![]() ![]() We cannot endow the individual with two antithetical natures,” he says. "A man who is bold enough to plunge in such a way as to turn a small amount into a large amount in a short time does not suddenly become conservative. Gibson said most investors have such a strong ego that they flatter themselves and feel that they would make great profits in a short period and feel they are wise enough to keep the profit.īut according to Gibson this isn't always possible as it is not in human nature that it should happen. “The progress of earnings should first be examined over a period of years, care being taken to iron out and disregard abnormalities except in so far as they may favorably or unfavorably affect the cash or asset position of the corporation under review,” he said. He said sometimes great profits are rolled up rapidly because of abnormal conditions, coupled with mere luck. Gibson said the results secured by a firm for a single year do not form a safe basis for estimating values. "Its possession and exercise calls for labor, reflection, self-denial and courage,” he said. Gibson said that common sense is the most uncommon of all human attributes. The habit is illogical and expensive, and I regret to say that it is quite prevalent,” he said. ![]() ![]() “Every man, whether he be an investor or a speculator should school himself against this habit of sticking to a bad bargain in the mere hope that something will happen to bring him out whole. He said an inexperienced speculator is likely to magnify the probability of profit and minimize the probability of risk to allow hope to outweigh judgment. Gibson said investors have a habit of sticking to a bad trade in the mere hope that its fortunes will turn around in the future. Gibson said the inability to accept a loss is one of the most common and most mischievous of the numerous errors found in connection with operations in the security markets. On the other hand the inexperienced public speculator sees no reason for buying at such times, as surface appearances are discouraging. Gibson said experienced and far-sighted investors buy securities because they have reasons to believe that profits will soon increase. Gibson said there is more chance of a wide price movement in a mystery stock than in a stock which can be competently analysed. Gibson said mistakes are made when opportunities in the market are treated as rare rather than common irregular occurrences. Treat opportunities as irregular occurrences “One of the peculiarities in connection with greed is that a speculator will frequently over-extend himself and endanger his entire capital in order to hasten the process of accumulating profits when there is no reason for haste,” he says. Gibson said the errors springing from ignorance, greed and fear are responsible for most losses in speculative ventures. Reasons for losses in speculative ventures "If the buyer knew they were cheap he would surely not order them sold if they became cheaper,“ he said. Gibson said investors who enter the stock market with tips as their basis of operations will never succeed.Īccording to Gibson there can be only one sound reason for purchasing or holding securities, and that is because they are cheap. Gibson said unexpected reversals are certain to appear at times and no amount of vigilance or study can provide against this contingency and the only thing which can insure a reasonable degree of safety is a sufficient margin or sufficient reserves at all times.Īvoid investing on the basis of stock tips But it works the other way, for each success makes the operator bolder and the first reversal will wipe out previously acquired profits,” he says. "He may escape for a time and he will usually resolve that after the present deal is carried through he will be more conservative. Gibson said over-speculation eventually ruins any investor's portfolio who indulges in it. Gibson said the most common error that investors make is that they assume that present conditions will be indefinitely projected into the future. Gibson said greed is responsible for over-speculation, lack of discrimination in the selection of securities, and is a synonym for impatience.Īlso, he said fear causes investors to sell when prices are low and prevents investors from buying when securities are intrinsically cheap. Impatience and inability to await resultsħ. Relying on tips and “market appearances.”Ħ. Operating on insufficient margins or overspeculating.ģ. Buying at high prices after a major advance.Ģ. ![]()
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