Tuesday, September 14, 2010

Investing based on spam, bad idea

In what should be one of the more obvious concepts to be presented to you,MarketWatch reminds us that if you invest in a stock based on something touted in a spam email, then you are very likely to lose money.
This is known as a pump and dump, where someone buys a stock and holds it, and then goes out and tells everyone they know (or in this case, many people they don't know at all via spam) that it is a great stock and they should buy it. Some number of those people buy it, the price goes up, and the original person sells out their position, having made their money, after that, leaving the other people holding on to a stock that may or not be any good (usually not, especially in the case of a pump and dump when many people are going to dump out since it is a scam that got you in there).

This goes back to the idea of maybe not doing whatever someone says to do in an email since you know, they might have their own interests at heart and not your interests.

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