•Variable annuity scam. The right variable annuities can be appropriate for certain investors. But crooked agents increasingly sell seniors hugely expensive annuities with a plethora of hidden fees, often pitching them at "free" investment seminars. Bear in mind that variable annuities are generally a bad idea for investors who may want to draw on the money within the next decade or so. Only purchase variable annuities issued by reputable, well-known providers, and research them carefully. (The Fidelity Independent Adviser's VIP Portfolios provide guidance for investors with Fidelity annuities.)
•E-mail and Internet fraud. Phony investment firms for years have enticed victims through telemarketing or official-looking mail campaigns. But they're using the Web more and more, often seeking investors through bulletin boards, newsletters, or spam.
Some pitches are so outlandish that they're easy to dismiss with a chuckle and label as "junk" (we've all received pleading e-mails from Nigerian princes who need our help reclaiming their fortunes). Many e-schemes are more sophisticated, however. They may seek personal information (a strategy known as "phishing"), which they'll use to steal your identity and ring up enormous debts. Alternatively, they might offer to send you a large check as long as you promise to wire back only a portion of it (you find out the check is bogus only after you've wired the money).
Those are just a few of the most common schemes to be aware of. Generally speaking, they can be avoided by following a fairly simple set of rules:
1. Don't trust anyone you don't know, especially if the person is making unsolicited offers. Be especially skeptical of offers from foreign countries, which can be harder for law enforcement to trace.
2. Don't provide such personal information as Social Security numbers or account numbers.
3. Never wire money to or cash checks from people you don't know.
4. Beware of high-pressure sales pitches and demands for immediate decisions, as well as aggressive or bullying responses if you raise doubts.
5. Watch out for key phrases like "guaranteed profits;" "no risk"; "Don't tell anyone else about this; or "Act now, because only a few lucky investors can get in before the deadline."
6. Expensive "training" sessions or materials should raise a red flag.
7. When presented with an opportunity, make sure you understand the offer and know the company behind it. Request written information about any investment you're considering, and take the time to read it.
8. Find out what state or federal agency regulates the firm, and check with those agencies to see if the offering party is properly licensed and legitimate.
In the end, it comes to the "too good to be true" rule. The relationship between investment risk and reward is one of the few sure things in life: The potential for high returns almost invariably comes with a high level of risk. Fortunately, a well-diversified portfolio of securities built for your individual circumstances can help you navigate some investment risk while generating the growth you need to make your money last throughout retirement. More important, it's risk you can measure historically and manage with a higher likelihood of success.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.