Some of these loans, too, are paid off by annual instalments, lots being drawn to deter- mine the bonds to be redeemed. If the bonds, therefore, have been bought at a premium, there is always the risk of their being drawn for pay- ment and paid off at par. On the other hand, if the bonds are bought at a discount, there is no danger of loss; and a profit will be realised should they be drawn for payment.
For instance, a £100 bond is purchased at 4 premium, costing £104. If the bond is paid off at par, or £100, there is obviously a loss of £4; but if the bond is purchased at 4 discount, cost- ing £96, it is equally obvious that, if paid off at par, there would be a gain of £4.
RAILWAYS.
Next to the British Government Funds, by far the largest amount of money is invested in Eng- lish railways. First in order of safety, as an investment, is the debenture stock of a railway company. This is the first charge on the rail- way, and holders of the stock are paid the in- terest thereon in priority to all other stocks. In the event of the failure of the company they must also be fully satisfied as to principal and interest before any one else can receive a penny. Any amount of stock, odd or even, may be pur- chased through a banker or broker, and war- rants for the interest are forwarded half-yearly to the address of the registered holder. The debenture stocks of good English railways com- mand a high premium, and the investment, therefore, though undoubtedly safe, does not yield much in the way of interest. Guaran- teed stocks are of various kinds and rank — some on the same level as, and others next in order to, debenture stocks. In some cases the interest is guaranteed by another railway. Before investing in these stocks the nature of the guarantee should be ascertained and its value taken into consideration. Preference stocks and shares come next in rank as an invest- ment. The interest on these is fixed at a cer- tain rate per cent., and, after satisfying the preceding stocks, must be paid in full; or if there is not sufficient profit in the year to pay in full, then as much as means will allow. But any deficiency cannot be carried on to the next year, and so it is lost to the holders.
There are several degrees of Preference stock, some taking precedence of others as to interest; a first preference may be as good as debenture stock, whilst the last preference of the same railway company may be no better than ordinary stock.
Preference stock may be purchased in any amount in the market, and the interest war- rants are sent half-yearly to the registered holders.
Ordinary stocks depend on the profits for the year for the interest they yield, and thus afford a wide field for speculation. The stocks of the great English lines may be relied upon as a good investment, the profits being steady and sufficient to assure a fair amount of interest after satisfying the prior claims of debenture and preference stocks.
Ordinary stock may also be purchased in any amount, and the warrants for interest are sent half-yearly to registered holders of stock.
In all cases railway warrants of every kind will, upon written request to the secretary of the railway company, be forwarded periodically to the bankers of the holder of the stock for the credit of his or her account.