How to Protect Against Ponzi Fraud Schemes.

How to Protect Against Ponzi Fraud Schemes.

It’s not easy to protect against Ponzi and other fraud schemes despite what the media tells you, after they occur. But there are basics you can follow to reduce the odds of falling into the traps that produce frauds.

A major basic in avoiding investment frauds: Stick to plain vanilla investing vehicles from low-cost plain vanilla investment funds. They are the ones with the lowest-cost management fees who have been around for years.

Avoid Hotshots who consistently appear to pay off far better than the plain vanilla, low-cost investment funds. They get publicity from ignorant or complicit “friends” or from media public relations hypsters.

Another investment basic: Avoid money managers if you can. Why pay a fee of 1% to 2% of your assets? This will amount to about 20% or more of your earnings a year. In hedge funds you also pay a cut of 20% or more of earnings off the top, plus that percentage of management fee. And you will be in a gray area.

Only a tiny number of money managers or hedge funds prove to be Ponzi schemes, but you will sleep better by staying away from them all.

Hire an accountant, a CPA, and if you have considerable funds, you must have a tax attorney to advise you. Otherwise, avoid fraud by sticking to plain, low-management-cost funds.