Risks and Scams of Investing in Penny Stocks

In this blog post we will discuss the risks of investing in penny stocks so you are better informed before making any decisions on how to invest your money.

Risks of Investing in Penny Stocks

If you’re reading this, it’s likely that penny stocks are something you’ve considered investing in. You might have seen a few posts on your Facebook wall from people who say they turned money into more money and made thousands overnight – but the risks are there!

Penny Stock Scams

Penny stocks are often the target of scams. Penny stock brokers will take advantage of inexperienced investors and show them how to get free stocks in companies with little-to-no chance for success, but they promise these bogus investments will make money that can’t be lost.

→ Pump and Dump

Pump and dump penny stock scams happen regularly. Penny stock promoters, or people who are responsible for selling the stock, will buy shares of penny stocks and inflate its price.

→ Short and Distort

Short and distort is the mirror image of pump and dump. It works by shorting the stock on Robinhood or a Robinhood alternative (usually in a bull market) and then releasing false information to send the price plummeting.

→ Reverse Merger Deceptions

The scammers buy shares of this doomed-to-fail private company and then take it public by merging with another already successful publicly traded entity through an exchange offer they have created – typically for millions of dollars more than what they purchased the stock for!

→ Guru Scam

They’ll lure you into thinking that your losses were just short term setbacks and that all would be well if only you could get back up again with one or two more trades.

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