11

capital  for  the  sake  of  a  possible  profit.  The
purpose  of  this  book  is  to  supply  our  readers
with  a  sound  system  of  investment  and  not
to  encourage  them  to  risk  their  capital  in
speculation.
In  the  above  example  it  will  be  noticed
that  the  movements  of  the  two  stocks  were
of  similar  extent,  that  is  to  say,  they  both
fluctuated  five  points,  so  that  their  width  of
fluctuation  was  identical.  Now,  when  comparing ­
  the  characteristics  of  different  stocks,
it  is  important  to  remember  that  stocks
resemble  or  differ  from  one  another  in  soundness, ­
  in  dividend-productiveness,  and  in  width
of  fluctuation.  Their  limits  of  fluctuation
constitute  a  very  material  difference  between
stocks  ;  and  of  two  stocks,  both  subject  to
precisely  the  same  market  influence,  one  may
rise  or  fall  five  points  as  the  consequence  of  a
given  event,  whilst  the  other  may  move  only
two  points  in  response  to  the  same  influence.
The  safety  of  Capital  is  obtained  by  dividing
it  (1)  equally  among  a  number  of  sound
stocks  (2)  of  identical  quality,  but  (3)  every
stock  held  must  be  subject  to  an  entirely
different  market  and  trade  influence.
In  selecting  stocks  of  identical  quality,  the
average  annual  fluctuations  over  a  period  of
at  least  three  years  should  be  compared.  It