Online brokerages have revolutionised the investing industry.
This has enticed many people to give investing a try even if
they have no idea what theyre doing. The process requires a lot
of research and a little luck. A quick search online can bring
an individual investor all the information they need in order to
make a few simple decisions. Unfortunately, there is a lot of
misinformation out there regarding investing in the stock market
and in reference to specific stocks. The process of manipulating
potential investors to scam them out of their money has followed
the stock market into the 21st century and online. Dont be
scammed out of your money read this article and avoid the
pitfalls.
1. Pump And Dump
In this scam, you are
misled about the projected earnings and growth of a company.
Uninformed investors purchase the stock. The price tends to
rise, and as it does, the original scammers sell the stock off
to new uninformed investors and take the profits. Once all the
hype drives up the price high enough and the accumulation
pressure disappears, the stock crashes and the investors lose
money.
2. Avoid Penny Stocks
Penny stocks are
stocks less than $5. 00 in value. The reason they are so low is
because the company is probably going bankrupt. To avoid the
majority of these scams, avoid investing in penny stocks. The
hype associated with pump and dump scams is similar between
scams. The fake press releases and research reports always tout
the given company as being on the verge of a world changing
technology, cure for a disease or fantastic new product. The
focus is always on the glorious future of the company, but very
little information is given about the current status of the
company in question.
3. Rumors
The second type of
stock market scam is characterized by rumors and traders tricks.
Manipulations of stock price can be achieved in subtle ways.
Money managers have the ability to start rumors about stocks
that they would like to move without paying a large price. The
rumor works to lower the price of the stock and create liquidity
in that company (TM)s stock. The rumors run unchecked and spread
through the market like wildfire.
For example, if a money
manager wants to purchase some stock in Company A, they can
start a rumor that the company is on the verge of bankruptcy.
This lowers the price of the stock and allows the manager to
purchase it at the desired rate. This works in the opposite way
as well. If the manager wants to sell stock for Company B, a
rumor can be started about an emerging invention from that
company in order to inflate the stock price. These subtle
attempts at manipulation can be the hardest for investors to
spot, and therefore the most difficult to avoid. Since rumors
are part of the business of the stock market it is hard to track
down where the rumors started.
Additionally, there is no
paper trail to track down the money managers who practice this
sort of manipulation. Fortunately, these inflations or devaluing
of stocks are very short lived. Within a short period of time
the rumors are proved untrue and the stocks bounce back to their
true value. These schemes fortunately never have any long term
impact on the market. Maintaining a long term investment focus
of owning good companies for long periods of time will offset
any of these manipulative rumors.
4. Manipulation
If you want to play with the big boys, you have to be able to
take a little bit of risk when you invest. Cheaters and
manipulators exist in every industry, and are especially
concentrated in an industry that is full of money like the stock
market. Having a diverse portfolio of stocks can surely save you
from losses that would otherwise hurt you financially.
About the Author:
For more great investing related
articles and resources check out
http://futuresinformer.info
