A recent article on this site detailed the hoax about how a schoolboy in New York City fooled the media into believing he had made $72 million trading securities during recess.
Of little surprise, it turned out to be a hoax.
The aftermath is replete with articles about how to spot a stock hoax. That is simple. Invest for the long term in blue chip stocks that pay dividends. It is a wise strategy to pick the biggest and the best in sectors such as BHP Billiton (NYSE: BHP), the largest natural resources company in the world, and Caterpillar (NYSE: CAT), the biggest equipment builder on the planet. Both pay dividends that are well above the average of around 2 percent for a member of the Standard & Poor’s 500 Index (NYSE: SPY).
The clues were many for Mohammed Islam, even if New York magazine and others missed every one at first.
The first was pretty obvious: you need to be 18 to have a brokerage account. He was only 17. Islam also claimed to be making millions trading penny stocks. His “strategies” were laughable in their transparency. As was shown by his being busted, investors are far better off for the long term with blue chips such as Caterpillar and BHP Billiton.
Caterpillar and BHP Billiton both have solid business models with dividends over 3 percent.
Each is positioned well to profit from global growth. Income investors will be especially pleased by the history of dividend growth from each market leader. That is what investing is all about. Even if Islam had done well, it would have been from speculating, not investing. That is why he was pretty much doomed, one way or another. Investors are far better off avoiding speculators, especially those that are underage, and buying shares of blue chips for the long term that pay handsome dividends.