It made me think of how youth must feel after years of the comfort of living with parents who are in their later years of career growth and income. They grow accustomed to the lifestyle of having most of what they want. Then they get out on their own. Perhaps its the first year at university or they get married and get their own place to live. All of a sudden that economic boost from mom and dad is gone and the reality of “being alone financially” hits them. Many run back for help, crying.

We have a responsibility, as parents, to teach our children what to expect and not lull them into a carnal sense of security, only to have it shattered when they move on. Yes we want to give them things, but they must be prepared for their future also – with expectations, with financial education and with lots and lots of love.

What do you do to prepare your kids for the inevitable future?

An initial step you will want to take when presented with a potentially interesting investment opportunity over the Internet involves getting the facts about any company or investment plan you might be considering from an independent source.

Furthermore, do not base your investment decisions solely on what you read on any particular online website, newsletter, e-mail or discussion forum. This is especially important if the information pertains to a stock that is thinly-traded and from an obscure company or to an overseas investment.

Categories of Internet Investment Fraud

While Internet investment fraud has many different variations, most of them fall into one or more of the following basic categories:

• Pump and Dump or Short and Distort Stock Scams
• Pyramid Schemes
• Low Risk, High Reward Frauds, HYIP and Ponzi Schemes
• Overseas Investment Frauds
• Over-hyped forex software

A good idea if you want to protect yourself from these scams would involve reading up on each of them in order to familiarize yourself with the ways that they are perpetrated and how to avoid becoming just another victim of investment fraud.

How Online Investment Frauds Spread

The ways that investment frauds are now perpetrated over the Internet are often similar to how such frauds were committed in the past using telephone calls or solicitation letters sent via snail mail.

A variety of Internet-based means can be used to find and entice potential fraud victims. These might include:

• Online newsletters
• Unsolicited spam e-mails
• Discussion forums
• User groups
• Bulletin boards
• Article websites
• Chat services
• Websites

Remember, it usually does not take that much to use these techniques or to set up a fancy website these days, so do not be taken in by what you read online. Check out any investment advice thoroughly before committing any funds to help prevent Internet investment fraud.

Steering Clear of Stock-Related Frauds

One classic stock-related fraud is known as the boiler room scam. This generally involves a broker placing excessive pressure on clients to trade over the telephone, but this sort of pressure can also be found in communications made over the Internet, especially in chat rooms or e-mail. Boiler rooms are often used in microcap stock frauds that involve the high-pressure sale of distressed, non-existent or overvalued stock.

Accordingly, when it comes to preventing stock frauds, investors will generally want to look for those that have filed registration statements and periodic reports with the SEC. You can review these documents for the company by going to the SEC’s website and searching the SEC’s online and public EDGAR database for free.

Furthermore, you will want to avoid buying the stock of any company that is not listed with the SEC without thoroughly checking the validity of each any every material statement made about the company.

Basically, investing in unlisted stocks is really only for expert investors who will want to perform their due diligence by taking verification steps like the following:

• Obtaining and analyzing financial statements from the company.
• Verifying any important new product developments or contract claims.
• Calling the company’s suppliers and customers to find out if they do indeed have dealings with the company.
• Researching the background of the company officers to see if they have a criminal record or have given investors a good return in the past.

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Enjoy!