Chances are, you may have been swindled at some point in your life, or you know someone who has. Nearly half of consumers surveyed recently by Stanford University's Center on Longevity and the Finra Investor Education Foundation reported being a victim of financial fraud in the previous year—a far higher tally than earlier surveys indicated. No socioeconomic or demographic group is immune. "Men and women, college students and retirees, rich and poor—all are potential targets," the report's authors found. Nearly 40% of victims never told anyone about the fraud.
Estimates are problematic, but Americans are thought to lose some $50 billion a year to financial scams. And there are indirect costs: bounced checks, late fees, trouble meeting monthly expenses and even bankruptcy. So it's not surprising that the emotional cost of fraud is also high, with 50% of victims reporting severe stress and more than one-third citing depression. The toll is compounded for senior victims, who have little time to make up for lost resources. "When elderly people lose their life savings, they lose hope," says Ricky Locklar, an investment fraud investigator at the Alabama Securities Commission. "To me, those crimes are worse than someone robbing the corner drugstore at gunpoint."
Here are four steps investors should take to protect themselves:
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
1. Recognize the art of the con. Scammers succeed with financially sophisticated victims because investment fraud is a crime of persuasion. Be wary of high-yield, low-risk offers, as well as anything with a guarantee. Question anyone who claims a special credential, experience or affiliation to gain credibility.
2. Resist pressure. Con artists exert social pressure by claiming that other savvy investors—whether celebrities or members of your church—are already on board. Don't be swayed by small favors, such as a cut-rate commission or a free meal, and don't be rushed by claims of limited supply designed to create a false sense of urgency. Learn about persuasion tactics by playing Finra's interactive "Con 'Em If You Can" game at www.conemifyoucan.org.
3. Do a background check. You can find information about registered securities firms and brokers, including employment history, licensing status, criminal events, investor complaints and pending investigations, at https://brokercheck.finra.org. If you're working with an adviser, check out https://adviserinfo.sec.gov for information about a firm and key personnel, including certain disciplinary actions. You can also search for an individual to view that person's professional background and conduct. At www.nasaa.org, you'll find your state securities regulator, through which you can access extensive employment, disciplinary and registration information about a broker or investment adviser. Check out commodities, futures or foreign exchange dealers at www.nfa.futures.org/basicnet.
4. Research the pitch. Use the SEC's Edgar database to research securities (www.sec.gov/edgar.shtml), or check them out with your state regulator.
-
5 Multibagger Stocks With Amazing Returns in 2025multibagger stocks As the term suggests, multibagger stocks multiply your money – gains of 1,200%, for example. Here's where to look for that kind of performance this year.
-
Investing Freebies: Perks You Get for Owning These StocksWhile the biggest investing returns come over the long term, these companies offer instant gratification for investors with several freebies and perks.
-
Mutual Funds Are About to Get the ETF Treatment. Here's What It Means for InvestorsThe SEC is expected to decide soon whether mutual funds from dozens of providers can be offered as ETF share classes.
-
What Tariffs Mean for Your Sector ExposureNew, higher and changing tariffs will ripple through the economy and into share prices for many quarters to come.
-
How to Invest for a Fall Interest Rate Cut by the FedA lot can happen between now and then, but the probability the Fed cuts interest rates in September is back above 80%.
-
Are Buffett and Berkshire About to Bail on Kraft Heinz Stock?Warren Buffett and Berkshire Hathaway own a lot of Kraft Heinz stock, so what happens when they decide to sell KHC?
-
How the Stock Market Performed in the First 6 Months of Trump's Second TermSix months after President Donald Trump's inauguration, take a look at how the stock market has performed.
-
Fed Leaves Rates Unchanged: What the Experts Are SayingFederal Reserve As widely expected, the Federal Open Market Committee took a 'wait-and-see' approach toward borrowing costs.
-
Fed Sees Fewer Rate Cuts in 2025: What the Experts Are Saying
Federal Reserve The Federal Reserve cut interest rates as expected, but the future path of borrowing costs became more opaque.
-
Fed Cuts Rates Again: What the Experts Are Saying
Federal Reserve The central bank continued to ease, but a new administration in Washington clouds the outlook for future policy moves.
