The stock market crash - and after

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Monograph

Identifikator:: 1815583320

URN:: urn:nbn:de:zbw-retromon-204544

Document type:: Monograph

Author:: Fisher, Irving http://d-nb.info/gnd/118533541

Title:: The stock market crash - and after

Place of publication:: New York

Publisher:: Macmillan

Year of publication:: 1930

Scope:: XXVI, 286 S.; graph. Darst

Digitisation:: 2022

Collection:: Economics Books

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Document type:: Monograph

Structure type:: Chapter

Title:: Chapter XIII. Flight from Bonds to Stocks

Collection:: Economics Books

Flight From Bonds to Stocks 203 ing world. They evolved five reasons for the now proved fact that stocks are a better investment than bonds: first, because the stockholder stands to win as well as to lose; second, because modern dividend policy is toward steadiness; third, because a portion of the stockholders’ earnings is reinvested for him and ultimately yields further dividends; fourth, be- cause the unstable dollar tricks the bondholder, but any effect on the stockholder is largely neutralized; and fifth, because diversification can correct the irregularities of the stockholder’s income but not that of the bondholder. This fifth reason is much emphasized by these writers, especially by Edgar Smith and Kenneth Van Strum. They show that whatever truth there is in the “risk” carried by the stockholder as compared with the bondholder, this risk can be partly neu- tralized by diversification. If one invests $10,000 in ten different companies, putting $1,000 into each, while he does run a real risk of losing all that he has invested in some one or two of these companies, this risk is mostly offset by the probability that some other company will prosper exceedingly. Both Smith and Van Strum show how this diversification does neutralize the risk and correct the unsteadiness of the stockholder’s income. The bondholder, like the stockholder, may be said to be “gambling.” In fact, he is more like the man betting on “heads” or “tails.” The dollar will go up or down for all bonds at once, and there is no wav to iron out that gamble by diversification. The

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