The Consumer Reports Money Adviser newsletter (December 2006) identifies which people are more apt to becoming an investment-fraud victim and tells consumers how to protect themselves. A study by the National Association of of Securities Dealers Investor Education Foundation says people age 60 and older account for about 30% of fraud victims. However, that doesn’t mean young investors aren’t vulnerable. The study lists several characteristics shared by frequent victims including:

• Male
• Married
• Financially literate college grads with an annual income of $30,000

• Self-reliant about making investment decisions

The article says a scammer “dangles the prospect of instant wealth and high returns that come with little or no risk.” Con men also use the social consensus ploy of “Everybody’s doing it.” to target members of a specific group. Another popular tactic makes the investment being offered seem rare or in great demand.

So how can you protect yourself from investment fraud? Here are some suggestions given by Consumer Reports:
1) Find out if the salesperson is legitimate. Call your state securities regulator (you can find this information at www.nasaa.org) to check whether he is licensed and also if he has a record of complaints or disciplinary actions. 2) If you receive an unsolicited email touting a “can’t miss” deal, remember that everything carries risk. Forward the email to enforcement at sec.gov. 3) To toughen your resistance to persuasion tactics, get a copy of the NASD Foundation study and listen to audiotape excerpts from real-life scam pitches at www.nasdfoundation.org.