The Ypsilanti daily press., 1946-04-01

which they purchase a large inter
est. often stocks OF these rom-
panies sell for less than the real
liquidating value OF the securities
which they hold. This is an ad-
want &c 10 the investor when buy
ing such stocks: but a disadyant-
age when selling.
"open-End" Companies
When a salesman calls upon you
TO sell you the shares of an invest
ment company it will probably he
an open-end company where the
amount OF stock outstanding varies
from day TO day. There are about
75 OF such active open-end com
panies For instance, IL the sales
man should sell 10 y 100000
worth OF these shares, when the
checks come into the company it
will go into the stock market and
invest this 100000 in perhaps ~
high-grade listed stocks. which
stocks will be held in the com
pany's treasury. Then. the com
pany will issue 100000 worth OF
new shares which will be mailed
out to the aforementioned inves-
tors.
II will be seen, therefore, that
these Open-end Investment Com
panies proyidr a very good method
Of diyersihcation for small inves.
tors. Naturally, the investor must
pay something for this service. All
"open-end" investment companies
add = sales charge to the asset
value of their shares and this
charge normally runs around 81 oc.
There is. however,, no charge for
liquidation OF holding except in
very rare instances and in sucn
cases IT is usually less than lec.
Without getting into the minute de.
tails OF the computation. the base
figure o. asset value is arrived at
by dividing the net value OF the
assets at market by the number
of outstanding shares and adding
to this the sales charge. This net
asset value figure is what is used
to determine the price paid at liqui-
dation.
Different Glasses OF oPen-End
Shares
Among the larger OF these open.
end companies might be mentioned
the Massachusetts Investors Trust;
Keystone Custodian Funds: In
corporated Investors, and the State
Street Investment Corporation.
These companies often have dir
ferent funds. One fund may be
limited to common stocks. another
fund to preferred stocks; and an.
| other fund to bonds. Moreover, in
some cases the above divisions may
be divided into "high-grade with
low return" and Speculative with
high return" which might mean six
or more different funds This en-.
ables an investor TO decide for
himself the character of securities
in which he desires to invest. bu,
still insures him broad diversifl-
cation in the group which he Sc
lects. Furthermore, there is no
reason why an investor cannot Sc
lect more than one group. IL he so
desires, and thus get a double form
of diyersifcation.
Investment Companies and the
General Stock Market
Investors buying the shares of
any investment company should
realize that there is nothing guar
anteed, either as to the annual in
come to be received. or what cash
will be returned II one desires to
sell. The market price OF the
shares in investment companies
must 20 up and down with the
general stock market. II is not
like putting your money in the saw.
ings bank or in government bonds
where you know exactly what inter
est you are going TO get and that
you can get back the same princi-
pal that you put in. no more and
no less. Therefore. when buying
the shares of an investment com
pany the general stock market
averages should be considered.
In the early days. these invest
ment companies were not market
factor; but today they should con-
tribute as a stabilizer OF the entire
stock market. For instance, It Is
estimated that about l.500 firms
throughout the country, with an
average of FIVE statesmen each. are
selling, ever day, thes hares Of
investment companies They are
turning in 10 the New York Stock
Exchange. in purchases. nearly $50.
100000 per month. which is nearly
five per cent of the total transac-