In August the North American Securities Administration Association, or NASAA, released their annual list of investing scams and traps.
In their press release, NASAA president, Denise Voigt Crawford, was quoted as saying, "Knowledge, attention to detail and a healthy sense of skepticism are a triple threat to fight investment fraud."
When it comes to investing, anything that sounds too good to be true, probably is.
Visiting an investing professional is no guarantee of a scam-free environment either.
Some of the products and practices the NASAA highlights are not merely the province of shady scam artists. Seemingly legitimate advisors or brokers could be pulling a fast one. Always research the background of the people to whom you're entrusting your money.
Here is their list of the top 10 investor traps. I put the conflicts of interest item at the top of the list because it is the most common trap as far as I know. While only a few people may be offered a piece of a sweet gold mine investment, nearly everyone has spoken with an investment professional at some point.
Undisclosed conflicts of interest. Not everyone selling investment products and advice has the investor's best interest in mind, rather they may be dreaming of dollar signs. If an investment professional is reticent about how they get paid, find another advisor.
Leveraged and inverse ETFs. According to the NASAA these types of securities are more suitable for day traders than the average retail investor.
Foreign exchange trading schemes. While currency speculation is a legitimate activity with secure access available to individual investors, some scam artists claim to have surefire strategies and formulas. The NASAA reports that many times, the crook's strategy is actually a Ponzi scheme with no actual trading, just stealing.
Gold and precious metals. As with currency trading, there are legitimate ways of investing in gold and precious metals but scammers are out there. Beware.
Green schemes. Green is hot these days, both with investors and those who would fleece them. Investigate any investment opportunities in alternative energy
Oil and gas schemes. The NASAA states that investing directly in oil and gas ventures is too risky for smaller investors. Even when the investments are legitimate, commissions and expenses can negate much of the revenue. Further some promoters of these enterprises have tangled with regulators before and structure their businesses to avoid securities regulation.
Affinity fraud. Just because someone is in your club, religious or professional organization or any other group does not mean they're trustworthy. Get a second opinion on any investment opportunities, the NASAA suggests.
Private or special deals. Private offerings are legal but according to NASAA they are not as closely regulated as other securities. Make sure the investment is legitimate and not being promoted by a con artist or scammer.
"Off the books" deals. Shady brokers may sell investments without their employer's knowledge or approval. They can be illegal, NASAA states.
Unsolicited online pitches. Beware of investment misinformation. If you did not solicit investment advice, take it for what it's worth: absolutely nothing.