The Author - This is my third book—all written about long term or life­time investing. This one, I think, is better done than the others, and of course is more up to date.

Nearly all of the books on investing have been written by people making a business of selling investments, or charging a fee for advice about investments, or by professors who may have done considerable studying, but whose practical exper­ience as investors has been quite limited

1. Invesment Companies - As of December 31, 1961, there were 195 investment compa­nies, which were members of The Investment Company Insti­tute, and had total assets of approximately $25 billion. Some 170 were open-end companies with assets of approximately $23 billion, and 25 were closed-end companies, with assets of around $2 billion.

2. Early Experience - Some understanding of the early experience of investment com­panies is necessary to show the reasons for federal regulation and its importance to investors.

A few investment companies were organized in the United States before World War I. Although investment companies in the United Kingdom were well established, it must be remem­bered that until World War I the United States was a debtor nation, and the number of holders of common stocks was rela­tively small.

3. Wall Street - When Wall Street and Washington cooperate it is news indeed. It may be long before another industry so heartily endorses a regulatory measure and before both houses of Congress pass a similar proposal without a single negative vote. The Investment Company Act of 1940 was approved August 22 and became effective on November 1 of that year.

4. Closed Investments - Closed-end investment companies differ from open-end com­panies (mutual funds) in three important respects:

1. Closed-end companies do not constantly sell shares in order to raise additional money. As a rule, the capitalization of closed-end companies changes infrequently, if at all.

5. Mutual Funds - Open-end investment companies are now generally known as mutual funds, the terms being used interchangeably. Un­doubtedly, the word mutual has sales value, for it is associated with savings banks and certain life insurance companies. In a number of ways, open-end companies are no more mutual than the ordinary commercial bank or industrial enterprise. This does not detract from their merits, but uninformed investors may misunderstand the implications of the word.

6. Objectives - To illustrate differences in the objectives and investment poli­cies of representative investment companies, statements con­tained in prospectuses and other official material published by investment companies are cited.

Under its Articles of Association, the company has very broad powers of investment as well as authority to lend money and underwrite securities. According to its statement of policy, the company may invest in any type of security.

7. Performance - Investors should make sufficient allowance for differences in objectives when measuring the results or, as they are generally called, the "performance" of investment companies. The most obvious need is recognizing the distinction between common stock funds and balanced funds. The latter maintain a substan­tial part (at least 35 per cent) of their assets in bonds and preferred stocks of investment quality.

8. Case Studies - The studies, which constitute this chapter, are presented as a source of concrete data on the origin, functioning, and record of several investment companies of different types. Obviously, space permits discussion of only a few among the companies in the field. Those chosen do not necessarily have the most out­standing records, but their experience offers the investor the opportunity to gain some understanding of the operations of different types of investment companies.

9. Investment Guides - This is a book about investment companies, not a book about investment. Nevertheless, I shall condense one man's experi­ence in this chapter and set forth some considerations on investment that I have developed out of many years of observa­tion, activity, and reading. Understanding something about the nature of investment can help the investor who makes his own decisions about buying and selling individual securities. It can also help the investor who buys investment company shares, for greater understanding of investment problems will help him appraise the performance of his company. A restatement may even be useful to managers of investment funds themselves.

10. Institutional - The investor in investment company shares is interested in institutional investing because he participates in such invest­ment when he buys investment company shares. Secondly, institutional investing has an impact on prices and may influ­ence the price, which he pays for his shares. Thirdly, institu­tional investing affects and probably will affect to an even larger degree both the securities market and the economy of the nation.

11. Good Measure - Almost always, after we have discussed a problem with a friend, we think back and say to ourselves: "Why didn't I add this, and this? How could I have overlooked that?" This chapter is the result of such questioning, as it were. We began with a "fireside chat." Let us see what an equally informal chat with the reader-investor would cover after he has read this book.

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