Sizing Up Your Investments

by David Jenyns on April 18, 2008

In outlining a program of investment, the author, of necessity, must assume certain things about the stock market investor, which may or may not be true, and he must in some measure attempt to advise the stock market investor and substitute his judgment for that of the stock market investor.


A large proportion of stock market investors and potential stock market investors want to know that when they invest $10,000 they are going to get back $10,000, not $9,000 or $4,000, as a result of a declining stock market or for other reasons. Certainly the stock market should not be ignored, and stocks should be purchased by a large proportion of stock market investors; but there are other things in which to invest money, and some of these other things may provide for the preservation of capital better than the stock market. The second important characteristic of an investment should be yield. The banks secure higher rates than what they pay depositors, and their high rate business cannot be considered unduly risky. The third important characteristic is tax benefits, especially for the higher income stock market investor. In order to meet these general criteria of investment, namely relative safety of the capital, high yield and tax benefits, certain investment principles must be followed.

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