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Beware of the “Pump and Dump”

When a Bull Market in stocks begins and money starts pouring into a sector, especially Gold & Silver Stocks, There are so many newsletters and stock analysts that clutter your inboxes with the latest and greatest stock recommendations. The stocks are often either Paid advertisements where a company has paid the website in the form of a cash payment or stock options to write and article and promote it to the subscribers of that website or the website themselves has a vested interest in the stock and they want to "pump" it up to increase the stock price.

This is not Illegal at all and often the websites that promote these stocks have a very large following of subscribers and the stocks do end up going higher. The challenging thing is to know which stocks to play and which to leave alone. Often, of course, it requires lots of Due Diligence on your part to decide but often these stock recommendations happen so quickly that if you wait a few days or weeks your too late. This most recent start to the New Gold Bull Market that is happening now has seen so many of these stocks go up. Some have gone up as much as %500 - %1000 percent and the Bull Market has Just begun. The important thing is that if you decide to purchase any stock that is being PUMPED in a newsletter be sure to do some homework on the stock and not to just buy it based on the info that the newsletter is providing. The other thing to look out for is the DUMP!. Some people will send out a newsletter after newsletter pumping up a stock so the price keeps rising and once they reach there MAGIC number they sell the stock and the stock price plummets. The stock had no real value at all other than a number of shares that were being traded.

If has come light to many investors that it is very important to "Follow the Money" as they say. Follow the money would mean, Who is buying the stock? who is the company being run by? are insiders of the company buying any of the stock? these are probably the 3 most important things to find out before investing in any company. If you find that the company is being run by a person that has a proven track record for successful mining operations and has delivered shareholder value in the past that is a good thing. If you see at the same time that that person actual owns a percentage of the company that is another good thing.

2 great examples of this would First Majestic Silver  which is run by Keith Neumeyer who is also the CEO of First Mining Finance and another great company called McEwen Mining which is run by Rob McEwen. Both of them are major shareholders in their companies and have delivered huge returns for their shareholders. When you see to people like this running a company that has a vested interest in a rising share price you can sleep well at night that your stock is not going to be a PUMP & DUMP scenario.

A Bull Market will bring out all sorts from the sidelines to try and make money. those that have lived through bull markets before knowing the success and failures that happen in them. If you are lucky and catch the right stock you can make a fortune but at the same time if you catch too many wrong socks you can be left in the dust.

Good investing.

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