The Author - This is my third book—all written about long term or life­time investing. This one, I think, is better done than the others, and of course is more up to date.

Nearly all of the books on investing have been written by people making a business of selling investments, or charging a fee for advice about investments, or by professors who may have done considerable studying, but whose practical exper­ience as investors has been quite limited.

1. Savings? - Although investing is the subject of this book, we start with a few words about saving, because a man cannot in­vest money until he has saved it—unless he is one of the minority who inherit or marry or borrow or otherwise come into control of what others have saved.

Especially in recent years, an American with a steady job probably has sufficient income so that he can pay es­sential living expenses and also save something, if he wants to.

2. Cash on Hand? - The simplest thing to do with savings is merely to hold the cash for use when needed. It is also a sensible thing to do, if not carried too far.

One of the surest ways to waste money—and a way fol­lowed by tens of millions of Americans—is never to have any free cash. When one of these people buys clothes, jewelry, household goods, an automobile, insurance, or va­cation travel, he begins to use the item immediately, but he pays by installments that are not completed until months or years afterward. Maybe he is still making payments after the item is all used up or worn out.

3. Investing? - "Investment" is a word often used merely as an excuse to justify buying something that the buyer cannot afford. Some­times it is hard to draw the line; but to play safe, let's not call a purchase an investment unless we expect it to result in a measurable financial benefit, either to reduce living expenses or to increase income, or to cause capital to grow in market value.

4. Good Advice - When the writer began to study investing, he was puzzled as to why so few professional financial people recommended the sort of investing that, to the writer, seemed to take ad­vantage of the best available means for probably obtaining good, long-term results. But gradually he has come to realize that this is a natural condition, existing also, in varying degree, in other fields of human activity.

5. Security? - Wrap the big hand around the little hand... for now begins a little heart's journey into prayer... the guide is Dad, the goal is a security not even he can provide.

But the pattern is security, and it is Dad's privilege to supply his part of it for the little hearts in his care.

In this binding, enclosing love, life finds its finest answer.

6. House Debt - Owning one's home can be a genuine investment, but often is only partly so. In the majority of cases, a family's main reason for buying a home is probably to have a more satisfactory room arrangement or better equipment, to live in a better neighborhood, or maybe a less tangible reason, to be independent or to acquire social status.

7. Life-Insurance - "If anything should happen to me..." With that idea planted in a man's head, he is an easy mark for a life-insurance salesman. This vague phrase gets around the ugly word "death"; and combined with pleasant phrases such as "security" and "building an estate," it develops the impression that life insurance is the ideal protection against almost any conceivable difficulty that a family might encounter.

8. Buy Insurance? - Before buying an individual life-insurance policy, a man had better find out to what extent he is covered automati­cally or can obtain low-cost insurance through his being a member of a group.

In the United States the group life-insurance program covering by far the most people is the one included in the Federal Government's Social Security law and financed by tax on covered employees and then" employers.

9. Percentage - What is the difference between 3 per cent and 6 per cent annual income on an investment of $1,000? For just one year, the answer is easy: it's $30. And as long as the in­come is spent each year, while the principal amount re­mains unchanged, the answer is the same, year after year.

10. Stocks? - Explaining corporate stock is made easier by glancing first at some forms of business that do not have shares of stock.

In the simplest type of business organization, one and the same man is sole owner, proprietor, manager, boss, and worker; he is "the whole works." In occupation he may be, for example, a farmer, a plumber, or a grocer. Or he could be a professional man, such as a physician or a lawyer.

11. Nervous Man - Unless we are able to exercise a considerable degree of control over our emotions, civilized life is impossible. In a typical family, by the time a baby is a year old he has begun to learn that staging a tantrum does not always bring him favorable results. And an adult can hardly earn a living or manage children or gain the respect of his associates unless he usually can manage his own nervous reactions.

12. Big Names - A number of American corporations are so big that it takes some imagination to realize how large they really are. The Bell Telephone System has more revenue and employees than the combined governments of New York State, New York City, and all of the city, county, and other local gov­ernments within that state.

13. Gambling - Apparently most people enjoy gambling, and indulge them­selves at least occasionally and within limits. For those will­ing to risk hundreds of dollars or more at a time, and who like a complicated game, the stock market is ideal for gam­bling or, as it is more politely called, speculating or trading. In most forms of gambling, a player's choices of possible action are few.

14. Owing Stock - With all the hullabaloo about speculation, an amateur in­vestor may naturally assume that Wall Street is strictly for gamblers. This is a great pity, because probably a long-term investor can get better results in the stock market than else­where, provided he follows a few fairly simple rules. Also, it would help in the public understanding of how free enter­prise, and especially big business, is owned, if more of our non-gambling citizens participated in owning corporate stock.

15. Extra Cash - For many people, being short of cash is chronic. But we assume here that an investor is usually able to keep his expenses within bounds. And yet, no matter how carefully he plans, sometimes he finds himself needing to spend consider­ably more money than his current income provides. Only a reckless person assumes he will never have to face this situa­tion

16. Why Diversify? - In planning a home for a family, perhaps the most urgent single requirement is a place to sleep. But if the family have any choice, how long will they put up with nothing but bedrooms? For comfortable living, a family needs several rooms, each one designed and equipped for a different use. In making investments, many people seem to assume that one type will take care of everything.

17. Easy Payments - A person with no savings can indulge himself in dreaming that some day, without effort, a lot of money will fall into his lap; and of course, sometimes dreams come true. But for nearly all of us, the only way we can logically expect to ac­quire capital is to accumulate it, bit by bit, with the assistance of wise investing.

18. When to Buy - During 1956 the peak price reached on a share of some common stocks listed on exchanges was as much as ten times as high as it had been three years earlier, in August 1953. Even in some broadly diversified investment companies, the price of a share was more than doubled in those same three years.

19. What is Profit? - A "profit," in business or investing, is usually defined along this line: The selling price of an item, less its cost and expenses, is profit; or if selling price is lower than cost plus expenses, the difference is "loss." Suppose we buy an invest­ment for $1,000, including buying expense, and sell it for a net of $1,500, after deducting selling expense.

20. What is Yield? - "Yield" is a common expression in Wall Street; and as with the word "security," sometimes its meaning is what an intelligent amateur would suppose, but often it is misleading.

Among the corporate and government bonds bought and sold in the stock market, sometimes the purchase price, the par value, and the maturity value are all the same amount.

21. Spend-able - The words "principal" and "income" on an investment are usually assumed to have a clear and simple meaning. A man puts $1,000 of his principal into a savings deposit; during the year the bank credits him with $30 interest, and this is his income. If he buys 100 shares of corporate stock, those shares are his principal, and when the company pays him a dividend, that is his income.

22. Cut Taxes - Income taxes are a rather complicated subject, and are discussed here only to suggest how they may affect investing.

A major difficulty in writing about the income-tax aspect of investments is that people can own investments exactly alike, but the Federal income tax they pay can vary any­where from zero up, depending upon the owner's total tax­able income

23. Results - Suppose a man buys some common stock at $10 a share, and a month later the price has risen to $11. Does that mean he did well? Or suppose that a month after he bought at $10 the price went down to $9. Does that mean he made a bad buy? Or, taking a longer period of time, if in ten years the value of stock has doubled, is that a good performance? How do we judge whether buying a certain stock was wise?

24. Investment Company - When a man makes a deposit in a savings bank or joins a savings and loan association, or takes out a life-insurance pol­icy, he pools his money with that of other investors. Thus in fixed-dollar investing, the assembling of capital from many people into one pool, to be invested according to the judg­ment of an institution's management, is a long-established, widespread practice generally taken for granted by investors.

25. Sales Charge - A "sales charge" is included in the cost of shares in most mutual funds. To an investor who understands words better than figures, a selling charge is like taxes—something to be avoided, if possible. To a more analytical investor, the ques­tion is "Where can I get the best net over-all results? In a company with or without this charge?"

26. Mutual Fund - Probably this book annoys many readers by its failure to say which are the best companies, but we feel we have good reasons for the omission. This book aims to give information and ideas that an investor has difficulty in finding elsewhere. By contrast, details about specific investment companies, as well as other stock-issuing corporations, are easy to obtain.

The End