Unlike those involved in the huge, fraudulent schemes that hit the media, the everyday American working for a typical company is less likely to lose everything in one shot. Even a cursory reading of investment guides can prevent catastrophic errors.
The guidelines are simple: Put only 5 to 10 percent of your money into the riskiest investments. Don't invest in financial schemes too complicated to understand. Don't trust returns that sound too good to be true. And don't take the word of a single source on the potential return for any single investment [source: Tyson].
"You've got to do your research," says Eric Tyson, author of "Investing for Dummies" and "Personal Finance for Dummies." "If you only listen to talk radio recommendations without independent verification, you can get into trouble."
Tyson has met people who have paid thousands of dollars for seminars on how to get rich on real estate. They could have saved all that money, he says, if they had paid for a couple of hours with a certified financial planner.
Before sinking a significant amount of money into any investment, be sure to talk to a variety of experts, not just one. To be safe, stick to the 5 to 10 percent rule, and it's highly unlikely that just one bad investment will destroy your entire portfolio.
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- Calkins, Laurel. "Enron Fraud Trial Ends in 5 Convictions." The Washington Post. Nov. 4, 2004. (Oct. 20, 2010) http://www.washingtonpost.com/wp-dyn/articles/A23034-2004Nov3.html
- Tyson, Eric. "Investing for Dummies." Sept. 2008. (Oct. 20, 2010) http://www.erictyson.com/categories/20080612
- Zambito, Thomas and Greg B. Smith. "Feds say Bernard Madoff's $50 billion Ponzi scheme was worst ever." NYDailyNews.com. Dec. 13, 2008. (Oct. 20, 2010) http://www.nydailynews.com/news/ny_crime/2008/12/13/2008-12-13_feds_say_bernard_madoffs_50_billion_ponz.html