The Washington herald., 1912-06-22
AN INVESTOR WHO
GETS WHAT BE WANTS.

Copyright. 1879, by c. N. Keys, New
York;
An investor up State IN New York has
a fund Of 1900 invested in bonds. 1t
has taken him nearly forty years to ac-
cumuIate this fund. When he was be-
ginning his saving habit he sought the
advice Of an old-fashioned banker who
told him that he should never buy more
than one bond Of kind. and that he
should make his purchases whenever his
money was ready without paying any
attention at all to market conditions at
the time.
The result Is HEt- this investor, who
is not at all q very widely educated
man, and who has paid little attention
TO study of finance, has a fund that is
about as well diversified and as safe as
could be imagined. He has faithfully
followed his original rule for nearly
twenty years. has never sold any bonds
and has never traded any except when
they mature or are called for payment
by the company who issued them. The
noteworthy feature of the fund, OF
course, is the fact that he has thirty
seven bonds for s. 900 each, all issued by
different companies.
In the days Of the panic Of 1898, he
had only a very small investment At
time when he owned six bonds, all rail-
road issues, two OF the companies
whose bonds ne owned went into the
hands OF a receiver and defaulted on
their bonds. This frightened him pretty
badly and for some years he did not
buy bonds at all, then, when the rail-
roads were reorEaniZed he found that
he had all his money back again in the
reorganization. together with the cou-
pons that had not been paid This dou-
BILE episode led him to the conclusion
that, after all, even II temporary condi-
tions. appear very unfavorable, the final
security of a good bond was about the
best that he could do in the line Of an
investment This conclusion was
strengthened by the fact that one Of the
banks in which he deposited money at
that time failed and paid him only 70
cents on the dollar. Therefore, he re-
sufned his bond buying practice and has
continued II up to the present time.
The old banking house with which he
did business retired about ten years ago.
He asked that II recommend him some
other house through which he could buy
bonds, and ne went over and introduced
himself to the new house. He has dealt
with IL consistently ever since. One
bond which he bought from II default
ed on its interest and the house asked
him to put his bond into a protective
committee. He did so and again found
out that well secured bonds turn out
pretty well no matter what happens.
This incident gave him the same kind
Of faith in the second house that he had
in the first and he Is going on with his
saving habit just te same as he did be-
fore. In fact, he has told the writer
that he has left instructions in his will
that during the life time Of his wife the
fund be left invested as it is at the pres
ent time and sold only as one OF the
members of this firm advises.
The second characteristic that is
worth noting is the very great diversity
of the fund. Before this fund could be
wiped out entirely and cease to bear in
come thirty-sevsn well known COM
panies doing established business in this
country would have to be in default at
one time. Such a contingency would be
almost a miracle Of bad luck and Is
about as unlikely to happen as anything
one could conceive. While one would
hardly advise this extremely minute,
splitting up Of a fund as a regular prac-
tice, every critic Of Investment. does un-,
qualifedly advise that not more than %
per cent, and preferably not more than
10 per cent, OF an investment fund be
put ordinarily into one security. It Is
a disregard of this simple rule that
plunges so many people, living on the
income from investment, into compara-
tive poverty in every period of hard
times The writer could fadduce from
his own knowledge dozens Of instances
in which practically the entire revenue
of a family has been wiped out by the
passing Of a dividend on a single stock,
or the failure Of a single bond issue TO
pay its interest
The third feature Of sound investment
illustrated in this fund lies in the nature
OF securities bought. Having learned
the lesson from the three defaults which
he had experienced. this buyer always
asks his bankers, when they recon-
mend a certain bond to him, how many
other bonds there are which would have
to default and be wiped out in reor-
ganization before his bonds could be In