The Resulting Investment Program

The foregoing discussions have made it evident that over-all investment is not a subject to be approached lightly, or in a haphazard manner; diversification, being the underlying principle employed to minimize risk, must be obtained through (a) the media of investment; (b) the industries represented; (c) geographical distribution. Throughout the entire plan lurks the danger of inflation or deflation, and these powerful forces must be taken into consideration. With all these things in mind, with the realization that ownership of common stocks constitutes a hedge against inflation, with the assumption that provision has been made for both a "rainy day" fund and adequate life insurance, we may now arrive at a final program for investment. It has the advantage of relative simplicity:

TOTAL INVESTMENT FUNDS divided into

PART I (60-40%)
In high-grade, fixed-dollar obligations: bonds, preferred stocks

PART II (40-60%)
In common stocks, of which at least half must be quality defensive type

Note 1: The percentage shown may vary with the individual himself, his objectives, the inflationary outlook, and other special factors; the extremes may be justified, but seldom exceeded.

Note 2: Diversification in common stocks may also be realized by participation in mutual funds and by purchase of bank and/or insurance-company stocks.