The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1922-08-19

the bonds Of
- such CO rpora-
tons, together
with the obligations Of local, state
and national governments. There are
several types of this security, but
broadly speaking, they may be cIassi-
fed as follows:
Bonds issued by National, State and
local governments.
Bonds and stocks Of public utility,
transportation, financial and indus
trial corporations.
There are two distinctions that run
through this classification. First: that
between the bond and the share of
stock; Second; that OF the legal and
economic status of the issuer:- A
Bond, in simple terms, is the note Of
the tssuer calling for a certain sum Of
money to be paid at a definite time
with interest In the case Of a pri-
vate corporation It is usually secured
by a mortgage on specific property
or the pledge of certain securities for
the repayment Of the loan; in the case
Of a government agency. by the pledge
Of certain Of its revenues.
In buying a bond you are
simply loaning your money to
the issuer. When you buy a
share Of stock you become a partner
in the business; you are a joint owner
in the ratio your stock bears to the
capital OF the company. The bond
holders claim Is superior to the stock
holder, but the bondholder has no
voice in the management Of the en-
terprise. From this distinction in
their legal status arises a distinction
in their claims upon the earnings Of
the company. The bond calls for a
stipulated interest return payable at
stated intervals which the company
cannot refuse to pay without sub
jecting itself to foreclosure and bank
ruptcy. The share OF stock, on the
other hand. Is only q claim upon the
surplus earnings OF the company after
its legal obligations are met and a
division Of these surplus earnings
rests entirely with the controlling pow
ers OF the company.
Governmental agencies, n the main,
issue only one form Of negotiable Sc
curities-a bOnd-and while a gov
eminent bond Is merely the promise
Of the government to pay, without
security, yet so we'll has our govern
nent protected its credit there has been
coined a phrase to represent the acme
Of safety, "As safe as a government
bond" Bonds Of counties, cities,
towns and other government agencies
are just as safe. They are backed by
the good faith and credit Of the mu-
nicipality, but are further secured by
the pledge of certain revenues derived
by taxation.
The negotiable securities most use
full as an auxiliary TO money and
banking credits are the bonds Of these
various governmental agencies and the
bonds Of public utilities-transport
ton and manufacturing companies
such as are regularly quoted en- the
Exchanges. They comprise in large
measure the investment OF banks, in
surance companies and estates. The
purchase Of these securities. however,
is not limited to large financial in
terests; many individual investors
have become acquainted with this
manner Of saving and are laying these
securities away in their strong boxes
against a day Of greater need. The
Federal Government has played
large part in educating the public in
the value OF bonds as an investment
through It's five Liberty loan drives.
Get the Facts F'irst-Then Invest
There are three fundamentals in
making an investment that every one
should consider. First: You should
be reasonably certain your principal
viii be returned to you in full at
some certain future time; your peace
Of mind depends upon that; Second:
You should select a security that can
be converted into cash before ma
tUrity, If necessity should require,
without great loss. Third: Naturally
you VIII select that investment pay
ing the best income consistent with
SAFETY and convertIbility. Income
should always be a secondary con-
sideration.
Banks are realizing more and more
the economic necessity Of helping
their depositors find suitable invest
ments for surplus funds. Most Of the
larger banks have established invest
ment departments where they buy and
sell high grade securities. The drain
that is annually made against the
resources Of our people by unscrupu-
lous stock and bond salesman $50
called has reached such proportions
IT is staggering. Many States, in
Guiding our own, have established Sc
curities commissions in an effort to
curb this evil, and while much mas
been accomplished. a great deal more
should be done. am certain our
banks are willing to help in any way
they can to conserve the resources Of
our people.