Beware of Scams:
There are too many people who want to scam others out of their money.
Investment opportunities that seem too good to be true involve; share, boiler room, hedge fund or bond fraud. These usually involve bogus stockbrokers cold calling people out of the blue to pressure them into buying shares that promise high returns. In reality, the shares are either non-existent or so worthless they are impossible to sell once you have bought them. You are also promised free research reports, special discounts and ‘secret’ stock tips. The fraudsters may provide false share certificates and other documents to make the investments seem credible.
Once the fraudsters have squeezed whatever money they can from investors, they quickly disappear. Therefore if someone cold calls you offering investment advice, it is probably a scam.
Another type of scam is pump and dump. This is the illegal act of an investor(s) promoting a real stock they hold, and then selling once the stock price has risen following the surge in interest as a result of their endorsement.
The stock is usually promoted as a “hot tip” or “the next big thing” with details of an upcoming news announcement that will “send the stock through the roof”. The scheme always boils down to a basic principal: artificially raising interest in a stock. Pump and dump scams tend to only work on small and micro-cap stocks that are traded over the counter. The perpetrators behind the scam increase the demand and trading volume in the stock and this new inflow of investors leads to a sharp rise in its price. Once the price has risen, the perpetrators will sell their holdings and make a large gain, and then the price falls dramatically.