objects have had striking advances in market value over the
years—such as diamonds, paintings by masters, first editions of
books, rare stamps and coins, etc. But in many, perhaps most, of
these cases there seems to be an element of the artificial or the pre-
carious or even the unreal about the quoted prices. Somehow it is
hard to think of paying $67,500 for a U.S. silver dollar dated 1804
(but not even minted that year) as an “investment operation.”^4 We
acknowledge we are out of our depth in this area. Very few of our
readers will find the swimming safe and easy there.
The outright ownership of real estate has long been considered
as a sound long-term investment, carrying with it a goodly amount
of protection against inflation. Unfortunately, real-estate values are
also subject to wide fluctuations; serious errors can be made in
location, price paid, etc.; there are pitfalls in salesmen’s wiles.
Finally, diversification is not practical for the investor of moderate
means, except by various types of participations with others and
with the special hazards that attach to new flotations—not too dif-
ferent from common-stock ownership. This too is not our field. All
we should say to the investor is, “Be sure it’s yours before you go
into it.”
Conclusion
Naturally, we return to the policy recommended in our previous
chapter. Just because of the uncertainties of the future the investor
cannot afford to put all his funds into one basket—neither in the
bond basket, despite the unprecedentedly high returns that bonds
have recently offered; nor in the stock basket, despite the prospect
of continuing inflation.
The more the investor depends on his portfolio and the income
therefrom, the more necessary it is for him to guard against the
56 The Intelligent Investorin a year—that it can, all by itself, set an otherwise lackluster portfolio glitter-
ing. However, the intelligent investor avoids investing in gold directly, with its
high storage and insurance costs; instead, seek out a well-diversified mutual
fund specializing in the stocks of precious-metal companies and charging
below 1% in annual expenses. Limit your stake to 2% of your total financial
assets (or perhaps 5% if you are over the age of 65).