Smart Investor’s Guide to Avoiding Scams in Stock Market

Investing in the stock market can have the power to change your life, for better or for worse. While there’s always an element of gamble involved in trading stocks, the last thing you want is to lose your money unnecessarily as a result of falling prey to a scam.  

But don’t panic: it’s entirely possible to avoid scams even if you’re new to this form of investing. This article breaks down everything you should know, and the precautions you should take to invest smartly without getting scammed.  

Watch Out for Unregulated Investments 

Something to be aware of from the get-go is that scammers push investments that sound too good to be true. But they’re typically easy to fall prey to, using fake credentials and complicated terms to make their offers seem legit, and drawing you in with exaggerated returns.  

Before you put in any money, check if the company is registered with the right financial authorities, like the Securities and Exchange Commission and Financial Industry Regulatory Authority (FINRA). If you can’t find official records, it’s best to avoid making the investment altogether. 

Be Wary of Pump-and-Dump Schemes 

Pump-and-dump scams are also worth being aware of, given their role in manipulating stock prices.  

You may come across fraudsters promoting low-value stocks through social media and forums, trying to encourage you to buy in. Once prices rise, they sell their shares—and then the stock crashes, leaving you with losses. If you see aggressive promotions telling you to buy a stock fast, you should treat it as a red flag. 

Verify Accounts with an SMS Verification Service 

A lot of stock market scams involve hacking into investors’ accounts and stealing their identities.  

You can minimise the likelihood of getting your account hacked by using trading platforms that employ an SMS verification service, like https://www.smspool.net/, adding an extra layer of security when you’re logging in. This helps protect your account from fraudsters who want to take control of your investments. 

Avoid High-Pressure Sales Tactics 

We’ve touched on this briefly above, but it’s worth reiterating: legit investments don’t need you to make a fast decision.  

 Always be aware of the fact that scammers want you to act quick, telling you the opportunity is limited or the price will rise soon. They’ll shrug off your questions and make it hard to research the investment. If someone is pressuring you to invest without giving you time to think, walk away. 

Check Sources Before Acting on Stock Tips 

Following on from this, a good way to avoid falling for misleading or false stock market tricks is to make sure you’re verifying all the information you come across before you make any investment decisions.  

With social media and forums being accessible to anyone, it’s easier than ever for scammers to create fake news stories or pose as financial experts to promote certain stocks. Again, you should always look at a company’s financial reports and track record rather than jumping on the hype. 

Takeaway 

Scammers rely on pressure and false promises to steal from investors. The tips in this guide can help you avoid fraud while making investing decisions.  If something feels off, trust your instincts and take the time to verify the company before you commit.