Nowadays we have a plethora of investment opportunities in which to wheel and deal with our hard-earned capital… if we are lucky enough to have some at all these days! But back in Victorian England, the average investor had far fewer choices than his twenty first century counterpart.
The National Debt and Property
If a Victorian Gentleman, or Lady for that matter, wanted low risk and moderate returns on their money, they would tell their solicitor to put their money into national debt shares or into real estate, utilising rents and mortgages to grow their portfolio.
The National Debt Share was made up of a variety of bond and stock issues which supported specific government projects, together with the 3 per cent consolidated bank annuities available since 1751.
The rapidly expanding London building sector offered a good opportunity to earn money through rents and mortgages. These advances were discounted by small and medium-size builders to obtain capital for further speculative constructions via Bills of exchange.
Expanding National Railway
Another investment opportunity open to the Victorians was to invest in the domestic railway system. However, returns on domestic railway investments varied enormously but averaged just fewer than 8 per cent in the 1840s, better than many other current opportunities.
Overseas railways built by British contractors also matched high dividends with high risk, with the exception of the Indian railway system, which was guaranteed by British authorities.
Loans to Foreign Governments
Business investment also allowed for speculation on loans to foreign governments, or on imported commodities such as tea, cotton, gold and other precious metals.
Until 1856, most business investments involved the assumption of unlimited liability by everyone in a company, a condition that tended to restrict the supply of venture capital. From 1844 a company could incorporate liability simply by registering at the Board of Trade. In doing so, however, its prospectus was made accountable to government supervision and its operations opened to public scrutiny.
Getting Used to Investment and Risk
During the Victorian era, most commercial, industrial, and construction enterprises were still operated as partnerships or sole proprietorships, and, in the case of the Thames Embankment, such contractors often had trouble raising capital for large-scale projects. Nevertheless, the railway boom got the public used to investing and reassured individuals that the failure of a company did not usually mean the loss of one’s entire assets!
This important period in our financial history set the tone for how many of us invest our money today…. risk versus reward Sir, that’s the ticket!!