Evening star. [volume] (Washington, D.C.) 1854-1972, 1932-05-29
INVESTORS WARNED
T0PR0TECT FUNDS
DEMONSTRATION
Dean Langmuir Restates
Sound Market Program in
Address to Bankers.
GIVES PRACTICAL TALK
ON BUYING SECURITIES
Explains Relative Values of Stocks
and Bonds as Producers
Of Income.
Special Dispatch to The Star.

Special Dispatch to The Star
FAIRMONT, w. Va, May 28.-Dea.
Langmuir, vice president of Distr,b.
utors' Group, Inc, New York City. ad-
dressed the West Virginia Bankers
Association Convention here on the
fundamentals OF an Investment Pro-
gram" which proved to be a most
timely restatement Of principles which
Will be employed more and more as the
coming financial and business recovery
expands.
Success in the field Of investment"
declared Mr.. Langmuir, lis seldom
based merely on extensive knowledge or
technique. Great fortunes are built I'D
oy men with simple viewpoint who
apply common sense and follow a few
fundamental principles - principles,
however, which turn out to be sound
Inc nrst step is to get rid of false
notions. There is, for instance, a wide
ly accepted idea that a given security
Is good or bad, and that its desirabiuty
can be exactly rated.
This Is not true. The same secur-
lty, good for one person. may be bad
1or another. The question of whether
a security Is good or not cannot be
answered without first asking the cues
ton. Good for what?'
Even the most sophisticated in
vestors would often find it difficult to
state their detectives. Some who talk
only in terms Of long-term investment.
follow in practice a vacillatIng trading
policy. Thousands of investors make a
great show of activity, shifting their
funds from one security to another,
and IN the process forget their original
aims and end by getting nowhere.
Diversification Needed.
Once objectives have been formu-
lated, 1t viii be found that scientific
Investigation represents by far the
most useful tool in achieving success,
and it represents a far broader subject
than is generally recognized, the speaker
added.
"Diversification is usually described
as an application of the principle of
not putting all of ones eggs in one
basket. The argument runs that if an
investor buys one security only and
that security goes down so per cent,
he will be seriously affected: but if he
acquires an interest in IS securities and
one Of them goes down so per cent, his
less will amount to only per cent Of
his total investment. Accordingly, the
maximum loss involved in the selection
Of any che security is reduced.
'Dlversiflcation is commonly thought
Of as being accomplished merely by
an investment fund between a
considerable number of securities of the
zane type. An investor Is said to have
if his total security list
consists in 80 or 40 different bonds.
This, however, is not true DIVERSE
fication, for Investigation should be
made to apply to the type of invest
ment. not merely to the number of
securities owned.
Both Stocks and Bonds Urged.
9TH, bondholder has, as against the
the important advantage
Of enjoying a relatively assured fixed
income whether times are good or bad
The common stakeholder is not entitled
to receive any given number of dollars,
but he has greater opportunities of
profit. for any increase in earnings goes
entirely to the sockholder," said Mr..
In view Of the strong safety pro-
visions inserted in the trust agreement
for the bondholder's benefit. it would
seem that good bonds would be quite
safe. Yet in one very important sense,
stocks are safer. Since the bondholder
Is entitled to receive only a fixed num-
ment depends entirely upon the value
OF the dollars he receives.
Stocks have serious drawbacks. as
We have learned in the last two or three
years. but they do have the advantage
of protecting the investor against rising
prices and imitation
Common stocks confer ownership In
properties and commodity inventories,
and represent an investment. not in a
certain number of dollars to be repaid
later. but in brick and mortar. If any
imitation should occur, accompanied by
rise In the commodity price level,
then the value of the physical prop
critics and commodities owned by the
stockholder will rise in price cor
respondingly.
Best Methods Of Investment.
There is another kind Of diversified
tion to which attention has not been
directed; that is, Investigation with
respect to the time of making security
purchases.
THE level Of security prices of stocks
and bonds changes considerably from
month to month and from year to year.
As We have seen lately, these changes
may be tremendous. Some wait to pur-
chase until 1t Is believed the bottoms
have been reached. Others resort to
with respect to the time
element and spread purchases over a
period, thus applying an averaging
process.
The latter policy is far sounder No
one has ever been able. except by &C
cident. consistently to sell at the highs
and buy at the lows"
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