Look at the company's balance sheet for its statement of bills and notes payable. If this debt is large and there are no offsetting liquid assets, let your most unpopular neighbor buy the stock.

Don't be such a chump as to buy stock or bonds in a company that does not conspicuously publish its balance sheet, a statement of earnings, the amount of stock, bonds and notes issued and the par value of the stock. In plain English, don't be a sucker.

Don't buy stocks from strangers whom you know nothing about or who represent firms you have not heard of. Above all don't be so foolish as to suppose you have been picked out for special honor. Stocks and bonds are honestly sold usually in one of two ways, either publicly to all who will buy, or else privately to special persons because of business acquaintance, actual friendship or for some special business reason, such as when the person approached is a customer or a dealer who can assist the company. If a complete stranger writes to you or calls upon you in an attempt to sell stock and gives as his reason a personal interest in you, sick the dog on him.

In one case a woman received a beautifully engraved certificate telling her that she had been invited to buy stock in a highly risky concern (this is my description of it, not the agent's), and further stating that she was "invited guest No. 626, and that only one hundred and six persons of her state had been so invited." Of course, such a method of selling stock smacks of quackery.

Whether it is the best way of doing business or not, the fact is that legitimate investment securities are sold in a calm, matter-of-fact, businesslike manner. Don't let any one persuade you otherwise. Especially beware the promoter who drags his own feelings in. A rather unsophisticated investor in the course of a little more than two years of dealings with a notorious Chicago promoter, received one hundred and fifty letters, and the investor wrote that Mr.______, the promoter, seemed to be a "proud sensitive man." Of course, the "proud sensitive" tone was purely buncombe to fool the unwary.

Don't buy stocks the literature describing which deals mostly with generalities or good advice, such as the advantage of saving money. At least nine-tenths of a stock circular should be devoted to describing the particular company, giving details of properties owned, their location and indebtedness, the earnings of the company for a series of years, balance sheet and so on. No modification of this rule may be admitted in the case of any form of railroad, light, power, gas, telephone, manufacturing, mining, trading or mercantile company.

Be suspicious of all flashy "flossy" literature, full of red ink.

Avoid stocks whose promoters do any of these things:

Ridiculing of conservative savings-banks.

Denouncing Wall Street (which may or may not be a very bad place, but is invariably denounced by stock promoters for their own selfish purposes and to throw a blind over their own operations).

Selling the stock at some absurdly low price, such as two or three cents a share.

Attempts to work the hurry-hurry game and declaring that the present allotment of stock will soon be exhausted. Even if it is, which is unlikely, there are literally thousands of other good investments, and several thousand legitimate, reputable brokers, bankers, banks and trust companies ready to sell them to you. If any one tries hard to sell you something which he says many others are eager to buy, it is likely to be to your advantage to let one of the others buy it.

Calling attention to the profits of some other company instead of their own. This is the surest sign of an illegitimate stock. Especially beware of any concern that calls attention to the profits of the Bell Telephone Company. Practically every swindler in the country uses this company as an illustration.

Don't buy stocks the promoters of which promise dividends of several hundred per cent. almost right away. Even the richest companies in the world rarely pay big dividends in the early stages. The Bethlehem Steel Corporation refused to pay any dividends for years. If a promoter promises enormous dividends shortly and his predictions were really probable he would not be selling the stock less than several hundred or even thousands of dollars per share.