WELLINGTON NEWS

Hokitika Guardian, 9 August 1928, Page 4

WELLINGTON NEWS

THE SMALL INVESTOR, (Special to “ Guardian.”) WELLINGTON, Aug. 7. There has been a remarkable growth in the number of small investors who have become interested in stocks and shares in recent years and this has been noted also in other countries. The same phenomenon lias been experienced in Australia and to go further afield the same has occurred in the United States. The National City Rank of New York points out that speculation in stock by the big outside public has reached a stage where ordinary business is taking a back seat. This condition did not arise overnight. It has been a matter of slow growth. The small investor in New Zealand received his entry into the security market during the war period and after, when our Government shut out of the London market was obliged to raise funds within the Dominion, and the small investors came to the aid of the Government. Since then the number of small investors has grown, they have widened their knowledge of Stock Exchange methods and have learned to appreciate the values of securities. It is largely owing to this new phenomenon in the investment business that there is now not the keen demand for mortgages of real estate, and to take over this business a number of finance and mortgage companies have been formed in various parts of the Dominion, and most of them are doing a profitable business. The small investor, however, is the prey of a class known as the “share-hawker” whose statement in respect of the company whose shares he is vending are invariably highly coloured if not bordering on falsity. His entire interest is to sell the shares and pocket his commission. An authority on investments writing in a Melbourne, daily has some very useful advice. He points out that’ formerly big public corporations were comprised mainly of people of wealth,

but now the shares are spread over all sections of the community, with small holders predominating. He gives two examples. In the National Bank of Australasia there are 8000 shareholders and the average amount of scrip held is £SOO. Goklsbrough, Mort and Co. has 6000 proprietors.

and the average holding is £330. The same thing is to be noted in the Dominion, for the Bank of New Zealand has many thousands of shareholders. This spread is rather a good thing for the country for it means that the small investors will resist the social-

isation of the means of production,

distribution and exchange which is the cardinal plank of the Labour platform. It is good for the country in

another way, for it means that small investors will help through joint stock companies to develop the resources of the country. Each year contributes its quota of investors seeking suitable purchases of shares for their few hundreds.

Unfortunately the experience of many small investors has been bitter for advantage has been taken of their ignorance and cupidity by unscrupu-

lous company promoters and share-

hawkers. - The Melbourne authority says: “Failure to appreciate the fact that the business of investing, like any other form of enterprise, is governed by simple basic principles has been the cause of losses frequently disastrous, because complete losses of savings, and sometimes insolvency, have been menaced by placing too great faith in the impossible, being achieved from investments. Departures from the simple rules covering any activity involve penalties: and in the investment field, in which

money is the only commodity dealt

in, the penalty of non-observance of tho notes, is a loss of portion, if not the whole of that money.” Risks cannot bo completely avoided unless interests aro confined wholly to the giltedged classes of ceeurity, such as Government stocks and bonds. The fact that risks cannot be completely avoided demonstrates one of the most important principles to be applied when investing. The widest possible spread of interests should be secured, in other words, avoid placing all your eggs i?i one basket. This is the basic principle adopted by investment trust companies who spread their investments over a wide range of securities, and ovc-r as many countries as possible. Almost without exception, enterprises from which big returns are expected are speculative, and expose the money investors to abnormal risks. To .safeguard himself the new investor contemplating purchases of shares, would buy only through many of the reputable stock and sharebrokers registered by the Stock Exchanges. Such registered sharebrokers are not allowed hv the rules of the Stock Exchange to advertise, consequently when a new investor conies on the scene he is treated with great consideration by the broker who wishes to secure and retain his business.