How to Avoid Investment Fraud by Listening for “Red Flags”

The American Association of Individual Investors (AAII) recently released a guide for reading between the lines when it comes to investment advertising. If you want to avoid investment fraud, you need to develop the savvy to recognize the tired old boasting and lies that these fraudsters use to lure you in. The hard part is that you don't really know what to look out for until you've already been a victim of investment fraud.

As investment fraud attorneys, we've seen just about every trick in the investment scam book. Learning to recognize the way fraudsters operate can be a big step toward avoiding Ponzi schemes and other scams. Take a look at some of the claims you might hear when you're being sold a "lemon":

• High returns. Higher returns are better returns, and it's easy to be dazzled by claims of 600% annually. Don't be fooled. High returns come with high risks, and it's very unusual for the private investor to see returns greater than 25%.
• Out-of-date information. Bending the truth about investment performance can mean easy money for con artists. A fraudster may try to reel you in by publishing old information that makes an investment look like it's doing well, even though its current performance is lackluster or worse.
• Tricky math. Reporting averages, ignoring compounding, or otherwise "cherry picking" numbers is a subtle scam, and it is very effective. Make sure you understand how your returns are calculated and pay attention to how it matches up with your statements.

Of course, these are just a few of the many ways con artists prey upon unwitting investors. If you have been taken in by investment or securities fraud, contact a skilled investment fraud lawyer today at 1-866-6-BROKER (1-866-827-6537). We also recommend you take a look at our free book for investment fraud victims: Five Signs of Investment Fraud ...And What to Do if it's Happened to You.