Growth Securities or Income Securities?
Growth Securities or Income Securities?
Growth Securities or Income Securities?
Should you invest in growth securities or in income securities?
In general, some balance should be established between the two alternatives but on the whole, for younger people who are not particularly interested in present income from their investments, it is wise to put money into growth investments. Forolder people, however, who may desire to supplement Social Security, insurance, and annuity programs with maximum ad ditional income from investments, the emphasis may better be placed on yield. It is obvious that you cannot have the best ofboth growth and yield in the same security. A growth stock implies that profits are being fed back into the corporation inorder to expand, while a yield stock implies that profits arebeing divided and distributed to the stockholders.
The Mutual Fund News Letter, an important monthly publication in the financial field, in an issue some years agooutlined a dozen basic considerations in the development of a successful investment program. These suggestions are repro duced here as a guide to prospective investors.
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(1)Safety: This should be the primary consideration in all
your investments. If you invest poorly or unwisely, you could
lose most or all of your money in a short period of time and,
with today's taxes, it would be difficult to make up your
losses.
(2)Income: Your investments should be the kind that will
yield a satisfactory income at all timesin good times as well
as bad. Then, if you lose your job or become ill, there will be
some steady income available.
(3)Growth: Your investments must grow over the years or
you will suffer. Through the years the cost of necessities and
luxuries has risen constantly. In addition to an investment
which "pays a good income" look for one which will increase
in value over the years. If both income and principal do not
increase, you are not getting the maximum benefits from your
investments since you must overcome the ravages of inflation.
(4)Diversification: To obtain the maximum degree of
safety, income, andgrowth, you must diversify your invest
ments as broadly as possible so that failure of one or two will
not hurt so badly. This is merely adherence to the old adage
of not putting all of your eggs in one basket.
(5)Selection: Diversification alone will not give you all theprotection you wantyou must also be selective. Look for thebest you can find from the point of view ofsafety, income andgrowth. (6)Supervision: Every investment should be watched care
fully to see that it fulfills its purpose. This requires constant
supervision at all timeswhen you are away, ill, or just too
busy to look after things.
(7)Marketability: Yourinvestmentsshould bereadily
marketable at all times. Do not let yourself be frozen into
something which you cannot dispose of quickly if the neces
sity arises.
(8)Regularity: No matter how careful you may be, your
investments may decline in value. If you can invest on a
regular basis, the purchases at market highs and market lows
will balance.
(9)Compounding: On receiving the income from your
investment, you gain the use of the income but nothing else.
However, if you reinvest the income you bring into play the
marvelous effects of compounding, creating surprisingly good
results over the years. Try to find an investment which permits
you to "compound" by automatically reinvesting all or part of
its earnings.
(10)Opportunity: New investments appear from time to
time. Your program should leave you the freedom to acquire
new investments to improve the growth prospects and condi
tions from time to time.
(11)Flexibility: Conditions change and we must change
with them. Last year's good investment may be sour next year
and today's unattractive investment may be very solid next
year. Keep flexibility in mind.
(12)Improvement: You should not sit back and do noth
ing after you have invested. Never cease your efforts to im
prove the account in every possible way.
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