The Wilmington morning star. [volume] (Wilmington, N.C.) 1909-1990, 1946-03-30
By ROGER w. 8ABSON

L 1
view Of the tremendous growth in
the business of Investment Com
panies, readers of this column
should realize their possibilities,
both as service to the small in.
weston and as a factor in stabilizing
the present stock market.
Investment companies are divided
into two main groups:-The close.
end companies are the old-fa shion'
ed Investment Trusts, of which
there are a large number scatter
ed throughout the United States
There, however, are only a few
large ones. the securities of which
are listed on the New York Elk.
change. AS examples Of these com
panies, l might mention Lehman
Corporation, Adams Express, Atlas
Corporation and Tri-Continental.
Through Broker
These closed-end companies have
definite amount of capital stock
which is not increased or decreas.
ed. When ar Investor buys such
stock he does not buy OF the com.
pany but, through a stock-exchange
broker, must buy the stock Of
someone else who desires to sell
AS a rule these companies do not
diversity very broadly but usually
confine themselves to special stu.
atoms in which they purchase a
large interest. Often stocks Of these
companies sell for less than the
real liquidating value of the securi.
ties which they hold. This is an ad.
vantage to the investor when buy
ing such stocks; but a disadvantage
when selling.
When a salesman calls upon you
to sell the shares of an Invest.
ment company it will probably be
an open-end company where the
amount of stock outstanding varies
from day to day. There are about rs
of such active open-end companies
For instance, if the salesman would
sell today 100000 worth of these
shares, when the checks come into
the company it will go into the
stock market and invest this $780,.
900 in perhaps twenty high grade
listed stocks, which stocks will be
held in the compaay's treasury
Then, the company will isue $780,,
900 worth of new shares whi'1 oil
be mailed out to the above-mention
ed investors.
For Small Investors
1t will be seen, therefore, that
these open-end investment com
panies provide very good methoe
of diversification for small inves
tors. Naturally, the investor mus
pay something for this service
All "open-end'' Investment com
panies add a sales charge to the
asset value of their shares and thi.
normally runs around IL per cent
There is, however, no charge fol
liquidation of a holding except ir
very rare instances and in such
cases it is usually less than one pei
cent. Without getting into the min
ute details of the computation, the
base figure of asset value is arriv
ed at by dividing the net value OF
the assets at market by the numbe,
OF outstanding shares and adding
to this the sales charge. This net a
set value figure is what is used te
determine the price paid at liquida
ton. So.
Among the larger of these open
end companies might be mentioned
the Massachusetts Investors Trust
Keystone Custodian Funds; Incor
porated Investors, and the State
5 tr ct Investment Corporation
These companies often have differ.
ent Funds. One Fund may be limit
ed to common stocks, another Func
to preferred stocks; and another
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 OF
more different Funds. his enables
an investor to decide for himself
the character of securities in which
ne desires to invest, but still in.
sures him broad diversificaticn in
the group which he selects. Further.
more, there is no reason why an
investor cannot select more than