The Eureka sentinel. [volume] (Eureka, Nev.) 1902-current, 1912-02-10
Great Risks Accompany Great Profits



Tell you about stocks, bonds, and investments in generaH
The Business Doctor grinned eff you can take a couple of years
of from your work and start to school with me, l can give you
some little idea Of the subject in that time Not any less. Millions
Of pages have been written on the subject and millions OF dollars
lost following the suggestions of those pages
81 know what the object of your question was, however, and
will try to tell you the fundamentals
"You are looking for an investment for some surplus cash.
Now, as to the stock and bond question, let me illustrate in words
of two syllabes. II bought a piece of business property on the
opposite side Of the street and borrowed some money of you, give
ing you a deed Of trust on the building as security, you would be
sure of your money, no matter how much or how little 1 made in
the business l opened there. You would get your money when
your note became due and you would get your interest; but even If
1 made a fortune, you would get no more than just your money and
your interest
"f instead of lending me money with the property as security,
you invested money in the business, you become a partner in the
store, and if 1 make a big success any year. l would declare a divi-
dend and you would get your proportionate share. It, on the con
trary, the business proved a failure and the creditors forced me in
to bankruptcy, you would not only make no proflt, but you would
lose your investment as we'll
"This is exactly the difference between bonds and stocks.
Bonds III ordinarily secured by a deed of trust on the actual prop
erty of the corporation Or establishment issuing them. They bear
from A to 6 per cent interest, but have no participation in the prof
its of the concern.
Stocks are issused to people who wish to participate in the
profits Of a business and bear no interest, and their sole value con
sists in the probability of the institution issuing them making prof
it's Hence. for speculative purposes, stocks are better than bonds,
and for investment purposes bonds are infinitely superior.
"The next investment is, of course, real estate.
"In almost any growing city improved real estate will pay 8 or
10 per cent on the investment, but it has the handicap of not leay-
ing the investment available at short notice. The only time the
average business man needs his money is when times are hard,
panics prevailing or business dropping below the usual volume, and
and at times like this real estate is a dead thing on the market
so, summing the proposition up, it amounts to about this:
If you want to speculate. to take a gambling chance. investin stocks.
If you have money that there is no possibility of your needing and
want an investment that will pay you well. put it into improved
real estate. II you,are looking for something with the maximum of
safety which may be showed over the counter of a bank at any time
as security for a loan, buy bonds.
Every bond, to be secure, should be based on a first mortgage
or a good second mortgage on the property Of the institution issuing
it If it is a mortgage on land, then the value of the land should be
at least one-third greater than the sum of the bonds issued; if it is
on improved property, these improvements should be income pro-
ducing, rented at a fair rental to reliable tenant.
"Never invest money you cannot spare, that you are not willing
to take a gambling chance with and where its safety depends on
the good will of a business, on a patent that may be pirated or i'm
proved or in the stock of any industry that is a luxury, liable to be
dispensed with in hard times or subject to changes in styles.
"Last of all, when you contemplate an investment of any Sort
take il to the president or cashier of your bank and ask his opinion
of it. for it is his business to handle and investigate securities, and
he is an expert in them, just as you are expert in your own business
"In all investments of all kinds the security is inversely pro-
portionate to the profit. The big bonanza stock is less liable to be
good than the small dividend industrial Great risks invariably &C.
company great profits"