Stock Market Scams: How To Avoid Stock Market Scams In 2021
It is easy to stay safe from stock market scams.
As long as you trade stocks via the trusted and respected brokerage that you got through your research, you will not be prone to be duped by risky stock market scammers.
You can avoid most stock market scams by adhering to these three rules:
- Ignore any stock trading opportunity that seems too good to be true.
- Invest through a reliable and reputable brokerage.
- Be mindful of getting involved in the latest hot investment trends.
In this article, I will shed light on how you can avoid stock market scams.
Feel free to contact your local securities authorities if you have been a victim of stock market scams.
5 Stock Market Scams That You Should Avoid
- Pump and dump
Pump and Dump is an illegal practice where scammers buy up shares in a stock that is not popular.
The con artists then use false information to promote it and skyrocket its price.
Once the price is high, they sell it before anyone notices it.
It is common with small, over-the-counter stocks that are not well known.
The scammers may write a fake article or press release about the stock.
They may also make fake posts on internet forums and social media painting a fake picture about the stock.
They may claim that the stock has a huge technological potential.
Stay away from stocks whose value keeps increasing as a result of news from unreliable sources.
- Stocks promising guaranteed returns
There is nothing like a guaranteed return in the stock market.
Even the Treasury bill offered by the United States government (which is seen as the investment with the lowest risk) has its risks.
There are risks in the stock market.
If you see anyone trying to lure you into a no-risk investment, such investment is not credible.
- Halo effect
In some cases, persuasive stock market scammers may try to convince you to invest with them.
They make use of fancy pitches, huge promises, and truckloads of confidence to make you fall prey to their tactics.
Pay attention to any pitch that contains lots of big promises but little to no details.
- Jump on the trend
False pitches usually involve making you feel like you are the only one that has not gotten into a particular stock trading opportunity.
The scammers play on your FOMO (Fear Of Missing Out).
They make it look like lots of credible people in the society have certified the opportunity, invested in it, and have enjoyed good profits.
- Phantom riches
Phantom riches refer to claims of high returns in stocks without any risk of the stock falling in price.
Although it is possible for investors to earn huge returns in the stock market, every investment has its own risk.
Generally, stocks with higher returns have higher risks.
There’s nothing wrong with pursuing stocks with higher returns.
However, if you want to take this route, know that the investments will likely have greater risk and higher decline in price.
8 Things You Should Do To Avoid Stock Market Scams
- Verify the license of the person selling the stock
Ensure the person introducing the stock to you is licensed.
This is an important step that you need to take if you don’t want to fall for stock market scams.
Confirm the license of the person by contacting the necessary authorities.
- Confirm if the investment is registered
Most investment opportunities need to be registered with the appropriate financial institutions.
Verify the authenticity of the stock by contacting the necessary financial institution.
- Beware of stocks that promise high rates and/ or quick profits
Scammers know what people love to hear.
If an opportunity sounds too good to be true, then it’s most likely not true.
Stocks with higher returns generally have higher risks.
There is nothing like a zero-risk investment.
- Beware of high-pressure sales
Be mindful of people that tell you to act now.
This trick is usually used by scammers so that you can give them your money.
Ensure you have time to make the right decision after doing your research.
This is the right way to avoid investing in stock market scams.
- Stay away from unsolicited offers
Did you receive a call from nowhere offering you an ‘awesome’ investment opportunity? It may be a scam.
Always be skeptical about unsolicited offers.
- Request for the prospectus
Ask for a prospectus before you invest in any opportunity.
If they say a prospectus is not necessary, don’t accept such an offer.
Even if a prospectus is not needed, don’t make the mistake of investing in something unless there is a written material about the investment and the company offering it.
- Seek the counsel of a third-party
If you are interested in a particular stock ensure you talk to a third party.
The third-party should be someone that is not interested in the opportunity.
You can talk to your stockbroker, attorney, accountant, or any professional and reputable consultant.
- Watch out for stock market scams online
The internet is now used to promote many scams; especially social media.
Be skeptical about any investment opportunity that is advertised online, and ensure you do your research before investing in any stock.
Can I Retrieve My Money After A Stock Scam?
If you have been a victim of a stock market scam, you have different options that you can use to get your money back.
Since the stock market is regulated and scrutinized, you can recover your money.
However, the process is challenging and frustrates many people to abandon the money recovery process.
Here at Global Assets Refund, we are fully adept at recovering funds lost to fraudulent investments and stock market scams.
We collaborate with regulators and tackle the activities of scammers in the stock market.
Our representatives are capable of carrying out a detailed analysis of your case so that we can deploy the best strategies in getting your money back.
Once we have analyzed what happened to you, we will assign a caseworker that will work on your case throughout the fund recovery process.
Our positive reviews attest to the fact that we are the go-to money recovery agency in the industry.