However, the principal in a savings account is always guaranteed, can (generally) be converted into cash at any time, and usually earns a satisfactory rate of return. Most investors can make the same use of these formulas as large investors who actually do hold most of the fixed-interest portion of their portfolios in bonds. These larger investors cannot, of course, make any practical use of savings accounts, but they usually are able to use a combination of bonds, preferred stocks, commercial paper, bills and other fixed-interest investments to attain the desired degree of stability while still earning a satisfactory return on this portion of their portfolios. Regardless of actual investor practice, the term "bonds" is consistently used in this book to refer to that part of the portfolio not subject to fluctuations, since this is the standard terminology in discussions of formulas, and the illustrative examples assume that this portion does not in fact fluctuate. Some comment should also be made about the stock portion of the portfolio. This means all investments subject to substantial price risks”common stocks as well as convertible bonds and preferreds.

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