Show i I C B OF FINANCE t PROTECTING YOUR rOU SAVINGS SAYINGS By HAEOLD HOL F. F GREENE f Manager Maage Bond Department Guaranty naty Trust Company Compan of New York Ono One of or the constantly confronting con con- fronting the tho successful business man Is 13 that of ot selecting satisfactory Investments Invest Invest- ments for tor his accumulated savings In I making such selection there ar are four Cour factors factor which mu must l ho o considered Security Security Se Se- curU diversity marketability and andrate Tate rate of return return The subject of this i article has hns to do with tho second oCt of oC t these se factors diversity Most people are nrc familiar with ih the general Idea Iden of at distribution of or risk but comparatively few tew appear to realize Its Is Importance In connection with wih In e Investments Invest t- t ments Tho The majority of Investors seem to believe beleve that th they have attained proper diversity simply by the division qt their savings among several sc different differ differ- ent t Issues of securities A short time ago go a review of oC the tho Investment II holdings hold hold- ings of or a aver very successful business man that over half hal of oC the large larg total ci df dr this Investors Investor's holdings was divided I Investors sev seven n different Issues Of ot Oft I t these ese two were railroad bonds two ere public utility bonds and anc three yero oro Industrial bonds bond Each Elch ono one of oC the Iho individual ual securities was of oC Itself an nn excellent Investment Upon closer coser consideration con con- however howe It was soon seen that 10 real real- diversity had been obtained The two rai railroads road In question were both dependent for a large part of at their theirl l upon the the transportation oCal of oC pal al tho the two public nubile utilities were de- de upon cOal for or their source of power of or the three Industrials tw two were cre producers of or coal and the third a n I teel company compan dependent upon the same coal cal fields all al seven of oC the companies o operated In the same samo territory and all an I fere not only dependent upon UlOn the coal not I Industry but ut received their coal from tram tie the Le same Baro source of or supply Importance of ot Diversity The Th The coal Industry of or course Is one DC of oC the Import Important nl In our commercial commer commer- cial Ial life but no list of Investments Investment can canIte l Ite he e considered d diversified when all al of the companies represented In that list Identified an extent aTe to so great with Jh an any one Industry or an any one sectIon sec eec tIon of the of oC course Is a somewhat som ext ex- ex t U trenie eme example cample It I Is Is remarkable Is-remarkable how- how over ver that man many Investors no matter mater how carefully the they may select their securities absolutely lY Ignore the factor ot of diversity lt Too many con confine Cne their I purchases to 10 some some someone one class of oC Invest Invest- Invest Invest-I rents others who realize tho the danger 07 Are content merely merel to I Subdivide their holdings often ofen without q obtaining an any real dl diversity Investment securities are generally d divided Into four principal classes castes Government and municipal railroad anc utility and Industrial For the of securing diversity a n slightly different method of oC classification may mad made to advantage public debts 1 the revenue for tor which Is derived ed derl from tram l te taxation regulated private enterprises the basis of which is fixed rates private vate enterprises the tho basis of which Is Individual incentive In the lists given ghen below lelow no attempt has hns been made to In- In all al the various Industries and types of oC business a complete t tion Uon would bo be too long Ions to be given Iven l rc Therefore only those Industries Have been Included which have ha e large largo amounts of at Investment In securities outstanding outstanding out out- standing in the hands of at the tho public tp- tp L Public debts basis taxation basis taxation a Government obligations 1 I. United States Slates 0 2 Foreign countries s t O b State and ald municipal obligations obligations obliga obliga- 1 Domestic f- f J p. 2 Foreign IIi Regulated private ato enterprises x Basis fixed Basis fixed rates rr a a. Railroads 1 New England group 2 Eastern Easter trunk tunk rOUP lines bOZ OI coat coal carriers ff rw K 4 Anthracite coal coal caire carriers carrie w I 5 Southeastern lines 6 Cent Central l western lines linesT t T V. V 7 Central r north and south lines l S S. S Southwestern lines l 3 Northern crop carriers I 10 l. 11 Belt lines and terminal companies b Electric railways c Electric ic power po cr and light w companies Cd d Gas companies f 1 Natural gas g. g 2 Manufactured gas as c Telephone and telegraph corn cora j panics L Private enterprises s sM m Basin Individual Basis Individual c incentive o. o Ja a and manufacturing 1 i companies I 1 1 1 Agricultural machinery 4 I- I 2 A Automobiles uton bles and parts 5 3 3 Clothing and articles of S r apparel i- i I 4 4 Electrical supplies e 5 Food products I I. I f f- f l Fruit meat sugar grocer grocer- a t les ies etc C. C Mineral products Steel coal and coked coke co copper per J oil 01 etc ec I a iLjA 4 7 Railroad equipment J S. S Rubber products i I Vl 9 Ships J 10 Soap 11 Textiles I l. l r 1 12 Typewriters adding machines machines machines ma- ma chines chines etc l 1 13 Tobacco b ib b Distributing companies 1 Chain stores i 2 Mail fal order houses Even SEven this condensed list shows th the very wide variety of at Investments which I itis Is possible to obtain The investor should select his securities with lh a a view a-view view t to toas as wide diversity as a pos pos- eJ le and also a a certain cerain degree of geographical geographical geo geo- e graphical distribution Care Caro should be exercised to choose industries which h hnot not only appear to be different but are actually Independent of of each other Under our present complicated Indus- Indus trial structure thero there Is a great reat deal of oC Interrelation between the tho different lines of ot Industry Every Ever business Is Is to some Bome extent dependent upon other lines of or business For this reason absolute nb- nb ab absolute solute diversity Is an Impossibility but tile field of choice Is sufficiently wide to enable enable an any investor In to na high degree of practical diversity Foreign Securities The several classifications mentioned In the above table do not take Into Inlo consideration tho foreign corporation securities which are ae obtainable at nt present present pres pros ent In this marl market et to a limited extent bu but t which may my bo ho offered hero here more extensively Tho The addition of ot some Bome se securities so- so of oC this typo would Increase tho the er dl diversity lt of ot any list of Investment holdings There Is another form torm of ot diversity 1 which although Important Is seldom given shen any con consideration except uy oy uyI financial Institutions This Is diversity I as ns to maturity Tho The fact tact that periods of at prosperity and depression follow each ench other In cycles Is II a matter mater of or comm common n knowledge e In the same wo way periods of oC high and now Interest rates rales th that t Is tho thi rate of oC return obtainable ob Oh- 01 from n inv Investments v follow Colow each other cm In In cycles Now If It the tho investors Investor has chosen securities any n considerable of at which to mature In part happen approximately approximately ap ap- ap proximately the tho same periods ho e may find that ho lie will be forced to d do a considerable con con- amount wi of reinvesting dur during In ing inga a fi period period- of low 10 investment rates I dur-I If I ho he 11 had been careful to select e t se securities so- so P- P curtle with wih widely varying maturity I dates ha he would not be obliged to re- re than thim a small smal percentage re-I re of hi his capital during any one period To summarize the Ideal of oC diversity hersl I Is to so arrange your our Investments that no one event o ent In any anyone one Industry in any one locality or at on any one ono time I can Effect affect more than a n small email percentage percent percent- ago age of or your our total hold holdings I |