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How You Can Avoid Investment Scams On The Internet

Aug 18, 2007
Using the internet as a tool when you are investing is an excellent way for investors to find opportunities that they think will help to make them wealthy. It is easy for those with information, to reach millions by sending a mass e-mailing, by creating your own website, posting messages or engaging others in a chat room. It is difficult for even the savviest investors to wade through information that may seem credible, but only turns out to be false.

Investment Newsletters

There are hundreds, if not thousands, of newsletters that are available online for those who are interested in online investing. They seem to offer, free of charge, information that features either a company that is hot, or a "stock pick of the month." There are legitimate newsletters online that can offer the investor some sound advice, but you need to be careful as fraudsters can use this as a way to scam you out of your hard earned money.

There are companies that pay people to write newsletters, with securities or cash to write recommendations for their stock. This isn't legal, and federal security law requires that the author of the newsletter must reveal who paid them, the type of payment, as well as the total amount paid. Many scammers don't do this; instead they will lie about receiving payments, their track records, and anything else it takes in order for you to sell or buy a particular stock.

Online Bulletin Boards

Using an online bulletin board is a popular way for people, especially investors, to share information. On a bulletin board you will typically find threads that focus on a wide variety of investment opportunities. You may find that there are messages that contain truthful information, but there are just as many, if not more that contain falsehoods. When you are dealing with forums, or bulletin boards, you can never be sure who you might be dealing with, because it is easy to hide your true identity. Companies hire people to pose as observers who have put much thought and research into particular companies, when in reality they are paid to write these so-called unbiased opinions.

Using Spam E-mail

The cost of creating false e-mails is so inexpensive; many fraudsters use it as a way to find investors for fake investment schemes as well as to use it to spread false rumors about a company. When a spammer uses a bulk e-mail program, they can reach millions of users around the world in a very short period of time.

If you want to invest online and stay away from scams, you need to have cold, hard facts. You should never make investment decisions just on a newsletter you receive online or a posting on a bulletin board that you found. It is also wise to stay away from a company that does not file reports regularly with the SEC. This is only advised if you are willing to check that the statements the company is claiming are not false, and it can be a long and difficult process to find out the truth.
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