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.
Investigation Necessary.
In most cases, an intelligent investigation will prompt you to let alluring offers of great wealth for little money severely alone. The observation of the common-sense rules outlined above will save investors bitter disappointments and heavy losses.
It is safe to say seventy-five per cent of the so-called "Mining, Plantation and Air Line" schemes and "Security" companies now paraded before the public in flaring advertisements in the daily papers, and through glittering prospectuses sent through the mails, are vicious swindles. Men who operate these frauds pretend to be honest and high-minded. By constant practice of their wiles upon others they develop self-deception and come to believe in their honesty to such an extent that when questioned, they assume a good counterfeit of honest indignation.
Most of them do not own the furniture in the offices they occupy while swindling the public. It is a common practice for them to rent offices in national bank buildings and to furnish them with rich furniture bought on the installment plan, to make the necessary "front." They spend their cash capital for flaring advertisements, sell as much stock as they can induce the gullible public to buy, and then decamp, leaving unpaid bills for advertising, if they can get credit after their cash is exhausted, and their furniture bill unpaid. The absconding swindler is usually succeeded by an "agent" or "manager," who repudiates the bills against his rascally predecessor and continues the work of fleecing the gullible under some new title or by means of some new trick.