Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-02-21
THE BUSINESS OF GETTING
AHEAD.
Small Business Mans Investing.

The small business man necessarily
assume trade risk In his own enterprise
and Is in that sense a commercial
speculator. If he Is q groceryman, he
is assuming the hazards of being able
to meet rent. clerical salaries and
other overhead charges out of current
sales after paying wholesalers for
merchandise. The storekeeper specu-
lates on his capacity to compete with
low-operating-cost chain stores, on the
buying mood of customers In his dis
trict and on his own ability to fore
cast styles and changing whims of
the public. Risk is inherent I'm bust
ness and no business man can
avoid it,
However. In building up an indie
pendent structure of investment Sc
curities on which he can draw in case
Of trouble in his own business or in
case of emergency in his family, he
should select securities of high
grade. In his role of investor he
should look largely for safety Of
principal and assured regularity of
income. being satisfied with the pros.
poets for profit in his own business
rather than In some other large and
publicly owned enterprise, about which
he cannot be as we'll informed.
Must Consider Collateral Value.
Unlike the employee whose thrift
fund Is solely for personal and fam
lily uses, the business man must CON
slider the collateral value of his Sc
curities-the acceptability of the
stocks and bonds which he brings to
the banks as a basis for loans. Apart
from other considerations, securities
10 nave high collateral value must
VII %nhI
harlly will not lend on securities,
Whatever their merits otherwise.
which cannot quickly be converted
INTO cash. On short notice the small
business man may need additional
cash Tor his business or personal ey
pendltures and he should have in his
strong box investments at least mart
OF which can be quickly realized unon
either by sale at the stock exchanges
or by means of a secured loan at = 1L ee
bank. CT eiie
In other words. he should bave
among his holdings a substantial nro.
portion or issues which are listed in
the New York Stock Exchange, one
OF the out-of-town exchanges. or which
nave ready market over the counter.
CtherWlSe sound securities which lack
ready STABILITY might be unsuited to
ms peculiar needs. However. if a husi
ness man has 90 per cent of his funds
III FeadIy marketable securities, he
can ahofd 10 keep part of the remain
ger in less liquid form, such as high
grade mortgages. particularly because
hnarketabillty, like all other invest
nent attributes, must be bought and
pald Tor and is reflected in the price.
Inc competent business man can
ordinarily use capital on which he can
anord 10 take risk in his own business
more effectively than any other place.
Accordingly. he has little to gain in
placing his thrift funds at the DISPOSAL
OF other spectators, as the heads of
corporations whose securities are sold
to the public. Instead, he should
place his savings in safe bonds and
the best grade OF common and nre.
ferred stocks.
Speculation ON Margin.
Finance as conducted at present is
hlgnly specialized activity, and the
tact that the small business man has
made success in his local butcher.
shop or haberdashery store is no indi
cation that he can succeed in out
guessing the professional traders and
insiders, to whom speculation in
stocks is regular business. More.
over, speculation on margin is likely
TO distract the attention of the small
business man from his own enterprise
and in that way to have a deleterious
effect.
Being able reasonably to expect n
continued income from his own enter
prise, the small business man need not
select such gilt-edged securities as the
widow and orphan, whose sole means
OF livelihood comes from investments.
Though avoiding hazardous specula-
tons, the small business man can af-
ford to buy securities of medium
grade on which the return seems to
be amply covered by present earning
| power. Being a business man, he
should be able to keep in touch with
developments of the companies in
which he has invested by reading a
well edited financial page and by fol-
| lowing the financial reports which the
corporations send to stockholders.