The Psychology of Speculation. English-only reading by default; switch among English, Chinese, and Spanish, or compare languages side by side.
This chapter examines FRENZIED SPECULATION IS THE RANKEST FORM OF GAMBLING; IT IS A PERILOUS INDULGENCE, using the author’s early-twentieth-century investment framework to explain how investors were expected to judge security quality, income, risk, and market conditions. It opens from the chapter’s own discussion: An enormous percentage of stock market speculators become victims of over-confidence after a series of successful trades. Their buoyant spirits increase with every new success, until at length they throw discretion to the winds, extend their risks far beyond the margin of safety, and at the infallible turn of the market they find themselves in difficulty, like foolish fishes that get stranded on the beach at high tid
Readers studying financial history, investment education, and the chapter’s specific subject—over-confidence, margin of safety, thin margin—will get the most from this section. It is not suitable as a modern trading or investment checklist.
Read this chapter as historical investment education. The market rules, disclosure practices, securities, commissions, interest-rate conditions, and investor protections around over-confidence, margin of safety, thin margin may differ sharply from modern markets.