Investors will do well to consider that stocks of mines which are
only prospective are the most risky form of gambling. In buying
stocks of the undeveloped mines offered to the public on the strength
of statements the only substance of which is the imagination of
promoters, one runs up against a sure-thing brace game.
Don't take the promoter's word for it. When you wish to place money
where it can work for you, don't bite at the first "good thing" you
see advertised. It is to the interest of the man who wants to sell you
stock to place it before you in the rosiest light. Otherwise he knows
you would not buy it. If you want to buy stock, don't rely upon what
the seller says, but consult others.
Before consulting persons whom you think may be able to express an
honest and intelligent opinion, ask the promoter to furnish you a
statement of the condition of the company, showing its assets and
liabilities, profits and losses, and an accurate description of its
property.
You will then be able to judge whether the company is
over-capitalized; whether it is incumbered with debts (for debts may
lead to a receivership), and if its earnings may lead to permanent
dividends.
Also ask for a copy of the by-laws of the company. If, with such
information at your disposal, you cannot get a correct idea as to
whether the stock is desirable or not, consult your banker or somebody
else in your community who may be able to advise you.
If some one offered you a mortgage on a certain piece of property,
common sense would tell you to ascertain whether the property is
sufficient surety for the loan, or if the title to the property is
good and there are not prior incumbrances on it.
The man who would buy a mortgage without ascertaining the value and
condition of the surety, would be considered an idiot.
Why not use the same precaution when buying stock? Don't believe what
the promoter tells you about the value and prospects of the stock he
wants to unload on you. Don't take it for granted the stock offered
you will turn out a great money-maker and dividend-payer because the
promoter tells you so.
The promoter, generally a person from another city and entirely
unknown to you, has no interest in you, but is prompted by his own
selfish interest to sell you something which, in many cases, he
himself would not buy. He may Offer you a good thing, but it is up to
you to find it out.