How Safe Are Shares Or The Forex?

As an investment category, yes. All sorts of prudentinvestment- or bet-of $100 may purchase 500 or 1,000
and conservative institutions colleges, pension funds,shares which make a man feel big, whereas the same
foundations, trust departments invest in stocks.amount buys only a fraction more than one share of
There is, technically, greater risk in common stocksAmerican Tel and Tel, which is discouraging and
than in the Forex. But as any experienced investor canmakes a man feel small. Furthermore, a penny stock
tell you, there are many not-unusual situations in whichonly has to rise a penny to double in value; AT&T has
a common stock can be viewed as a better saferto go to around 160; and with the cunning of the
investment than the issues ahead of it.ignorant, even penny-stock investors seem to know
Or, take the common stocks of corporations likethat the rate of movement-up or down-is swifter
General Electric and Union Carbide. These, as itamong low-priced stocks than high. And finally-and this
happens, are the only issues on the companies' books.is the most insidious argument of all-the penny-stock
Who would argue that the bonds of even a first-classbuyer persuades himself that the amount of money he
railroad, for example, were necessarily safer?puts up isn't too important; after all, he's riding a long
Safety also depends, to an extent, on the price atshot.
which the stock was bought. A company may be solidWhat is wrong with all of this is that at no point does
as a rock, but eager investors may have bid its stockvalue enter into the calculation. Anyone who does not
to an unrealistically high level in terms of the per-shareconsider the worth of what he is buying is a gambler,
earnings likely to be attained. If a quarterly or year-endnot an investor. The sorry result is that a few bad
earnings statement does not bear out the optimism ofgambles can sour an otherwise sane person on the
the eager buyers, they may begin to unload.true value of investment.
The man who has bought near the top and wants toBeyond this, safety is largely a matter of sanity. There
hang on may see a dismaying depreciation in hisare many ways of examining a stock and of judging
holdings, even though, by all investment standards, hethe time to buy it or sell it. All of them are available to
does own a good, safe stock.the average investor. Learn them and use them. You
The point is, some stocks are safer than others, andwill never get stuck with a poor stock masquerading
the value of all stocks may shift and vary and therebyas a safe one.
alter temporarily their safety-the possibility of cashingHedging Against Inflation: One of the big arguments in
them at the price paid-for the investor.favor of stocks bears on another aspect of safety.
It is not hard to find a safe stock, if by that you meanThis is the fact that stocks may frequently act as a
one representing a lively, alert, efficient company that ishedge against inflation.
unlikely to collapse and fail. While not every stock listedInflation, according to the classic definition, is the
on the New York Stock Exchange is a daisy, theeconomic condition resulting in a rise in prices and a
mere fact that it has met the requirements for listingdrop in the purchasing power of the dollar. In effect,
says much in its favor. For one thing, to obtain listing agoods are scarcer than money. Thus, through the
company must agree to report its financial conditionoperation of the forces of supply and demand, goods
regularly. This alone makes it possible to evaluate thebecome more expensive. Dollars, relatively more
company's performance and prospects, and thusplentiful, become cheaper-more of them are needed to
estimate whether its stock is a good buy.buy this item or that.
This in not to say that unlisted stocks or stocks carriedIn the United States, inflation has been at work for
on other exchanges are chancy. As you can quicklysome time. It is not runaway inflation. Our productivity
discover, some rather fine companies are not on the(goods) is managing to stay fairly well abreast of our
so-called Big Board-the New York Stock Exchange.prosperity (money). Still and all, since 1939 the
The Great Atlantic and Pacific Tea Company, HumbleConsumer's Price Index means of measuring the
Oil, and Creole Petroleum are listed on the Americanfluctuation in the prevailing prices of certain basic
Stock Exchange. Such representative companies ashousehold commodities--has jumped from 99.4 to
Anheuser Busch, Eli Lilly, and Time, Inc. are unlisted, and195.7, almost a 100 per cent rise. In the same period,
traded only in the over-the-counter market. Fewthe dollar's value has dwindled from 100 cents to 47.3
insurance companies and no banks both quite stablecents-value, of course, representing what the dollar will
stock categories-are listed on the New York Stockbuy.
Exchange.In a fluid situation like this, safety of investment takes
Still and all, the new investor will be wise to confine hison a new dimension. Many conventional ways to save
dealings to stocks that are relatively well-known andthrough a savings account, an annuity, a Government
have a ready market. For out of the estimated 5,000bond held to maturity can practically guarantee safety
public, stock-issuing corporations in the United Statesof principal. You will always get out the same number
there are, inescapably, some dogs. They do not haveof dollars you put in. But there is no assurance as to
to be thieving and corrupt. Poor management, wobblyhow much those dollars will buy.
financing, and an inability to keep pace with the times inStocks cannot guarantee that the amount you have
production and distribution are reason enough for theinvested will be returned to you, safe and sound. But
investor to avoid them.when dollars are plentiful and goods bring a fat price, it
Here, too, may be mentioned the "penny stocks," whichis possible that a company in whose earnings you
have enjoyed an unfortunate vogue in recent years.have a share will be distributing dividend dollars more
These glitter like a prize in a shooting gallery, but theyliberally.
promise something for nothing, and this is no premiseSo shares and the Forex have risks but if you are
for a smart investor to accept. Many are out-and-outaware of them you can make sure you limit them.
swindles. Others are legitimate enough, but rank as theIf you invest in Forex or shares "paper trade" first and
wildest sort of speculation; double-0 on the rouletteonly use real money once you feel comfortable.
wheel, or a mare in the Kentucky Derby will comeWith the Forex you can use good Forex software
home a winner more frequently than these babies.that is available to limit your losses.
For the man who can only be called the ignorantA good rule is worth mentioning: Never risk more than
investor, they have a certain attraction. The smallyou can aford to lose.