How to Avoid a Ponzi Scheme

Bernard Madoff was sentenced to 150 years in prison for bilking investors out of $50 million. The maximum sentence is small comfort for his Ponzi scheme victims, some of whom lost of their life savings. Here are some tips for making sure you don’t become a victim of investment fraud:

• Use only trusted financial advisors. This includes conducting research on the individual's credentials, past investment history and accreditation. Individuals certified by the Financial Planning Association, Certified Financial Planner Board of Standards and the American Institute of Certified Public Accountants can prove their credentials through their affiliation with the organizations.
• Do the research. Before investing, examine the operations of the organization and ask to see the paperwork they are required to file with the Securities and Exchange Commission.
• Follow your instincts. If you feel that an investment is particularly exotic, risky or unfamiliar, you may not want to invest your money in it. If someone promises an investment return that is unnaturally high or steady, the warning alarm should start sounding.
• Individuals nearing retirement should be especially wary of their investment status. Chances are, you are counting on the money you've invested to guide you during your retirement years. Make sure all investment decisions are made with sound judgment.