We are all, who are outside the circle of professional experts, ignorant about investments, and so also are some who are inside it; but there are degrees. The ignorant investor with whose plight I am now concerned is the really blatantly ignorant one, who constantly falls a victim to knavery not because of his or her greed or stupidity, but because of sheer ignorance of the whole business and lack of a sound and disinterested adviser.
It is easy to tell people, as I have in the foregoing pages, that investment is a very difficult matter and that the best way of dealing with it is to find a good stockbroker and follow his advice. But what if they do not know a stockbroker, and what if they happen to fall into the hands of a bad one?
It is easy also to tell people to consult their bank manager. But many people have not a banking account, and sometimes the advice given by bank managers is unfortunate.
It is really a serious problem, because the losses incurred year in year out by these unfortunates must run into big figures, and, apart from the individual hardship involved, we cannot afford to lose capital in this way. Moreover, the existence of this evil produces a swarm of human vermin who live on it, and it is an ugly blot on our financial system which invites and receives acrid but justified comment from its critics.
Some radical improvement in our investment machinery seems to be needed, and all the more because of the great increase in the investment habit, among classes in which it was formerly uncommon, during and since the war. The social importance of this growing democratization of capitalism is difficult to exaggerate, and it will mean disaster if the stimulus is checked by losses due to bad investment. Another cause which makes this problem urgent is the prominence lately given to profit-sharing as conducive to industrial co-operation. Most profit-sharing schemes invite, or even oblige, the wage earner to invest his share of profit in the company that employs him. Thereby he puts too many eggs into one basket and risks capital loss, as well as loss of his job, if the company falls on evil days. It is surely much more desirable that he should invest outside, through some sound and trustworthy channel.
When one airs these views in the company of business men they are apt to agree and then to observe that there would not be much, if any, profit attached to solving the problem because it would mean expensive propaganda and, at best, a great deal of business in piffling amounts; moreover, that it does not seem to be anybody in particular's job.
What I should like to see would be a trust company with an absolutely undoubted Board—either formed ad hoc, or one of those already in existence—which would, along with its ordinary business, make a speciality of catering for the ignorant investor by taking his money and issuing shares (perhaps participating preference) to him.
Or one or some of the great insurance companies might take the matter up as a special line, forming a separate company or branch for this purpose. They all have a body of experts on investing, but of course they have already so much to invest that they hardly know where to put it. But this special line might be helpful to them in their insurance business.
Whatever company or institution took the business up would be obliged, if it meant to deal thoroughly with the problem of the ignorant investor, to spend a good deal on publicity, so that everyone who has money to invest might know that some trustworthy concern was prepared to take charge of its investment. It does not look like a highly profitable enterprise, but the huge profits that have been made by providing insurance and tobacco to millions of the impecunious seem to indicate that sound investment might be popularized to the benefit of the pioneers. And the benefit to the public would be enormous.