7

/¿y s ' usc/ VY

To  begin  with,  the  danger  is  obvious  of  an
investor  confining  his  purchases  to  one  stock.
In  such  a  case  he  would  be  retaking  his
accumulated  wealth  on  the  fortunes  of  a  single
security,  and  on  any  serious  depreciation  overtaking ­
  the  stock  of  his  choice  his  loss  would
be  considerable.  Further,  he  would  be  reduced
to  the  vexatious  position  of  having  no  other
practical  course  open  to  him  than  to  wearily
nurse  his  crippled  investment  in  the  vague
hope  of  its  ultimate  recovery.  A  'prudent
investor  will  therefore  split  his  capital  up
among  a  variety  of  investments.  The  number
of  investments  which  would  best  suit  his  case
depends  entirely  upon  the  amount  of  capital
of  which  he  is  possessed.  Thus,  with  a  capital
of  £1,000  to  invest,  three  stocks  might  suffice,
whilst  with  £5,000  capital,  ten  stocks  would
be  requisite.  Later  on  in  this  book  we  shall
lay  down  a  very  definite  scheme  for  the
scientific  sub-division  of  capitals  of  all  sizes.
The  idea  of  investing  capital  in  a  variety
of  stocks  is  to  prevent  any  financial  disaster
adversely  influencing  more  than  a  small  portion
of  the  total  capital.  Therefore,  to  select  two
-or  more  stocks  whose  price  fluctuations  depend
on  the  same  influences  would  be  to  defeat  the
whole  scheme  of  distributing  capital.  So  that
not  only  must  capital  be  sub-divided  among  a