Online Investment Frauds

6/27/2012, 1:31 p.m.

Taking control of your investments has never been easier, but there are some online investment frauds you should know about. There's a wealth of information online about stocks, companies, and their investment potential. Finding which information is worth paying attention to and which information is deceptive, however, can be tricky.

Frauds to Look Out For

One common investment fraud is when a site or emailed newsletter recommends hot stock picks that aren't actually hot--it's really just in someone else's best interests to get the stock sold. While not even true experts can promise a return on an investment, these recommendations aren't usually even smart picks. Many online newsletters will accept payments to tout certain stocks over others, and your portfolio may pay the real price for the misinformation. What complicates this issue is that there are legitimate newsletters offering expert picks on stocks, but weeding through all of the information can be time consuming. It's a good idea to check with your financial planner to see if there are sites or newsletters that he or she recommends.

Another common online investment fraud occurs on bulletin boards. If you are scoping the Internet for leads on good investments, you may come across sites where people are talking up a company or its assets. While it can be exciting to get in early on a good thing, these leads are usually false. People sometimes band together to spam a bulletin board and chat about a certain opportunity. It may look like a variety of people are recommending the prospect, when in reality this is a planned attack of misinformation geared to lure you into investing poorly. The opportunity, in all likelihood, is not the next big thing, even though the unscrupulous people behind the push to sell it want you to think it is.

How to Protect Yourself from Online Investment Frauds

* Learn how to acquire and analyze financial data. Public records can give you important data about the solvency and future of a company, and being able to review it puts you ahead of the pack.

* Check the stock history of the company and of other businesses the CEOs have run. Did those companies also make money? This can't tell you what the current company will do, but good management practices can make or break a business.

* Find a broker or financial expert to discuss stock choices with. With modern technology, you can choose how active you wish the expert to be in your portfolio, but the expert's goal is to make you money, especially since many of them make a percentage of your earnings.

And as the adage goes, if it sounds too good to be true, it probably is. Look into potential investments with care, and ask the experts if you need to. Online investment frauds are out there, but with a bit of research and some healthy skepticism, you can make the most of your investments and your time.

Questions? Email me at wesley@thewandwgroup.com and visit our website at http://www.thewandwgroup.com. New Money Talk is a weekly article focusing on retirement, personal finance, and estate planning.

Comments and questions are welcome, but because of the volume of email, personal responses are not always possible.