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Bonds

The next rule is to prefer a first mortgage bond over any other. The bondholder is then part owner in the actual property of the com pany whose bond he has purchased. Next, he should prefer a listed to a non-listed bond. A listed bond is one recognized by one or more of the great stock exchanges of the world, and may be for that reason more readily dis posed of.

It must be further remembered that no bond that combines a high degree of safety with ready convertibility (that is, ready sale) can pay a high rate of interest. A recently published bond list shows approximate annual yield from two and nine-tenths to six per cent. What are known as gilt edge bonds, pay little if any more than savings banks, but these se curities may be bought at times at a price low enough to afford the purchaser the op portunity to sell at a high price. As a rule, however, bonds of the best type fluctuate in price only slightly.* Having safeguarded his purchase, the small investor pays his money and receives his bond, generally with coupons attached, each coupon bearing the date and amount of interest due semi-annually. On the date specified, the owner cuts the coupon from the bond, and he may deposit it in a bank just as he deposits cash or a check; in fact, a coupon is a check * See page 157, on interest return.

issued with the bond to the holder thereof in payment for the loan, and use, of his money.

But what can the average small investor do with a fifty or one hundred dollar bond ? The moment he receives it, he feels that he owns something he cannot take proper care of. It is too valuable to be left in a closet or a bureau drawer; it cannot be carried in one's pocket, and unless kept in a safe place it may be lost or destroyed by fire.

The first thing to do for protection is to take the number of the bond so that it may be traced in case of loss. Generally, issuing

companies will register a bond in the name of the owner. The best protection for it, and for all papers of permanent value, such as deeds, insurance policies, and the like, is a safety deposit box. A box may be rented for five dollars, or less, a year. They are pro vided for in banks and the offices of trust companies, and they are practically a guaran tee of security, for a box has never been known to be opened by anyone but the owner.

Having now purchased a bond and pro vided it with a secure place of refuge, the bond holder has only to cut his coupons as they fall due. This simple act of cutting money from a piece of paper is apt to lead one to un dervalue it. When it comes so easily one is tempted to spend it as easily. Make it a rule to deposit bond interest in the savings bank at once, and let it contribute its portion to the sum necessary to buy the next bond. In this way, adding interest to principal, there re sults a constant augmentation of the savings account, and the principal increases rapidly.

The small investor must remember that he may buy a bond, say of one hundred dollar denomination, either at par (one hundred dollars), or less than par, or above par, but if he holds it until maturity (the date when the principal is to be paid) he will receive par for it. Sometimes bonds are issued subject to call before maturity. This call feature is often at a price above par.

The small investor who makes the savings bank the depository of whatever small amounts he can set aside; who buys small denomination bonds with great care; who keeps his bonds in a safe place and never fails to deposit the coupons in the savings bank, will be surprised how rapidly his fortune will increase.

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