Remarks On Business Investment Choices

16 Sep 2009 @ 8:42 AM

Remarks On Business Investment Choices

For the investor himself, there is some sort of moral in all this. One does not rush blindly into the purchase of investment-company shares any more than a prudent man would rush to buy the stock of newly formed XYZ Electronics Company or any such business opportunity. Intelligent decision depends first upon what the investor wants for himself: income, capital gains, conservatism of principal, or even a bit of each.

Having decided what his ultimate aim may be, the next step is the selection of an appropriate fund—and here he may be quite bewildered, for there are so many opportunities for business.

In order to make a satisfactory choice, he should study the prospectuses of a number of them, paying particular attention to those funds which have had a better-than-average performance over at least a decade.

It is true that the purchase of investment company shares is a “way out” for the uninformed, or for the investor who lacks the time and skill necessary to keep up with financial matters; but there is one decision he should make and in which he should be so objective that no salesman can talk him out of it: which fund he should buy.

The salesman of shares will attempt to show that the impressive rise in asset values is nothing short of phenomenal and a great opportunity, forgetting that many private portfolios show similar gains; but the acid test is found in the results in the form of continued dividends and capital gains, which reflect the degree of success which the management has achieved.

There seems no doubt that the well-managed investment company is becoming more and more a suitable vehicle for the savings of persons of modest means; no supervision is required of the individual, although he must use great care to read the semiannual reports with a critical eye.

Open-end shares provide a safeguard in the standing redemption offer, but closed-end shares may often be bought at a substantial discount from net asset value; and the brokerage upon the latter is considerably less than the surcharge levied upon the purchase of the former.

Perhaps the most comprehensive publication dealing with investment companies is that issued annually by the Arthur Wiesenberger Company of New York. Should the investor feel its cost to be beyond his means, he may consult it at many libraries and brokerage houses.

Other critical discussions may be found in the various comprehensive and detailed textbook discussions of this phase of investment as a whole. Still others are to be found in certain issues of both Barron’s and Forbes magazines, devoted especially to the subject of investment funds and their recent behavior.