A stock investor guide to eluding micro-capitalization scams

Article Written By: Vonda Carr

Anything involving with your money should be scrutinized well. Like any astute banker or creditor, you must check the credibility of those asking you to invest your hard earned money to their investment proposal. With so much scam online, it's quite hard to trust easily. In fact, it can be downright suicide if you lose your sense of skepticism. You have to always do due diligences in everything that involves your money. Don't be a guinea pig for mistakes that others will learn from.

There are many penny stock offers online. You just check you inbox and you will find these messages like these: Penny stocks! Get Rich now; Top picks for Penny Stocks. These messages are well marketed designed to get your emotions going so that you'll want to jump in and join. If you're not familiar with stock trading, you're going to be screwed with such offers. Penny stocks are risky investments. You should invest in blue chip stocks instead and growth stocks. Penny stocks messages are complete with testimonials.

In the words of Warren Buffet: Don't invest in anything you don't know about. If you don't know anything about penny stocks, then don't start. Learn about it first and seek guidance from the experts before diving into anything so risky like penny stocks. To know if the messages about penny stocks are scams, here are some tell tale signs it is a scam.

One sign to be wary of are astronomical returns, or if they guarantee success in the stocks. Stocks are risky investments. There are no guaranteed returns to it. Astronomical returns are possible but rare. You need to have been able to time the market well and your stock pick was right on target. But usually, returns from the stock market don't reach the sky. They are higher than most investment vehicles but not absurd returns. Bottom line is foolproof returns are impossible. Only savings can boast of safety.

Scams are usually "for a limited time," and are very cheaply priced. Fraudsters lure you in by declaring that the stock's prices have gone down temporarily, to a level you can now afford this is your lucky day. Then they'll tell you to invest as soon as possible, in fact now. Listen to their message closely, and hear between the lines. Hot penny stock picks might indeed be great but only if you trust the person or persons offering them.

Next, the testimonials and claims are often very persuasive and impressive. This should send another bell ringing in your head. Check out their claims and see if they are true. More often than not, they are lies, blatant lies at that.

The important thing to do is to not be gullible. Always be skeptical and do due diligence by checking their SEC records. Make sure they are duly licensed and their information can be checked for legitimacy. They have to have a good reputation and a long track history before you can even think of investing your hard earned money with them.

You should never cave in to pressure to invest in something. Patience has its virtues in making money. Always remember the rule 1 in investing is to never lose money. By remaining skeptical and doing due diligence, the odds of losing money is significantly lessened. Success comes from investing in companies with great fundamentals for a long term horizon.

About the Author

The journalist who wrote this column has discovered a corporate finance expert by the name of Josh Yudell. I believe Josh Yudell to be widely considered an expert in the fields of investor relations, SEC compliance, corporate finance and capital structure.

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This Article Has Been Published on Sat, 15 Jan 2011 and Read 228 Times

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