Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-03-01
MEN AND MONEY
BY NJ. S. Rukeyser.
Copyright. 1877

The recent strength of the best
grade of dividend-p paying stocks re-
fleets a wholesale switching of ven
turesome investors from bonds to
shares.
The prolonged rise of bond prices
has greatly reduced the investment
yield on bonds. and those who insist
on q higher return than they can now
get in the bond market have been buy
ing shares on which they believe the
present dividend rates can be main
tanned. In making the switch from
bonds to- stocks the investor gives up
the creditor status and becomes a vir
tual partner. In general. the transfer
entails heightening of the risks as
sumed
The intellectual basis for the new
demand for investment stock was laid
| by the researches of Edgar l.. Smith
and others. who supplied statistics to
prove that in a growing country like
the United States common shares
| have proved better long-term invest
ments than high-grade bonds.
Unless stocks are carefully selected
and thoroughly diversified. however,
the investor may get into dangerous
grounds.
Interest In Foreign Bonds.
Changing interest rates have also
heightened the interest in foreign
bonds, which offer a higher return
than domestic issues. In general, how
ever, the investor must pay for bet
ter return in larger risks.
A study by the National Industrial
Conference Board indicates that by
far the largest bulk of investments
among individuals OF large means is
in stocks However. among those with
incomes of less than $4,000 year real
estate, bonds and savings accounts
are the most popular forms of invest
ment. In 1924 those with incomes OF
less than So, 900 derived Is per cent OF
their total income from rent and inter
est and less than per cent from divi-
dends. AS incomes increase, the rela-
tive proportion which comes from divi-
dends on common shares rises. In the
case of the ultra wealthy. with in
comes in excess of S50O,000 a year
dividends constitute so per cent of the
total, and rent and interest only 10
per cent.
That Americans of moderate means
are to an increasing extent becoming
capitalists is revealed by the fact
that whereas in 1918 rent, interest
and royalties constituted only II per
cent Of the total income of those
whose total incomes ran between
| 81 900 and $4,000 a year. in 1924 the
same items comprised 1876 per cent
of their aggregate income. Divi-
dends in 1918 amounted to only 81
per cent Of their combined total in
come and in 1924 to % per cent. The
| wider dispersion of securities among
the masses continued in 1925. and
1926.
Research Is Essential.
Although Mr.. Smiths conclusions
| in regard to the merit of good COM
mon stocks are sound, they will be
misunderstood. Stocks picked by,
blind chance may lead to heavy loss,
and no one recognizes the fact better
| than he.
Research" he said, SIS essential
to conservative investment manage
ment 1t tends to reduce the mar
gins of error open to those whose re-
sponsibility it is to conserve and en-
nance investment values intrusted TO
their care.
BROADLY, it consists OF seeking and
assembling all ascertainable facts re-
lating to matters concerning which
decisions are to be made, and pre-
senting them in such form that they
may be used as definite aids in reach
ing sound conclusions.
1.-The constant application of con-
| tinuing research to the management
of invested funds should tend to pro-
duce an earned increment over and