Investments for women and estates ought to have all the speculative elements eliminated as far as human foresight can guard against them. Women and children belong to a class of investors who can least afford to take risks, no matter how small, as they have no means of repairing their losses in the event that any of their securities go wrong, dependent as they are upon the continuation of their incomes.

An illustration of how necessary it is to exercise extreme care when making investments for women and estates is recalled in a distressing case that came to my attention as the outcome of the failure of the Third Avenue Railroad. An elderly woman was left 300 shares of the stock in this company when they were selling around $200 a share and when there was not even a breath of suspicion that anything could go wrong with this property. This stock represented an investment at the then market price of over $60,000 and was sufficient to give the woman an income of over $3,000 a year, enough to provide for all her necessary comforts. Overnight her fortune was swept away and her income vanished as the result of the failure of the company. In place of comfort for her declining years she saw poverty staring her in the face. She was finally prevailed upon to sell her stock for $30 a share, stock that cost $200, for she had no means with which to pay a large assessment.

On the interest she receives from her money in a strong savings bank, she is finding it hard to make both ends meet.

It would have been far better for this woman to have her $60,000 invested in government bonds, though they would have brought her an income of only $1,200 a year.

I cite this case in order to show clearly that the smallest risk can quickly become the greatest risk. Such bonds as construction bonds, mining bonds, collateral bonds, unsecured debenture bonds, and notes, or for that matter any bonds unless properly secured by physical assets, belong to investments that cannot be safely recommended to dependent women or estates. In saying this, I have no intention to reflect upon the desirable securities of this class, of which there are many, but to emphasize the advisability of minimizing all risks.

Security is the foremost consideration for such investors. Income is secondary. The undoing of many of these investors directly results from a desire to increase the income at the expense of safety.

In the selection of investments for women and estates the suggestion is made that the same rules be applied as govern the investments of savings banks in Massachusetts, New York, Connecticut, Illinois, Ohio, Pennsylvania, and other states. These laws are the combined result of the most careful study in determining the safest character of investments. Copies of these laws may easily be secured by writing to the secretary of state of each of the various states. The laws of some states regulating the investment of funds by executors, administrators, and trustees fall in the same class.

The foregoing laws usually authorize the investment of funds in some of the following classes of securities:

1. Bonds of the United States.

2. Bonds issued by the states.

3. Bonds of any county, city, town, or other municipal corporation where the total indebtedness does not exceed a certain per cent of the assessed valuation of taxable property. Usually, the limit of indebtedness is anywhere from 10 to 15 per cent.

4. Bonds or notes secured by a first mortgage on real estate. The acts usually provide that the estimated worth of the real estate shall be at least twice the amount of the loan.

5. Bonds of certain railroad and industrial corporations which are listed on the exchange and on which there have been no defaults in the payment of interest or principal over a period of five years or more.

The exact provision in each case can be ascertained only by referring to the statute and such administrative rulings as may have been made by the state banking departments or other authorities.

Bonds For Women And Estates. Test Questions

1. Why should investments for women and estates be free from speculative elements?

2. What sorts of securities are to be avoided?

3. What should be the first consideration of such an investment?

4. How do state laws regarding legal investments for savings banks aid in determining the classes of securities suitable for women and estates?

5. What are some of the most common provisions of such laws?