Stock investment advice is easy to find. Do you get cold called by brokers with the latest investment tip? I have, as have countless others around the globe. And many of us have lost a lot of money to these people. So, how can you avoid some of these pitfalls?
In general, if you get cold called by anyone, the best stock investment advice that I can give you is to leave them alone, no matter how appealing, or how plausible the sell is. Many of the people and firms who operate in high pressure sales environments, operate outside the law. And these people usually start with a cold call.
If You Are Cold Called, Steer Clear - Rule 1.
Remember that the tactics used can be very cunning.
It is not unusual for disreputable firms to start gently. They will warm you up with a 2 minute call, which invariably will get you excited at the prospect of making some money, on the basis of a deal "which hasn't come off yet", but they will call you if it does.
And it will.
And so will they!
They often quote shares which are listed, usually on the nasdaq, and it is within my experience for this to occur whilst the price of stocks rises as predicted. Believe me when I say that I was caught, and the the stock prices were being manipulated (this was the subject ultimately of an SEC investigation).
Double Check All Information You Are Given - Rule 2
Another favourite ploy of the crooks is if they know you have previously bought shares which are worthless, they will come up with some cock and bull story about a takeover or a similar machination, and offer ridiculous amounts of money for worthless shares. All YOU have to do is pay a fee to release the funds.
And guess what.
You will lose more money!
If It Sounds Too Good To Be True - It Probably Is! - Rule 3
If you are contacted by anyone you don't know, contact your local regulatory authority, and check them out. If the broker is not known to them, stay clear.
Ask Your Regulatory Authority - Rule 4
Ask at the outset if the stocks being peddles are restricted. Most of the cases I have come across where victims have been defrauded, have involved the infamous regulation S stocks. If the stocks in question are regulation s, and you might have to push the point, then don't get involved.
Ask If The Stock Is Regulation S - If They Are - Run - Rule 5
For many of us, this advice will come too late, and we have already been caught. If so how do we know we have been caught, and can we complain?
There are certainly some questions that one can ask oneself which, can help make your mind up if you might have been caught. Ask your self the following, and see if the scenario applied to you:-
1. I didn't understand, and it was never explained to me, that the shares I was buying could not be sold for at least one year and possibly longer.
2. I didn't understand, and it was never explained to me, that the shares I was buying were not traded on a proper stock exchange and might never be traded so might never be sold.
3. I didn't know, and wasn't told, the extreme risks associated with Regulation S stocks, up to and including a swift loss of up to 100 per cent of my capital.
4. My personal finances and my investment needs make me unsuitable as a buyer of Regulation S stocks (e.g., because I have a modest income and cannot afford to take risks, I am elderly and cannot afford to wait in the hope shares will be quoted in the future, I am retired and cannot replace lost capital).
5. I would never have agreed, had I known, to an investment where the company whose shares I was buying was actually making a very large payment to the broker. This would have destroyed any feeling that the broker was making a recommendation for my benefit and not in return for payment.
6. Sales calls from the broker were very enthusiastic and almost promised big, fast profits; this was misleading.
7. The broker never recommended 'normal' shares to me, but only Regulation S stocks, as if these were the only shares suitable for my needs.
8. Every Regulation S stock I was sold (or almost every one) collapsed and became worthless or near worthless. The law of averages suggests this is not just bad luck but bad skill on the part of the broker who recommended every one of them so enthusiastically, and made a profit on each sale.
Some of you reading this might think that this is flight of fancy stuff. Well, I can assure you that it's not. This is the real world, and real people get hurt.
Robin Banks has been a victim of investment stock fraud, so is well placed to give advice to others on how to avoid it.
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