Diversifying Without An Investment Company

by David Jenyns on May 23, 2008

An investor wanting to reduce the gamble in controlling common stock must hold stock in a good many companies. Momentarily ignoring the existence of investment companies, suppose a man decides that for adequate diversification he should control stock in 50 companies, and for the companies he selects the average price per share is $30.

Aside from the sales charge, most of the expense incurred in a typical investment company is the fee paid to the group responsible for keeping the fund invested. Suppose a fund’s capital is $25 million; 0.5 percent of this is $125,000, which the fund can pay for an investment manager, his assistants, and his expenses.

In 1959 most of the funds, or groups of funds, with $250 million assets or more, are at least 25 years old. Large size merely gives a fund the opportunity for a fine performance.

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