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Internet Fraud in Online Investing

Online Investing

Whether you are interested in online investing, collecting rare coins or anything else under the sun, the internet is no less than a miracle. It has made it possible for regular people to publish information and potentially share it with the whole world. While this is a remarkable power, the fact is that a lot of people have no qualms about misusing it. Internet fraud is prevalent in some form or another in almost every industry, and the field of investment is no exception. There are hundreds of investment scams out there, and till enough people learn how to avoid them, they will continue to rob the savings of unsuspecting beginners.

Online Investing- The Pump and Dump Strategy

This may sound like a strange concept, but it amounts to a very clever manipulation. Scamsters start by buying really cheap stocks belonging to a company. After this, they use emails, newsletters, discussion boards and websites to publicize false information and misleading growth prospects about that company. Once they have generated enough interest among potential buyers, the company’s stock value goes up, and the scamsters sell all their horded stock. Once they have made their sales, they disappear, and the company, if it even existed in the first place, loses all its inflated value.

How Scam Artists Reach their Victims

As far as online investing is concerned, scamsters use a range of methods to reach their victims. One of the most popular amongst these is newsletters. They get into a deal or tie-up with a newsletter that has managed to acquire a fair amount of publicity. This newsletter starts by assuring its readers that it reports financial trends without any bias or vested interest, and then it promptly goes on to promote a particular stock that is unusually ‘promising’. As soon as enough buyers fall for the gimmick, the newsletter and brokers both disappear. Scam artists also use emails, discussion boards and advertisements to lure people into investment frauds.

Avoiding Scams

The best way to avoid such frauds is to never take anyone’s word about a company or market’s prospects, unless you know for sure that the expert is an authoritative figure in the field of investment and is backed by solid credentials. Also, when it comes to newsletters or websites, always check if the people behind the endeavor have cared to identify themselves and their credentials. Finally, if someone is predicting a company’s growth prospects, do your own research too and see if you can verify that information. Always remember that a genuine expert on online investing will rarely make drastic predictions, and will never start with something like, ‘this is the greatest opportunity there ever has been to make millions’.

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