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Avoiding investment scams

With the stock market in turmoil in recent months and numerous other investments losing their appeal, many people are looking for ways to earn back the funds they've lost on stocks or to get some positive returns on the money they have left.

Unfortunately, there are many con artists out there trying to take advantage of people eager to offset their market losses.

Is it good to be true?

This is always the first question to ask when spending your money. If an investment or business opportunity promises "guaranteed," rapid or unusually high returns, examine the investment materials carefully to determine how these assurances can be possible.

Keep in mind that high yield securities also carry high risks, including the possibility that you could lose your entire investment.

And remember that just because a company has a nice office, attractive brochures and an appealing Web site, does not mean that it is poised for success -- or that it's even a legitimate business.

The more questions you ask, the more likely you are to discern if the promises are real or if they are whitewashing the risks involved.

Are they registered?

When a company registers its securities with a government regulator, it is required to publish an annual report and a prospectus with details of its financial situation.

It is possible to sell securities without registering, but this should be another red flag to potential investors.

It may mean the company is trying to avoid regulation -- and the kind of disclosure that regulation requires -- because it has something to hide.

Ask for an investment prospectus and annual report and review them with an objective adviser.

If these documents aren't available, it's probably best to walk away from the investment.

Does the investment have a track record?

Some scammers will offer you the chance to get in on the ground floor of a new opportunity.

This may sound tempting, but it's best to invest in a business that has a proven history of financial success.

Ask, too, if the people involved in the investment have any experience in this field.

Why do I have to invest immediately?

Con artists often insist that you must send in your money right away because only a few shares of a company are left.

This should be a red flag to turn down the opportunity. The cons are only trying to prevent you from asking questions they can't answer.

Is all my money being used to buy securities?

High-pressure salespeople often operate the way they do because they are expecting to get big commissions from the sales they make.

Those commissions are deducted from your money.

Before you invest, find out if there are fees or costs involved and ask how much of your total outlay will actually be used to make an investment.

Of course, legitimate stockbrokers do charge transaction fees, but it's always important to ask what they are in advance.