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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » Investment scams you should be mindful of.

Investment scams you should be mindful of.

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Asoka Samarakone


Expert
Expert
Investment scams you should be mindful of.
Investing today is not like it used to be. The game is oozing with crooks and cheats. But the average investor has no clue. Most investors end up losing... and losing big. The reason is simple... they don't know what they're getting into. No matter what, you need to understand the risks you take.
Don’t be a victim of an investment scam. It is easier than you think for crooks to con you out of your hard earned money if you let your guard down. Internet has just made it easier and faster for these vultures to feed on investors tempted by the possibility of an “inside deal. The people who run these scams range from the very crude and clumsy to the highly polished and sophisticated who wrap their con games in such an air of legitimacy it may be hard to see the truth. Schemes come in many forms to separate you from your money. They all have one thing in common: very high returns. The sad truth is that many people fall for these schemes because their greed overcomes their reason. Don’t let this happen to you.
One of the most popular stock schemes is called “pump and dump.” Here’s how it works.
In this sophisticated day and age, con men have also become more sophisticated. One very recent con technique is to dishonestly "pump up" the value of a new stock by using massive email to generate interest. Amateur investors see this email, and get suckered into buying bulk shares. Once the stock value rises enough, the con men then "dump their shares" in a big sellout in order to reap the dishonest rewards. ‘Pump and dump’ has also been blamed on the recent events surrounding the market which rose sharply, and similarly has fallen sharply.
A group of crooks buys up a block of stock in a little know company. The reason for this is that it is much easier to manipulate the price of the stock when there are fewer stocks held by the general public since fewer buying of stock are needed to increase the price. Sometimes it works and sometimes it doesn't. You now buy an otherwise worthless stock at low prices. This sets the stage for to make money when the stock price elevates. In most cases the company itself is clueless that it is part of a scam. It’s chosen because its stock is selling for pennies a share, making it easy for the scammer to acquire a huge number of shares with a minimal investment. If the crooks are successful, the stock’s price will jump as they convince people they are getting in on the ground floor of some big deal. Once the stock value rises enough, the con men then "dump their shares" in a big sellout in order to reap the dishonest rewards. The stock then crashes, and the investors will often lose thousands of dollars.
Short and distort.
The "short and distort" works in the opposite manner. Instead of first buying the stock, and then artificially raising its price before selling, in a "short and distort" the scammer first short sells the stock, and then artificially lowers the price, using the same techniques as the pump and dump but using criticism or negative predictions regarding the stock. The scammer then buys back the stock at the lower price
The pump and dump scam (and all the others) are aimed right at your greedy spot. When you start listening to that "get rich quick" voice, you are hooked. Greed, along with fear of losses, is one of the most destructive emotions for any investor. Slow down and think before acting. Sadly, today for most people performance is merely about completing the task fast and not achieving the best results.
What can you do to protect your self from being caught up in a pump and dump scenario? Most importantly you should use your own due diligence to wade through the hype. Ask yourself a few basic questions about the company in query. Are they making money? Are they creating new products? Are these new products going to become valuable within the future?
You can avoid a “pump and dump” scam by:
• Never buy on the recommendation of someone you don’t know
• Promises of quick gains are rarely true
• Big announcements, new products, and so on are a give away that you are being hyped

In the event you are not prepared to do at least a bit of homework, investing in any inventory isn't a great concept. Never rely entirely on anyone's advice, especially when dealing with Penny Stocks. But, in the event you take the time to research your investments, investing in Penny Shares can be a very financially rewarding experience.
Achievement is built by giving the best of your focus and your efforts to each moment. And as you build it, achievement builds you.
Asoka Samarakone

kaka


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Wish u happy new year, same time good one from you. we are expecting more this year from you Very Happy

opfdo

opfdo
Vice President - Equity Analytics
Vice President - Equity Analytics
Thank you Samare. flower

soileconomy

soileconomy
Vice President - Equity Analytics
Vice President - Equity Analytics
Good article to read specially who want to become overnight millionaires.

UKboy

UKboy
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Thank you very much (again) Mr Samarakone.
Sri Lankans are world famous for forget things so quickly. I hope they will at least try to change that attitude in 2012.

Kumar

Kumar
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Thanks a lot for sharing a valuable article with us.
Wish you happy new year.

For our forum members to read more here are another two link from our forum published 11 days back.

http://forum.srilankaequity.com/t14250-pump-and-dump-stock-fraud?highlight=pump+++%2Bdump

http://forum.srilankaequity.com/t14251-short-and-distort-naked-short#92022

CSE.SAS

CSE.SAS
Global Moderator
@UKboy wrote:Thank you very much (again) Mr Samarakone.
Sri Lankans are world famous for forget things so quickly. I hope they will at least try to change that attitude in 2012.

@Kumar wrote:Thanks a lot for sharing a valuable article with us.
Wish you happy new year.

For our forum members to read more here are another two link from our forum published 11 days back.

http://forum.srilankaequity.com/t14250-pump-and-dump-stock-fraud?highlight=pump+++%2Bdump

http://forum.srilankaequity.com/t14251-short-and-distort-naked-short#92022

I m agree with Ukboy ''with Srilankans are forget things so quickly'' ..

@Kumar some ppl in this forum never giving source of their article..

Trillionaire

Trillionaire
Manager - Equity Analytics
Manager - Equity Analytics
Thanks (again)! Very Happy

TortoizePlus

TortoizePlus
Manager - Equity Analytics
Manager - Equity Analytics
Some players are very smart. They are able to create bull signals in certain chart patterns also.

Some manipulators use all communication channels to publish some half truth news to inject some enzymes for creating a rally.

How many of you bought SIRA at 6 when they announce two hotel projects which is still in planning state.

How many of you bought PCH at 30 hoping so called ‘Future earnings’ from their BPO project in Jaffna.

How many of you bought PMB and PAP at peak following HNWI. Now they are no longer in major share holders list.

This is a game.

sriranga

sriranga
Co-Admin
Thanks a lot for posting valuable article which enable everyone to update them self.
Keep it up.
Wish you happy new year.

http://sharemarket-srilanka.blogspot.co.uk/

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics

Asoka,

From what I gather, you seem to be spending time to write and share these articles. I appreciate the time put to write a such a piece and share with the community for education purposes. I am a proponent of education myself.

greedy007


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Another useful post Asoka Samarakone

Keep it up

bakapandithaya

bakapandithaya
Vice President - Equity Analytics
Vice President - Equity Analytics
Thnkx asoka,good one, thnkx 4 sharing

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