In the next place it does not follow that because a bond or stock is not listed on the stock exchange it is without a market on the "outside," among bond and brokerage firms. In government and municipal bonds, probably nine-tenths of the business is transacted off the exchange, around among different firms, "over the counter" as the brokers say. Indeed more bonds are bought and sold outside the stock exchanges in several of our large cities than upon them. Moreover just because a bond or stock is listed on the exchange it does not prove that it will be actively dealt with in there. Even some listed securities are more freely bought and sold off the exchanges than upon them.

There is absolutely no rule about discovering whether any particular bond or stock enjoys an active market. If it is part of a big issue of a prominent, well-known company the chances are that it will be readily salable whether it is on or off the exchange, and usually will be on, unless the stock is closely and privately held. Many investment bankers make it a practise to "take care of" the securities which they sell. That is, they provide a market for them under nearly all conditions. Often a firm will buy back its own securities at a small charge, perhaps of only one per cent.

On the other hand the investor can have no hard and fast assurance that his investment bankers will repurchase securities sold to him. He may buy a bond or mortgage one day and go back a few days later and find the dealers cold and unresponsive. They were enthusiastic enough when they sold it to him. It was a very active, much sought for bond or mortgage then, according to the broker. But now he says there is no demand, and he will offer a price four or five or even ten points below the price of a few days ago. In one sense the stock exchanges are the more dependable markets in that their transactions are openly and publicly recorded. There is no secrecy about the buying and selling "on the board."

As a practical measure, I suggest to those who buy what might be called inactive securities, such as nearly all real-estate mortgages and bonds and stocks of small industrial and public utility companies, that they distribute their purchases among "successive maturities." That is, purchase one five-hundred-dollar or even a one-hundred-dollar bond coming due in 1920, another in 1922, and so on. In this way you will always have cash coming in. It may be noted that mortgages nearly all run for short periods. It is assumed that a man who buys a three or four-year bond will have no occasion to sell in that short space of time. In other words, if you distribute your maturity dates you will never need to worry about marketability.

In a general way it may be said that all securities running for short terms are easier to sell than those maturing many years in the future. This is particularly true of the short-term bonds of the more prominent corporations. For such investments there is always a demand on the part of large institutions for temporary investment. Then, too, a loan which is shortly to be paid off is more likely to maintain a price close to its face value because every one knows that soon it will be redeemable at that figure. But even if a hundred-year bond is sure to be paid off at its face value a hundred years hence there is plenty of time for it to fluctuate up and down in the interval.

A long-term bond may droop like a long piece of string. A short piece of string pulls up taut much easier. There is less slack to take up. As pointed out in a preceding chapter, the inexperienced investor must be very careful in the selection of short-term securities. They are of all degrees of goodness and badness.