Say somebody at your church or place of work tells you about these "can't miss" investment opportunities:
One is a new fuel-cell technology to allow cars to run on tap water. Another is an options-trading system guaranteed to at least double your money. The third is a company with a new laser that kills lung-cancer cells in smokers.
Your best bet? Steer clear and report the matter to securities regulators. Cockamamie schemes like these are typical of investment scams sometimes promoted by people you trust, who may have been duped themselves.
"Remember: Investigate before you invest, no matter who is selling," said Joseph Borg, president of the North American Securities Administrators Association, an organization of state regulators. "An investment that sounds too good to be true usually is."
Yet 43 percent of American investors in a recent survey said they would likely put their money in at least one of these three "opportunities."
"The fact that this number is so high among investors who ought to know better is quite revealing," said the MoneyTrack/IPT Investing Secrets Survey, a study conducted by Opinion Research Corp. for the MoneyTrack public television series and the not-for-profit Investor Protection Trust (www.investorprotection.org).
Among 1,255 Americans 18 and over who said they decide on household investments, a measly 1 percent appears to understand or put to use all eight investment basics covered in the survey. They are:
How compound interest works.
The meaning of diversification. Only 39 percent know that it involves balancing risk and return.
Having a comprehensive plan to determine how much they need to save for retirement.
Avoiding over-reliance on Social Security.
Understanding that a sudden windfall, such as an inheritance, insurance settlement or winning the lottery, is not the most likely way for a young person to build a large nest egg.
Understanding that stocks have delivered greater returns over the past 20 years than savings accounts or certificates of deposit.
Checking out financial advisers.
Two-thirds of investors who use a broker, investment adviser or financial planner have not checked credentials or disciplinary records with their state securities regulators, the Securities and Exchange Commission or NASD, formerly the National Association of Securities Dealers.
Knowing how to avoid scams. The "new fuel-cell technology" and "options trading system" are actual swindles featured on this season's MoneyTrack.
"We deliberately kept the questions on a simple level to get a full and fair sense of what U.S. investors know and do," said Pam Krueger, co-host and executive producer of the PBS series (www.moneytrack.org).
Humberto Cruz writes for Tribune Media Services.