The main problem with domain forwarding is that search engines don't work with it very well. You might choose a very keyword-rich domain name - "
CarpetCleaningMentor.com", for example – but this value will be lost if your domain name redirects. This is because, when a search engine spider follows a link and indexes a page, it then traces its route back to Google, Bing, Yahoo! etc. Domain name forwarding is one-way only, so the search engine spider is unable to retrace its steps. Search engines will still index your website via its real domain name, but your forwarded name won't contribute anything to the indexing of your page.
This can also be a problem if you use your forwarded domain name to create incoming links or reciprocal link trades. These links will not increase your page rank or help your website to be indexed, because the search engine spiders cannot "find their way back". If you are using domain forwarding, when you ask people to put links to your website on their own, make sure you give them your website's actual domain name, rather than the forwarding one.
Exerpt from Knowledgebase:
Domain Forwarding - Set it up correctly or suffer in Search Engines
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