New-York tribune., 1922-01-22
A Teachers Investment Plan

Question Il have great confidence in
youF advice and should greatly appreciate
inves, nents. l am a teacher without much
ssvings ! have $4,000 in municipal bonds
si,2Oo in Liberty bonds and 900 in Cana
d1an Northern rs. ] am planning now to
borrow OF the bank money for three 81 900
bonds IN order that l may over a long
opportunities for investment. I can rea-
sonably expect to repay this in about three
Years safety means much to me. and
cEe's income on Investments is very small
from these. so that I hesitate TO buy more
invest in something giving higher yield :?
And what do you advise for that, and for
the three other bonds wish TO purchase
How about Chicago Union Station CNss and
New York Telephone Cs, 1941? You often
recommend these. Will you kindly list
eral high grade investments suitable for
me? l must feel securely. H.
Answer-Your letter presents q very
interesting problem and there is Of
course something to be said for your
plan of borrowing money from the bank
to buy bonds at the present attractive
prices. We are inclined to agree WI
you that in all probability the move
ment of bond prices during the next
three years will be upward, but there
are any number Of possible contin-
gencies which might upset the present
tendency of investment securities
toward higher prices and lower Yields
1t seems to us that your plan comes too
near the edge Of speculation to be
proper for woman in your position
Suppose, for example, you were to suf-
fer some accident or illness which in
capacitatcd you for work for a period
of several months or year; you would
probably be unable to make payments
on your Indebtedness during that time,
and with the expense incident to such
a misfortune you might be unable to
pay the interest, SO that the bank
would have to sell your bonds to pro-
tect its loan. 1t might we'll happen
that this would occur at a time when
bond prices were somewhat lower than
they are now, SO that you would ac-
tually lose part of your principal. At
the same time it has been our exper-
ience that the borrowing of money to
pay for sound securities is an ex-
cellent means of saving and investing
and when the investor is careful to
keep his purchases we'll within the linn
it of his ability to pay the scheme is
good one. Accordingly we make the
following concreteN suggestions: First,
that you buy only one $1,000 bond at
the present time. Either the Chicago
Union Station 61ss or New York Tele-
phone 6s would be excellent for this
purpose. Second, if you transferred
your funds from government issues
into corporation bonds you could in
crease your return. For this pur-
pose we suggest United States Steel
sinking fund IS, 1862, recently selling
at about par, to yield per cent;
Southern Pacific San Francisco Term
inal first 4s, 1850. recently selling at
about 81 to yield $40 per cent; Hook
ing Valley first consolidated AIS, 1899,
recently selling at 83 to yield about 5.45
per cent; and General Electric de-
benture 5s, 1852, recently selling at
about IS to yield $50 per cent. These
bonds will give you a sound investment
list, in our opinion. but please under
take that Libertys and high-grade mu-
nicipals represent premier invest
ments, and that if you sell them to
place your funds in corporation bonds
you will be sacrificing degrees Of
safety for a higher yield.