The Stockbroker?

3. The training of the stockbroker is oven less adapted to render him a judicious counsellor. His business is to note the passing changes in the market for securities; to know the views of the jobbers with whom he deals; the feelings of hopefulness or depression which find expression in prices; the nature and extent of speculative operations which largely influence the course of values that prevail from time to time, so that when he receives an order to buy or sell he may be able to seize the apt occasion for the transaction - hitting upon the highest price if his client be a seller, or the lowest practicable price if his commission be to buy. His concern accordingly is entirely with the present or closely immediate moment: he is not so much concerned with what the investor really wants - the security which is the most likely to possess a permanent level of value or an increasing tendency, independent of the fluctuating phases of the day - as the price that can be secured which will prove most advantageous to his client. For, generally, the more easily a particular form of investment can be sold the less is the return which it yields. The reader will carefully remember my qualifying statement that these observations upon the preceding sources of advice are entirely general, and without invidious reflection; they apply solely to the effects (constitutional, I might term them) of practical and appropriate training, inherent in the respective pursuits; for obviously there are very many bankers and brokers who display in the highest degree - far superior to any ability and experience to which I can make but a humble claim - the wisdom and capacity of scrutinising and assessing a security in a manner adapted to the investor's desires.

The Shrewd City Man

4. On the whole, the soundest guide is a shrewd City man, as he is termed: a man of general commercial experience and aptitude; who does not make financial affairs (in the Exchange point of view) a main concern; who possesses, however, a sagacious working knowledge of them: and can accord-. ingly form a judgment which is free from any specialised form.

Avoid professional advice where possible.

5. But here it is well to repeat that it always proves the better course, where it is possible, to avoid advice. Difficult and complicated kinds of security obviously demand competent and capital skill, but the course of the ordinary investor should be limited to the broad highway only, whence these tangled by-paths diverge. It is usually difficult to discover a really serviceable adviser: even if that rarity be comprised within one's acquaintances, it is somewhat burdensome upon him to keep troubling him with one's wishes, hopes and fears; to impress his time and skill frequently into service; and to suppose (as is necessary, if his guidance is to prove competent) that he can retain in memory all one's investments and their relative amounts in order to effect a judicious distribution; while if, under a sense of compunction, we accept advice from one person at one time, and from another on a different occasion, we shall simply become distracted, erratic and confused in our investments (since all counsellors vary in their views and predilections), and probably some loss will mark the diversity of counsel.

Consistency essential to success.

To ensure successful issues in finance or in any department of human activity, a uniform and consistent system of procedure is imperative. A loss, moreover, (sustained in the security which has been recommended) is not infrequently attributed to the adviser, and not to the changing chances of events which even the most prescient may fail to forecast; for human nature is not generous in judgment when money disappears, and a rupture of friendship may result. Endeavour to rely upon yourself; study the prescribed ways of rightly viewing securities: restrict yourself at first (if not entirely) as I have counselled, to the simpler descriptions of investment in which you have acquired experience and educated your judgment; and never venture beyond the well-beaten track until, not merely knowledge and perception have matured, but until your funds are sufficiently large to sustain, without inconvenience or stress, a probable loss.

Act upon advice cautiously.

G. A sound piece of advice may be thus expressed: When you have taken advice, do not take it. I have intentionally adopted a form of statement which looks contradictory, for the purpose of thus calling special attention to its importance. Men differ so considerably from each other in their views, their desires, their feelings and purposes generally, the ends they aim at, and (last, but far from least) the proportion between the total sum they possess and the amount of the particular investment under examination, that no one in advising can, with every genuine intention, place himself completely and exactly in the condition of the person who is seeking advice. Hence the significant principle - running through all modes of action - that advice should be accepted, not necessarily to be strictly followed, but as a part only of the data - the facts and reasons - on which the investor's own decision should be based.

In mathematical inquiries, where many observations of a fact are made of different degrees of exactitude, the observations are, as it is termed, "weighted," so that where one has been obtained under superior conditions of accuracy than another, the former is counted as (say) two observations in estimating the correctness of the aggregate result. Each piece of counsel received should be similarly adjusted - the advice of a particularly sagacious friend being reckoned, in proportion to his skill and knowledge, as worth the recommendation of two or three other friends. In this way we prepare a tabular synopsis of advice and its indications, which, conjoined with our own inquiry and deliberation, will furnish a valid guide.