Penny Stock Scams
Penny stocks in general are volatile, equally capable of turning a small investment into a sizeable fortune or a huge loss. Investors in this market are often gamblers by nature, and those who push penny stock scams are aware of this. Scammers understand that many investors are lured by the siren call of Inside Information. Scammers count on unwary investors to jump on the anonymous hot tip on an online forum or chatroom. The savvy investor in penny stocks will be aware of, and will avoid, some basic penny stock scams.
A word about inside information. All investors would like to think that they are one of only a few people who are privy to relevant and reliable information about a company’s stock. The trick, though, is to be aware of and to recognize information that is questionable or even fraudulent. If the information comes from an unknown poster on a bulletin board or arrives in your in-box unexpectedly or comes in the guise of a telephone message from someone who was “recommended by a friend”, chances are good that you should keep your money in your bank account.
Scammers will fan the flames of interest in a certain stock and encourage a rush of buying. As more investors jump in, the price of the stock moves up and this fuels more buying. The cycle continues until the volume of shares and the stock price peaks, at which point the price collapses, leaving investors with worthless shares. Of course, the scammer’s shares are long sold and the scammer is out, setting up a new scheme.
There are also professional promoters who operate in a much more genteel manner. Using a word-of-mouth, grassroots-type campaign, these promoters generate and disseminate rumors about some penny stock, which is always poised to go through the roof. However, the end result is the same – the unsavvy investors are left with little to nothing and the promoters are on to the next sure thing.
So what is an investment beginner to do? Research, due diligence, more research, and then find a reliable, honest advisor to guide you through the minefield. There is a wealth of opportunity available in penny stocks, but you must beware the penny stock scams.
Rand Fletcher is a contributor to the website Make Money 17 Ways.
If you’re ready to make money with penny stocks, see Rand’s suggestions at
http://www.makemoney17ways.com/page19.html
Tags: Penny, Scams, Stock
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