There are signs that you can always look out for before you invest in a company which is being improperly promoted:

» Beware of any stock that you learn about on a bulletin board, chat room, newsgroup or email. Promoters usually use these to promote stock. Please see our article on Techniques Promoters use to Promote Online Investments for more information.

» Be on guard for high pressure tactics to buy from people you don't know. Promoters make their money from inflating the price of stocks in order to allow them and insiders to sell their cheap stock at higher prices. This is called pump and dump and it is a favourite tactic of promoters who are improperly promoting stock.
» Watch out for information that you see in online newsletters. Such information might appear to be unbiased and independent but usually such information is being provided by individuals paid to recommend the stock.
» Look out for information contained in publications that contain good investment information along with recommendations or stories about praiseworthy stocks. These publications are veiled attempts to advertise a company even though at their face the articles appear to be unbiased commentary when it fact the publishers have been paid to promote a stock.
» Beware of promises high profits and sales relating to products of a new startup company. It takes time for businesses to become successful and usually the path to success is a gradual increase and not an overnight success. Be realistic when reviewing promises made by companies.
» Never be fooled by press releases or announcements of pending or imminent acquisitions. Unless such acquisitions become reality, this is a warning sign that there is nothing behind the announcement but an attempt to fool you in buying a stock.
» If the company has weak fundamentals, then its low stock price is a reflection of what its worth and not what a promoter tells you its worth. Review the financials of a company and rely on only what you see and not on what you are promised.
» Be on the lookout for small cap companies that pay a generous executive salary or compensation package. This is a telltale sign that any money that the company is raising is going into the pockets of insiders and not into the company itself.
» Be leery of small cap companies that are investing in projects unrelated to their businesses. Small cap companies should not be changing their businesses when they have been created to pursue their original line of business.
» Beware of mining companies that change their focus, especially after another company has announced a large discovery. For example, you will have noticed that in the early 90's, diamond stocks were very popular. Mining companies that were looking for gold suddenly started hinting in their news releases that they also had properties that could contain diamonds. This was an effort to fool investors into believing that their companies could be one that make the next big diamond find.
» Watch out for reverse splits. For example, a company that is trading at $2.00 per share consolidates their stock, say on a 3 to 1 basis. Consequently, if you had 300 shares at $2.00, after the reverse split you would have 100 shares at $6.00. While on its face the value of the stock is the same, $600, you will begin to notice that the price of your stock will fall probably back to $2.00 and the value of your stock would be only $200. If the stock does not fall, it could be a sign that the company is trying to make its stock look more attractive by making it appear that it is worth more. A good company with high profits doesn't need to consolidate its stock to increase the value of its shares.
» Beware of companies that have been previously suspended or have had delinquent filings. This is an indication that the company is not well managed.
» Be leery of stocks that are thinly traded but have sporadic volume surges. This is an indication that heavy promotion is going on.
» Finally, if you think you have been scammed, report the scam to your local Better Business Bureau. You may also want to contact your local Enforcement Agency to assist you in investigating the scam.