The investor should be aware that even though safety of its principal and interest may be unquestioned, a long term bond could vary widely in market price in response to changes in interest rates.
The Reservoir plan is an engineering mechanism applied to the field of economics, and in its essence it has nothing to do with democracy or any other political philosophy.
If General Motors is worth $60 a share to an investor it must be because the full common-stock ownership of this gigantic enterprise as a whole is worth 43 million (shares) times $60, or no less than $2,600 million.
Even defensive portfolios should be changed from time to time, especially if the securities purchased have an apparently excessive advance and can be replaced by issues much more reasonable priced.
We urge the beginner in security buying not to waste his efforts and his money in trying to beat the market. Let him study security values and initially test out his judgment on price versus value with the smallest possible sums.
I am more and more impressed with the possibilities of history’s repeating itself on many different counts. You don’t get very far in Wall Street with the simple, convenient conclusion that a given level of prices is not too high.
It is no difficult trick to bring a great deal of energy, study, and native ability into Wall Street and to end up with losses instead of profits. These virtues, if channeled in the wrong directions, become indistinguishable from handicaps.
To have a true investment, there must be a true margin of safety. And a true margin of safety is one that can be demonstrated by figures, by persuasive reasoning, and by reference to a body of actual experience.
The Reservoir system will function not only as an equalizer of business conditions, but also as a national store to meet further emergencies, such as war and drought, and-most important of all-as the concrete means of developing a steadily higher living standard for all.
