WHAT IS "LEGITIMATE INVESTMENT."

Hutt News, Volume 1, Issue 33, 24 January 1929, Page 3

WHAT IS "LEGITIMATE INVESTMENT."

'' When you aTe in doubt about a transaction, and uncertain whether it is «r gambling one or not, ask yourself this question:— " 'If it is successful, will there ha any increase of wealth, or will any gain for one person be exactly balanced by the loss of someone else?' " writes Canon Peter "Green in the "Guardian." '' A real commercial transaction— say, prospecting for gold within the Arctic Circle —may be very risky; but if it is successful there will be a positive addition of wealth for ' the community as a whole. A bet, or any other form of mere gamble, may enrich one man, but only to the extent that it imprpverishes another. "This supplies a good starting point for our inquiry as to legitimate investment. AIL industry aims at the production and' distribution of wealth, using the ward wealth in its widest meaning. It may be material wealth, food, clothing, or furniture; or it may be 'services' such as are rendered by trams railways, the barber or the doctor. Or, again, the services may be such as add to our wealth or well-being in the way that is done by the actor, the musician, or the entertainer. But in all true, and legitimate transactions both sides profit. I part with half-a-crown, but I'get a pound* of tea, or a taxi rde, or an hour at a concert.

"Nbw where doe's the investor come in? Well, all commerce: involves two factors,, capital and labour. Whether it is starting a grocer's shop, or building a house, or opening up a mine in South Africa, it needs capital to start. If it turns out a success, I, the provider of the capital, am as much entitled to a share in the profits as is the man who provides the labour. But if the man (or one of them) who provided the original capital wishes to sell out, and I buy his shares, it is simply a question of a transfer from him to me.

"The moral and economic factors of the problem are not in any way affected I now become the man who,; provides the capital, a necessary factor in the business, and. I am entitled to my share in the profits. Now when a man looks out for some way of employing his capital, there is no more reason why he should not look out for one which is likely to pay him well than there is why a man anxious to employ his labour should not try to do so to the best advantage.

"A man is not to be regarded as a bad Christian because he seeks to employ what he has, whether capital or powers of, body or brain, to the best advantage, Of course, sometimes an investment will, owing to imforseen causes, turn Out very profitablej-.it is, not, therefore a gamble. You cannot eliminate chance altogether. Sometimes it may, turn out very ill; again it is not a gamble.

"The difference between, the man who bona fide buys shares, and the man who merely pays a deposit on their value, holding on the 'margin' system, is that the first provides fot industry something without which industry would be impossible, while the other simply enters into a transaction in the hope of skimming any profits that may be made, without contributing anything of value.

"And the fact tliat the man who enters into/ such transactions without inside knowledge usually loses heavily, while it proves his action to be' 3illy, does nothing to prove that t is not also morally wrong." - ,