The Intelligent Investor: The Definitive Book On Value part 12. The purpose of this book is to supply, in a form suitable for laymen, guidance in the adoption and execution of an investment policy. Comparatively little will be said here about the technique of analyzing securities; attention will be paid chiefly to investment principles and investors’ attitudes. We shall, however, provide a number of condensed comparisons of specific securities - chiefly in pairs appearing side by side in the New York Stock Exchange list in order to bring home in concrete fashion the important elements involved in specific choices of common stocks | 96 The Intelligent Investor Higher-Yielding Bond Investments By sacrificing quality an investor can obtain a higher income return from his bonds. Long experience has demonstrated that the ordinary investor is wiser to keep away from such high-yield bonds. While taken as a whole they may work out somewhat better in terms of overall return than the first-quality issues they expose the owner to too many individual risks of untoward developments ranging from disquieting price declines to actual default. It is true that bargain opportunities occur fairly often in lowergrade bonds but these require special study and skill to exploit successfully. Perhaps we should add here that the limits imposed by Congress on direct bond issues of the United States have produced at least two sorts of bargain opportunities for investors in the purchase of government-backed obligations. One is provided by the tax-exempt New Housing issues and the other by the recently created taxable New Community debentures. An offering of New Housing issues in July 1971 yielded as high as free from both Federal and state taxes while an issue of taxable New Community debentures sold in September 1971 yielded . Both obligations have the full faith and credit of the United States government behind them and hence are safe without question. And on a net basis they yield considerably more than ordinary United States bonds. Graham s objection to high-yield bonds is mitigated today by the widespread availability of mutual funds that spread the risk and do the research of owning junk bonds. See the commentary on Chapter 6 for more detail. t The New Housing bonds and New Community debentures are no more. New Housing Authority bonds were backed by the . Department of Housing and Urban Development HUD and were exempt from income tax but they have not been issued since 1974. New Community debentures also backed by HUD were authorized by a Federal law passed in 1968. About 350 million of these debentures
