Here is a email I get once a week. I like these emails because the majority are the basics in 101 investing that we take for granted.
Cheers
RG
ubject:
Investment Tip of the Week 06/25/00 2
Date:
Sun, 25 Jun 2000 15:45:20 -0400 (EDT)
From:
DonaldAFM@aol.com
To:
DonaldAFM@aol.com
Beware of Stock Market Fraud
This is a subject that has been on my mind a lot recently. Two weeks ago the
SEC arrested over 100 people in one day who were manipulating stocks, many of
whom were members of the Mafia. This type of thing is becoming all too
common. The rise in the stock market has led to many greedy people taking
advantage of the general public. In fact I want to share with you verbatim
an e-mail that I received just today:
DEAR MR DONALD
MY COMPANY GOING TO BE LIST IN OTC AND I M LOOKING FOR 40 TO 50 INVESTORS IN
COLADO AND TEXAS IF YOU CAN HELP MY COMPANY WILL PAY TO YOUR COMANY 20%. IF
YOU HAVE ANY INTEREST REPLY.
THANKS IN ADVANCE
Notice there is *nothing* in this e-mail about why this might be a great
investment for my clients. All they tell me is that I can get 20% of the
investment. This is too great a temptation for too many people I'm afraid.
So what is the average person to do? Here are some rules to follow.
1. Only invest in established companies.
Yes, penny stocks and other speculations occasionally have spectacular
returns. But these stocks are just fraught with 'white lies' and outright
frauds. The risk far outweighs the rewards. Don't let *your* greed cloud
your common sense.
2. Never invest in something when someone calls you up cold.
If it's that great an investment, they don't need to waste their time working
the phones. *Never* listen to a cold calling broker. Don't be polite, just
hang up.
3. Ask the person what their commission is.
If someone is really pushing hard to sell you something, ask them what their
cut is. If they are getting a huge commission, then by definition they
aren't unbiased. Their conflict of interest could be your undoing. After
all, if it's really a great investment, why would someone have to pay them a
fortune (i.e. the 20% I was offered above).
4. Keep in mind the person you are talking to could be lying.
We have a tendency to believe everything people tell us, *especially* if it's
written down in a prospectus or other printed material. But the range goes
from shading the truth (a "large" order from IBM is really a $5,000 test
order) to real lies (they've never even talked to IBM, and even if it did it
wouldn't matter since they have no actual product to sell them).
Stocks are the best yielding of all classes of investments. But it's
attracted all manner of rogues for just that very reason. Keep your wits
about you when you are investing in stocks.
Take care,
Don Steinmann.
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__________________________________________________________________
This investment tip is brought to you courtesy of Advanced Financial
Management, a fee-only investment advisory firm. If you would be interested
in having the same kind of thoughtful advice applied to your investments as
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Financial. Our maximum fee for active management is only 1% of the assets per
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Donald Steinmann and Advanced Financial Management assume no responsibility
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