Promoter's Word Valueless.
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.