There are few prospects that should terrify you as an investor more than the possibility that the stocks you’ve bought are secretly overvalued. This can be due to the business being unsustainable on a foundational level, outright fraud, or a long detailed web of smaller deceptions. The fact is that this happens more often than you realize, while the lion’s share of companies that take part in public trading do so legally and honestly, there’s one bad apple in every bunch, and eventually, someone is going to bite it. Luckily, there’s hope for you, as there are clear signs that this is going on. So, if you are scared your stocks numbers have been falsified, and have no stock option advisory services to help you, here are the biggest red flags that should raise your suspicion.
#1. Black box
This is the buzzword that you should always be on guard for. This is the same trick that Enron used in the early 2000’s to nearly get away with hiding their debts and overstating their actual profits. Even if the actual word is not used, if the company you’re buying stock in tells you that their revenue is generated in some vague way that cannot be disclosed to the public, then you’re probably not working with someone you can trust.
#2. Behavioral red flags
Sometimes it isn’t just one thing that gives away their deceit, sometimes it’s a series of smaller behavioral quirks that, when lumped together, reveal that they may not be the most transparent company on earth. While there are many of these telltale signs, the most common are: The IRS or SEC snooping around them for documentation, the chief auditor suddenly resigning, scheduled filing dates for financial statements are consistently missed, and sudden restatement of financial statements.
#3. Deals too good to be true
The old saying rings true: if something is too good to be true, it probably is. If a deal seems to benefit you on paper with no clear mutual benefit for the company as a result of you buying their stock, such as promising “guaranteed returns with minimal risk” (a famously shady promise in this industry). Returns are supposed to be inconsistent because the market is inconsistent. So if your returns are not only consistent, but consistently plentiful, above the average margin, then something’s fishy.
A good way to avoid this problem is to find a good stock option advisory service. And for that purpose, there’s none better at it than Trade Genie.
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