In all business there are a number of frauds who persuade people by giving fake information. So is the case with penny stocks also. Many stock companies advertise wrong information of their financial health so that people will but their shares. For this they try their hands in email spamming, in message boards, emails, faxes, and from other people who claim that such and such penny stocks will go through the roof. A lot of people have been susceptible to penny stocks scams. When they listen and put some money in that penny stock, they find their investment crashing and wonder what went wrong. Then they go on to blame other people, when in reality, they have nobody to blame but themselves. Here are three ways to protect you against penny stocks scams.

1. Take information you see on message boards with a grain of salt.

Message boards may be safe and risky simultaneously. On the one hand, they can give you great source of information. Then again, message boards are ground where offenders prey upon the beginners. These offenders are identified as "pumpers".

2. Disregard any mail, email, or fax that hypes a penny stock

A penny stock promoted by unwanted mail, email, and fax are in majority subject to scam. Penny stocks that promote themselves by means of spam are all vague. The only objective of sending is to create artificial height to pump up the price of the penny stock. Then the people who promote the stock will put up for sale their shares at a high price, thus motivating the price of the stock descending leaving those who have invested recently with a depressing loss. It creates the worst situation since those same people who recently bought will cling to hope of the stock price rising up again, but the most time, the stock price will not rise and they will gain a greater loss.

3. Do your own research and take personal responsibility

One of the most important rules to investing… by no means… ever…is to invest on tips and rumors. Chances are, your source is wrong or you’ll make the cut belatedly.

Make your own research! Clear in your mind you know what you are investing in. you should be confirmed your sources are honest and ethical and achieve the interests of its investors and clients. Tips are only ideas. Investments should only be made on your own personal conclusions.