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Investment Scams on the Internet

The Internet has become the communication channel of choice for many investors. It is a convenient way to communicate with investment providers and investigate investment opportunities.

The Internet has also become a popular place for thieves and scam artists to find victims.

Emails promoting investment ideas can be sent to millions of people very cheaply instead of cold calling over the phone or using regular mail.

Fraudsters can lure investors by building websites that look very similar to legitimate ones.

Investment newsletters claiming to provide honest and unbiased advice have become popular as illegal vehicles for some promoters to hype specific stocks.

Online bulletin boards may have messages from those trying to promote a stock with "inside" or "secret" information about a company’s results or new products.

 

It is always important to get the facts before making an investment. The Internet can make it difficult to distinguish between facts and what someone wants you to believe are facts.

Never make an investment based solely on what you may have read in an online newsletter or from an online bulletin board posting.

Be very wary of small or very thinly traded stocks you read about on the Internet.

Beware of companies that do not file regular reports with the Securities and Exchange Commission. You can access the SEC’s database of reports at www.sec.gov/edgar.shtml.

Be wary of offshore investment ideas, especially if they involve some form of tax avoidance.

Do not be lured by promises of high returns with no risk or very little risk.

Be wary of ideas that promise fast returns.

Be wary of investments in alternative investments like commodities, real estate, coins, artwork or gemstones.

If you see words like "guarantee, high return, limited offer or safe as a CD", be very careful.

 

Using Common Sense

Skepticism and common sense should play large roles in evaluating investment ideas found on the Internet. Here are two questions to always ask:

Does this sound too good to be true?

What makes me so lucky to get this offer?

 

Using the Internet Wisely