Financial Planning: A Midyear Guide 1987 : part two: The Stock Market : The Red Flags of Fraud

Every year, thousands of naive investors lose millions of dollars in high-risk investments that appeal to their greed. You hear it all the time, but any investment opportunity that sounds too good to be true usually is . Be extremely wary of any investment that offers an unusually high rate of return on your money within a few months.

Some basics:

Avoid any sales proposition made by telephone.

Unscrupulous companies buy “sucker lists” from each other. High-pressure salesmen working in “boiler rooms” are skilled at separating you from your money.

Be especially wary of long-term credit contracts for precious metals.

Investors lose millions by sending money to fly-by-night, unregistered commodities brokers. If you’re sure you want to buy gold or silver, buy it outright and store it in a safe-deposit box.

Never mail or wire money to an out-of-town company without checking first with the local Better Business Bureau for customer complaints.

Call the district attorney’s office in the company’s area, too.

Never deal with a company that sends a courier to your home to pick up money.

Find out if the salesman you are dealing with is licensed by the state or registered with the federal government to sell a particular investment product.