You will always get out the |
| to confine his dealings to stocks that are | | | | same number of dollars you put in. But there |
| relatively well-known and have a ready | | | | is no assurance as to how much those dollars |
| market. For out of the estimated 5,000 | | | | will buy. |
| public, stock-issuing corporations in the | | | | |
| United States there are, inescapably, some | | | | Stocks cannot guarantee that the amount you |
| dogs. They do not have to be thieving and | | | | have invested will be returned to you, safe |
| corrupt. Poor management, wobbly financing, | | | | and sound. But when dollars are plentiful and |
| and an inability to keep pace with the times | | | | goods bring a fat price, it is possible that |
| in production and distribution are reason | | | | a company in whose earnings you have a share |
| enough for the investor to avoid them. | | | | will be distributing dividend dollars more |
| | | | liberally. |
| Here, too, may be mentioned the "penny | | | | |
| stocks," which have enjoyed an unfortunate | | | | So shares and the Forex have risks but if you |
| vogue in recent years. These glitter like a | | | | are aware of them you can make sure you limit |
| prize in a shooting gallery, but they promise | | | | them. |
| something for nothing, and this is no premise | | | | |
| for a smart investor to accept. Many are | | | | If you invest in Forex or shares "paper |
| out-and-out swindles. Others are legitimate | | | | trade" first and only use real money once you |
| enough, but rank as the wildest sort of | | | | feel comfortable. |
| speculation; double-0 on the roulette wheel, | | | | |
| or a mare in the Kentucky Derby will come | | | | With the Forex you can use good Forex |
| home a winner more frequently than these | | | | software that is available to limit your |
| babies. | | | | losses. |
| | | | |
| For the man who can only be called the | | | | A good rule is worth mentioning: Never risk |
| ignorant investor, they have a certain | | | | more than you can aford to lose. |