This selling from the "insiders" sends the price plunging, wiping out unsuspecting investors in the process. This buying drives the stock price higher, prompting the fraudsters to suddenly sell all their shares. In a "pump and dump" scheme, fraudsters spread false or misleading information about a stock to entice investors to buy shares.
This lack of freely available fundamental information, combined with generally low trading volumes, makes this market ripe for illegal "pump and dump" trading scams.
These tiny firms often do not file financial reports with regulators, making research and due diligence very difficult. The SEC's definition of a micro-cap stock is one issued by a company with less than $300 million in market capitalization. To be sure, this technique does not allow for outrageous returns, but it did return over 50% during the past year and has a history of market-beating results.īefore I get into the specifics of this low-risk method of investing in the micro-cap market, let's look at what exactly a micro-cap stock is. What's important to keep in mind is that these huge gains are accompanied by equally gigantic risk - the kind that can quickly wipe out your entire investment.įortunately, there's a way to profit from this market while greatly reducing the risk. #-ad_banner-#The majority of investors simply discard these emails as nonsense - but the funny thing is, returns of 1,000% or more are indeed possible in the micro-cap sector. Most of these emails tout high-risk, hugely volatile micro-cap stocks. Have you ever received emails promising quick returns of 1,000% or more from stock investing? I know I have.
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