With twenty states now having legalized medical marijuana usage and two states, Colorado and Washington even legalizing recreational use of marijuana, many people think it is high time (pun intended) to look at investing in companies providing legal marijuana. Unfortunately, with just about everything else that captures the public’s imagination, scam artists recognize this interest and exploit it with pump and dump scams by which scammers use social media, emails, text messages and other ways of communication to lure people into investing into marijuana stocks which then bids the price up temporarily. The scammers then sell their shares and their victims who fell for the scam are left holding stock that is worth little. You can find more about pump and dump scams in the Scamicide archives and in my book “The Truth About Avoiding Scams” which can be ordered by Amazon by clicking on the link to the book on the right hand side of this page.
Scammers also lure people into investing in marijuana companies that are downright phony and mere shells. Once you find out you have been taken advantage of, it is too late.
An important lesson in stock investing is to never invest in anything that you do not understand. Many investors with Bernie Madoff forgot this rule, which might have prevented them from from falling prey to his quite transparent scheme. You should never invest in a company until you have done independent research. Don’t depend upon what you hear and read through social media, texts, faxes, or investment advice websites that you are not sure are legitimate. You can check out a company’s SEC filing on your own at the SEC’s Edgar website which provides first hand access to corporate reports by going to http://www.sec.gov/edgar/searchedgar/companysearch.html. You also may want to check out legitimate stock analyzers such as Argus Research, Morningstar, Value Line Investment Survey and Yahoo Finance, all of which can provide unbiased, reliable information. Don’t let greed blind you.