INVESTORS AND HIS ADVISERS

The investment of money in securities is unique among business operations in that it is almost always based in some on advice received from others . The great bulk of investors are amateurs . Naturally they feel that in choosing their securities they can profit by professional guidance . Yet there are peculiarities inherent in the very concept of investment advice .

If we assume that there are normal or standard income results to be obtained from investing money in securities , then the role of the adviser can be more readily established . He will use his superior training and experience to protect his clients against mistakes and to make sure that they obtain the results to which their money is entitled . It is when the investor demands more than an average return on his money or when his adviser undertakes to do better for him that the question arises whether more is being asked or promised than is likely to be delivered .

Advise on investments may be obtained from a variety of sources . These include : (1) a relative or friend , presumably knowledgeable in securities (2) a local commercial banker (3) a brokerage firm or investment banking house (4) a financial service or periodical and (5) an investment counselor . The miscellaneous character of this list suggests that no logical or systematic approach in this matter has crystallized , as yet , in the minds of investors .

If the investor is to rely chiefly on the advice of others in handling his funds , then either he must limit himself and his advisers strictly to standard , conservative and even unimaginative forms of investment or he must have an unusually intimate and favorable knowledge of the persons who is going to direct his funds into other channels .

But if the ordinary business or professional relationship exists between the investor and his advisers , he can be receptive to less conventional suggestions only to the extent that he himself has grown in knowledge and experience and has therefore become competent to pass independent judgment on the recommendations of others . He has then passed from the category of defensive or unenterprising investor into that of aggressive or enterprising investor .