Penny stocks are, in a nutshell, some of the most volatile investments that anyone can make. It’s quite true that there is great potential for a lot of money to be made in a fairly short time. It is equally true, however, that those stocks that were touted as ‘the best penny stocks to buy now end up losing you everything you invested, and maybe even more.
Because they do have so much potential it’s not surprising that an increasing number of ‘ordinary’ people are becoming more interested in looking for the best penny stocks to buy. Which means that the number of penny stock scams out there is increasing at the same time.
Being aware of these scams is your best defence against falling for them. With this in mind, let’s take a look at some of the most common right now.
The ‘Guru’ Scam
This is perhaps the most common scam that those seeking the best penny stocks to buy fall for. It involves those websites that feature page after page and article after article promising that the ‘X system’ will make you hugely wealthy overnight.
The sites are filled with pictures of yachts and cars and huge houses (and usually good-looking people with very few clothes who, these sites imply, will be very interested in you once you make all that cash) but they actually offer very little in the way of actual information about penny stocks. But, the copy promises, all will be revealed if you pay $99 a month to find out!
Basically, you should avoid these ads like the plague. There are really good advisors offering their services via the Internet but they do so with real information and honesty about the risks behind penny stock trading, not with glossy pictures of pretty girls drinking martinis.
Pump and Dump Scams
Close behind the guru scams in prevalence are the pump and dump scams. These basically involve the scammers hyping up a stock to encourage investors to buy in, and as they do, increase the price of the stock along the way.
They use dummy corporate sites, fake press releases, false paid news stories and more, anything they can to paint a very rosy picture of what is often a terrible stock. Once the price goes up the scammers will then sell the stock, resulting in a huge profit for them and nothing for you.
The best way to avoid these best penny stocks to buy scams is to educate yourself. Get advice from a pro if needed, see what truly reputable sources may have to say about this stock. Working with a trusted penny stock broker can certainly help a great deal.
The Short and Distort Scam
This is basically the complete opposite of the pump and dump. The scammer short sells stock to make a quick profit. They then use many of the same false tactics as described above to devalue the stock, before swooping in to repurchase the shares once the prices fall.
Avoiding Penny Stock Trading Scams
In addition to being aware that these scams are out there, which you are now if you weren’t before, the best way to protect yourself from them is to research every company you are considering investing in carefully before even considering adding them to your list of penny stocks to buy now.