9 
As a general rule investors distribute their 
capital in a haphazard sort of way. They will 
buy £100 worth of one kind of stock and 
£1,000 worth of another. This is fatal to a 
successful counterbalancing of profits and 
losses, for :—Capital must not only be split up 
amongst various investments, but these divisions 
of capital must all be of equal original cost. 
The idea of distributing capital amongst a 
variety of investments is that the movement of 
one division of capital may counterbalance the 
movement of another division. Clearly, then, 
if this system of counterpoise is to prove of 
practical value, the weight of the several 
adjusting divisions of capital must be 
identical. For instance, suppose that £1,000 
had been unequally invested in two stocks, their 
costs being £800 and £200 respectively, and 
let us further assume that the investor 
judiciously selected two stocks which repre 
sented two widely differing investment risks, 
and that one stock was adversely affected 
whilst the other improved in value. Now, if 
the stock which represented £800 of his 
capital fell five points and the other, in which 
he was only interested to the extent of £200, 
experienced a precisely similar rise, the 
investor would lose £40 over the first and, as 
a set off to this, he would only have made a