One of the simplest, most effective, and currently most popu­lar methods of buying stock is the Monthly Investment Plan. Started in 1954, the Plan now has more than 93,000 accounts in force, and new ones are being written at the rate of about 180 a day. Another 111,734 Plans begun in the same period have been completed or terminated. Altogether, MIP investors have bought some 3,674,000 shares of various stocks, with a market value at time of purchase of over $154 million.

The Plan operates on the brilliantly simple basis of revers­ing the conventional buying procedure. Instead of having the price of the stock desired determine the amount of money that must be invested, MIP permits the amount of money available for investment to determine the amount of stock bought. This is a feature highly attractive to new or inex­perienced investors, without large sums at their disposal.

Since the Plan encourages regular, periodic investment, it also permits the application of Dollar Cost Averaging, one of the more successful formulas for acquiring stock.

Step by step, here is how it works. The would-be investor, first of all, may go to a New York Stock Exchange member broker, any of whom may service an MIP account. He tells the broker which stock he would like and how much, on a monthly or quarterly basis, he expects to invest. He may stocks listed on the Exchange, but no securities handled over the counter, or exclusively on other exchanges.

The broker notes this information on a form, together with the name (or names) in which the stock is to be registered, and upon receipt of a first payment, the Plan is in motion.

The form, let it be said, is not a contract, but a routine purchase order. It does not obligate the investor to a series select any of the more than 1,500 common and preferred of installment payments; it is simply a record of his intention to invest a certain amount at regular intervals, if possible. Its small print merely specifies the normal conditions under which securities are bought and sold, which apply to any stock-exchange transaction. No fees, charges, or interest pay­ments are involved. MIP investors pay only the usual broker­age fees which, for the sake of convenience, are deducted from his payments.

Permissible payments range from as little as $40 every three months to a maximum of $1,000 a month. The usual rate is $40 a month.

Over the years, General Motors has emerged as the favorite MIP stock. It is being bought by some 4,500 Plan investors.

If you should happen to want it, too, what would your monthly $40 buy? As this was being written, GM sold at 48V4. With a commission of approximately 6 per cent deducted, you have $37.74 for investment. This will buy .7781 per cent, or about ¾of a share.

Right here is the unique element of MIP. It is possible in ordinary stock-exchange dealings to buy an odd lot of as little as one share. It is possible to spend no more than $40 and acquire 10 shares of a stock selling at 3. But in no way except through the MIP can an investor buy fractional shares and accumulate stock costing more per share than he has to invest.
The prime benefit to the investor is that it brings the entire range of Big Board stocks within reach. While it is not true that higher-priced stocks are necessarily sounder or better values than lower-priced stocks, a great many of the premier issues are to be found at prices above $40. It also seems to be true that even if a person accumulates, say, $180, by putting aside $40 a month for nearly five months, he does not rush into the market to buy one share of American Tele­phone & Telegraph. Although it may be an illusion, $180 in the savings bank seems like more wealth than a mere one share of stock—even AT&T. Furthermore, in five months' time, the accumulation may be needed elsewhere, or A T & T may have reached 200—both eventualities discouraging to the eager investor.

On the other hand, small as .7781 per cent of a share may be, it is a tangible, certain piece of GM which gives the investor an incentive to keep going.

With each payment, the broker sends out a statement in­dicating how much went for stock purchase, how much for commission, the market price paid, the amount of stock previously held, the fraction acquired, and the new total.

If a dividend is declared, you share to the extent of your holding. On a $.50 quarterly GM dividend, you would receive $.39 in cash or, if you had elected to reinvest your dividends to purchase more stock, an additional .0080 per cent of a share. (Two cents went for commission.)

Six-Year Market Performances of 20 MIP Favorites
1954-1959 Market Price Range

Stock  (20 MIP Favorites as of Sept.25, 1959)	Open	High	Low	Last*	6-Year Spread Per Sh.**
General Motors Corp.	$19¾a	$58⅞	$19⅝a	$52⅝	$39¼
General Electric Co.	29⅛ a	84¾	29a	81¾	55¾
Dow Chemical Co.	35⅜a	94¼	30⅞a	93⅛	63⅜
Standard Oil Co. (N.J.)	24a	68½	23⅞a	48	44⅝
Tri-Continental Corp.	15⅜a	42¾	15⅜	37⅞	27⅜
Sperry Rand Corp.	6¾a	29⅝	6⅜a	23¼	23¼
Phillips Petroleum Co.	26¾a	56¾	26¾a	42	30
Amer. Tel. & Tel. Co	52a	89	52a	78⅝	37
Int’l Business machines	48⅞a	488	48¾a	408	439¼
Pfizer (Chas.)&Co.	11¼a	45¼a	10⅛a	33	35⅛
Radio Corp. of America	23¼	71	22½	64½	48½
Safeway Stores, Inc.	13⅛a	42¼	12¾a	36¾	29½
Sears, Roebuck & Co.	20¼a	50⅜	18⅝a	48⅝	31¾
Monsanto Chemical Co.	25⅜a	55⅝a	24½4	49⅞a	31⅛
General Tel. & Elec.Corp.	19⅞a	79	19¾a	76	59¼
Minnesota Mng. & Mfg.	28¾a	151½	27⅝a	148¼	123⅞
American Cyanamid Co.	23¾a	65¼	21¾a	60	43½
General Dynamics Corp.	12a	68⅝	12a	44⅞	56⅝
Lehman Corp.	17⅛a	32½	17a	15½	15½
Standard Oil Co. of Cal.	23⅞a	62⅛	23⅞a	48¼	38¼

* 1959 prices thru 11/6/59.
**Difference between 1954—1959 high and low. a Adjusted for stock dividends or splits.

With each passing month, the steady growth of your stock holding will be a pleasant sight to behold. You will not, of course, always pay the same price or, therefore, get the same amount of stock. When the price rises, you will get less of a piece—although of a more valuable property. When the price sinks, you will get more stock—although of less value.

This, however, is where Dollar Cost Averaging enters to give you as fair a measure of protection as can be had in a chancy world.

No formula, nothing in fact, can protect you from the con­sequences of a weak stock or even of a moderately strong one which, in the course of 10 or 15 years, is overtaken by more vital and aggressive competitors. You will have to stay alive to events and keep tabs on your company's performance. American Woolen, for instance, was once among the premier textile stocks. Today the company no longer exists. It took a long time dying, and its groans were audible for many years before the end. It would have been impervious to the bene­fits of Dollar Cost Averaging, and an investor who got aboard in the good old days would have been well-advised not to hang on. Similarly, many railroad issues would probably not be considered suitable long-term investments from here on out. If, however, you choose among the Blue Chips, the market leaders, the long-term dividend payers, or any other grouping of high-grade issues, and if you can satisfy yourself that declines encountered along the way are indicative of the market, rather than the stock, your investment should turn out satisfactorily over the long run.

Much of the pressure generated by a decline can be eased if the funds invested are not needed elsewhere in your budget. To work properly, a long-term Plan must be able to ride out the periods when the market value of the hold­ing is less than the amount invested. Try, if you can, to invest only those dollars for which there is no foreseeable commitment. There may be fewer of them than you might like, but if they will permit a fixed and unvarying schedule of payments the Plan will have greater chances of success.

The MIP is extremely flexible. Although discussion has been concerned with one stock, the Plan actually permits investment in as many stocks as you wish, as long as you are prepared to put at least $40 every three months into each one.

If you have $100 a month for investment, you can estab­lish Plans for two stocks at $50 each, or one at $60 and one at $40. Or you could put the entire $100 into an oil stock. in January, April, July and October, into a steel stock in February, May, August, and November, and into a utility in March, June, September and December. You could even put $50 into each of six stocks on a quarterly basis, but this would be spreading the investment too thin to build much of an equity in any one. While the $200 a year you would be placing in each stock would achieve more than the minimum investor's $40-every-quarter, the opportunities for acquiring substantial holdings by limiting your $l,200-a-year investment to a few stocks are too good to be dissipated. As has been pointed out earlier, considerable diversification can be obtained from a very small portfolio of stocks, if they have been carefully chosen for the variety of their products and activities.

To repeat, the minimum unit of investment in any stock is $40. The fact that you are investing $100 a month will not allow you to purchase two stocks at $40 each and a third at $20.

In order of popularity as of December 31, 1959	Year Consecutive Annual Dividend Payments Began	Latest 12 Months Cash Dividends (Incl. Extras)	Price per Share 12/31/59	Yield*
General Motors Corp. Auto manufacturer	1915	$2.00	$54½	3.7%
General Electric Co. Electrical equipment	1899	2.00	99⅛	2.0
Dow Chemical Co. Industrial chemicals	1911	1.18a	98¾	1.2
Standard Oil Co. (N.J.) Petroleum products	1899	2.25	49⅝	4.5
Tri-Continental Corp. Investment company	1945	1.47	39¼	3.7
American Tel. & Tel. Co Bell telephone system	1881	3.15a	79¾	3.9
Sperry Rand Corp. Automatic controls, bus. Machs.	1934	0.80	25¾	3.1
Phillips Petroleum Co. Petroleum products	1934	1.70	47¼	3.6
Int’l Business machines Sells & leases bus.machines	1916	2.03a	438¼	0.5
Pfizer (Chas.)&Co. Pharmaceuticals	1901	0.08a	33	2.4
Radio Corp. of America Radio, TV mfg .& broadcasting	1940	1.47a	69⅛	2.1
Safeway Stores, Inc. Chain grocery stores	1927	1.25	37	3.4
General Tel .& Elecetronics Corp. Telephone System	1936	2.10	84⅛	2.5
Monsanto Chemical Co. Industrial chemicals	1925	0.98a	55½	1.8
Sears, Roebuck & Co. Department stores & mail orders	1935	1.30	50⅝	2.6
Minnesota Mng. & Mfg. Adhesives, abrasives	1916	1.50	176	0.9
American Cyanamid Co. Industrial chemicals	1934	1.60	58¾	2.7
Standard Oil Co. of Cal. Petroleum products	1912	2.0	50¼	4.0
Lehman Corp. Investment company	1930	0.53	27¾	1.9
Eastman Kodak Co. Photo & optical products	1902	1.56a	107½	1.5
General Dynamics Corp. Aircraft, submarines, atomic power	1936	2.00	47	4.3
Columbia Gas Sysytem, Inc. Gas service	1943	1.00	20¼	4.9
Union Carbide Corp. Industrial chemicals	1918	3.60	147	2.4

In order of popularity as of December 31, 1959	Year Consecutive Annual Dividend Payments Began	Latest 12 Months Cash Dividends (Incl. Extras)	Price per Share 12/31/59	Yield*
Olin Mathieson Chemical Corp. Industrial chemicals	1926	1.00	53⅝	1.9
Merch & Co., Inc. Pharmaceuticals	1935	1.60	80½	2.0
Aluminium Ltd. Aluminium mining & mfg.	1939	0.55	33⅝	D
E.I. DuPont de Nemours & Co. Nylon, chemicals	1904	7.00	264	2.7
Reynolds Metals Co. Aluminium mining & mfg.	1942	0.48a	70⅝	0.7
Westinghouse Electric Corp. Electrical equip. & appliances	1935	2.10	109⅜	1.9
Gulf Oil Corp. Petroleum products	1936	0.97a	36¾	2.6
U.S. Steel Corp. Steel & steel products	1940	3.00	98⅝	3.0
Bethlehem Steel Corp. Steel & steel products	1939	2.40	54½	4.4
American Can Co. Cans & containers	1923	2.00	43¼	4.6
Aluminium Co. of America Aluminium mining & mfg.	1939	1.20	106½	1.1
United Gas Corp. Gas production, distribution	1944	1.50	32⅜	4.6
American Airlines, Inc.	1950	1.00	25¼	4.0
Int’l Tel. & Tel. Corp. Electronics, communication	1951	0.98a	38½	2.5
El Paso natural Gas Co. Natural gas pipelines	1936	1.30	31½	4.1
Texaco Inc. Petroleum products	1903	2.55a	85⅝	3.0
Texas Instruments, Inc. Electronic equipment	-	-	170¾	-
Consolidated Edison Co., of NY Operating public utility	1885	2.80	58⅝	4.8
Northern Pacific Ry. Co.	1943	2.00	47¾	4.2
Pacific Gas & Electric Co. Operating public utility	1919	2.60	64¼	4.0
Pepsi-Cola Co. Soft drinks	1952	1.25	39½	3.2
Madison Fund, Inc. Investment company	1939	0.60	18¾	3.2
Kaiser Aluminium & Chem. Corp. Aluminium mining, chemicals	1948	0.90	51¾	1.7

In order of popularity as of December 31, 1959	Year Consecutive Annual Dividend Payments Began	Latest 12 Months Cash Dividends (Incl. Extras)	Price per Share 12/31/59	Yield*
Long Island Lighting Co. Operating public utility	1950	1.25	32⅝	3.8
Detroit Edison Co. Operating public utility	1909	2.00	42¼	4.7
Socony Mobil Oil Co., Inc. Petroleum products	1902	2.00	41½	4.8
Commonwealth Edison Co. Operating public utility	1890	1.95a	57⅜	3.4

* Yield based on dividends paid in the calendar year 1959 (including extras) and December 31, 1959 price, a - Adjusted for stock dividends, split-ups, etc.

To repeat, the minimum unit of investment in any stock is $40. The fact that you are investing $100 a month will not allow you to purchase two stocks at $40 each and a third at $20.

How well you hold to your investment plan is entirely up to you. There are no notices or reminders; there are no plead­ing or dunning letters. If you skip a payment or two or three, nothing happens except that you have broken the Dollar Cost Averaging pattern. Brokers may close your account if you skip more than four successive purchases, but few of them actually do so.

You can pull out at any time, simply by asking your broker to sell your holding. Or if you need cash, or wish to realize on a gain, you can sell any full-share portion of your stock. The only restriction in selling is that you must sell at the market. It is not possible to place a limit order, say, to sell at 33, when the market is at 31.

Unlike the lump-sum investor, you will not have a beau­tifully engraved stock certificate showing the number of shares you own. Yours, obviously, is an accumulating ac­count, and a fractional one as well, so that although your stock exists and you are known as a shareowner to your company, the certificates to cover you—and probably other MIP investors, as well—are held by your broker. If and when you terminate your plan, a certificate for the number of full shares you own will be issued to you, and any frac­tional share remaining will be sold for you or, by additional investment, rounded out to a full share. You can also specify that you would like a certificate when your shares reach a total of 50.

For as long as you are a stockholder you will enjoy the usual privileges of ownership. Your company will send you its annual reports and quarterly earnings statements. You will have voting rights to the extent of your holding, and your proxy will be solicited from time to time in the conduct of company affairs.

If stock splits occur or stock dividends are declared, you will share proportionally.

If, however, your company should offer rights in a new stock issue or in the stock of a new subsidiary, they will be sold, and the proceeds either reinvested or sent to you in cash. Since MIP is acting as your agent, it would, otherwise, have to circularize investors to see who wanted to exercise rights and who did not, and to arrange for collection of the amounts due, and to compensate for fractional holdings—all of which is a more complicated and expensive procedure from an accounting standpoint than MIP is prepared to undertake.

Being an MIP investor has one major drawback: it is an expensive way to accumulate stock. Not only is a number of small purchases considerably more costly to make than one large one, but odd-lot buying also involves a charge not levied on round lots.

The fact is that the 6 per cent commission charged in transactions involving $100 or less is the highest rate it is possible to pay. (Most round-lot commissions work out to between 1 and 2 per cent.) In the case of our original investor (See Chapter 9, p. 146), who acquired 21.87 shares in the course of a year, there were 12 transactions of $40 each. Actually, out of each $40, only $37.74 would have been invested and $2.26 (6 per cent) deducted as commis­sion. (Over the year, the investor would actually have acquired 20.51 shares, rather than 21.87.) Twelve times $2.26 is $27.12. A single investment of $480, however, could be made for $9.80. In fact, on one odd-lot transaction, the investment would have to reach $2,100 before the commis­sion would exceed $27.12.

Odd-lot commissions are based on the amount of money involved, and scale down as the amount increases. But the commission on a year's investments at any monthly figure from $40 to $1,000—the top limit—will be more than twice as much as that paid on a single investment of the total.

On the other hand, the amount of clerical and accounting work that must be done to maintain an MIP account is large. While the commission percentage may seem high, its dollar amount is not, considering that it takes as much time and manpower to buy .0614 of a share as it does to buy 50 shares—which, at a price of $50 per share, would yield a $29.50 commission.

There also may be consolation in the fact that even 6 per cent is less—in some cases, quite a lot less—than the loading charges exacted by mutual funds.

And, of course, there is the final point that a lump-sum purchase might be made at the high end of your stock's yearly range. This could reduce the equity by much more than the monthly purchaser pays in commissions. If the man with $480 had invested it all at the high point of 25, he would have got one less share than the monthly investor. The actual 12-year range of GE, however, went from 10⅝ (adjusted) to 72⅜. Had the man investing $500 a year used his entire $6,000 to buy at either of these extremes, it would have meant the difference between owning 564 shares or only 82. Not everyone, of course, unerringly buys in at the high. But as was pointed out earlier, there were only four months in the year in which the $480 investor could have bettered his per-share price obtained by Dollar Cost Averaging. The average investor can't count on spotting them in advance, either.

The MIP investor can "best rationalize his position by remembering that higher-than-ordinary commissions are literally a small price to pay for the advantage of Dollar Cost Averaging.