Tips To Minimize Investment Fraud

December 30 - South Africans and the rest of the world watched in horror as thousands of people reportedly fell victim to what is considered the largest Ponzi scheme in US history. Masterminded by Bernard Madoff, the story brought to everyone's attention the need to remain vigilant when investing money to ensure a satisfactory retirement.

Following what is now known as the Madoff Affair, industry experts are rushing to advise investors how to avoid investment fraud. The bottom line is that investors should spend time and effort doing their homework before singing on the dotted line, and they should - first and foremost - trust themselves.

The first tip offered to potential investors in order to avoid investment fraud is to find themselves an excellent money manager, based on that person's track record, industry reputation and capabilities. In this case, it is best to look towards money managers that are highly regulated (such as banks or insurance companies with investment management divisions) as these companies are usually very wary of ruining their industry reputation. A significant number of steps are taken to reduce internal fraud in order to keep those reputations flawless.

Secondly, investors are warned to conduct their own independent due diligence. No matter which company, with whatever type of reputation, is doing the investing, it is still up to the investor to check and double check before committing to anything long term.

One piece of advice that is always followed by experienced investors is to diversify investments. Instead of putting all one's money into one proverbial egg basket, it is wiser to spread those risks so as to avoid losing everything if that basket falls....

Finally, investors are urged to ask questions - and lots of them - before they are absolutely sure that they have received clear, concise answers. Some that spring to mind include exactly how the money is invested, the level of risk in relation to expected return and where the actual returns are coming from.