Sophisticated investors were among victims of Bernard L. Madoff's alleged $50 billion Ponzi scheme. Avoiding financial scams must be even trickier than we thought. These sites might make it easier.
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PONZIS AND PYRAMIDS
Maybe the Securities and Exchange Commission - which is taking heat over its failure for years to take complaints about Madoff more seriously - should have been reading its own definitions. Here are the SEC pages that describe Ponzi and pyramid schemes that masquerade as legitimate investment plans.
Ponzi:
investor.gov/answers/ponzi.htm
Pyramid:
investor.gov/answers/pyramid.htm
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SCHEME AVOIDANCE
Read here on the Money Under Thirty site how to spot and avoid Ponzi, pyramid and other financial scams. Check out an adviser's credentials; don't let your manager serve also as your broker; don't invest in anything you don't understand; and diversify. Sounds simple enough, but who's listening?
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SAVE EGGS
This site, Save Your Nest Egg, asserts that, with few exceptions, the financial-advice industry, if not a scam, is expensive, and it suggests do-it-yourself investing. It provides a variety of resources and tools for getting started. There are links to Vanguard Inc. and MSN Money pages where questionnaires help you figure out your tolerance for financial risk.
Here are the Vanguard and MSN Money quiz pages:
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PERSUASIVE CRIMES
Crimes of Persuasion is a compendium of "schemes, scams and frauds" - credit scams, talent-scout scams, missing-person hoaxes, work-at-home scams, and others - so many, in fact, that it could make you afraid to answer the phone.
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ANNIEBIRD'S ADVICE
The blogger "Anniebird" says the fine print of some financial advisers' paperwork may disclose their potential conflicts of interest. But a lot of people don't bother to do the reading - and their investments may suffer as a result.
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Reid Kanaley: rkanaley at phillynews.com
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