It can happen to anyone: You make what you thought was a good investment, only to find out that it was a scam. Investment fraud can happen to anyone, and recovery can be a long road.

Prevention is the key to avoiding investment fraud. Here are three ways to prevent (and avoid) investment scams.

1. Research

Savvy investors know that it’s important to do their research before making an investment. Research should go beyond press releases, unsolicited emails and forum postings.

Take the time to learn about the company’s products or services. Educate yourself on the industry. Find out as much as you can about the company, its history and its reputation.

Also, check the SEC’s EDGAR filing system to find the company’s financial statements.

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2. Ask Questions

Be wary of unsolicited offers, and always ask questions before making an investment. Scammers count on their victims not investigating before investing.

Asking questions and doing research will help protect you from scams. Do more than just ask for more information and references.

The SEC provides information on which questions to ask, like:

  • How will this investment make money?
  • What can cause the investment to decrease or increase in value?
  • Is the investment product registered with my state securities agency or the SEC?
  • What are the total fees to buy, maintain and sell the investment?

Fraudsters won’t be able to provide legitimate answers to these questions.

3. Know the Red Flags

Knowing the red flags can also help protect you from becoming a victim of investment fraud. Red flags can include:

“Guaranteed” Returns

There is no such thing as a guaranteed return. Every investment comes with some degree of risk, and the level of risk is reflected in the rate of return you can expect to see. Safe investments typically come with a lower return.

A high return is usually an indication of a high risk, or a potential total loss. Scammers typically try to convince investors that the high returns are “guaranteed.” The goal is to get you thinking about how your life will change once you’re rich. Don’t fall for it.

If It Sounds Too Good to be True, It Probably Is

When something sounds too good to be true, it usually is. Compare the promised yields with the current returns on well-known stock indexes. Investment opportunities that claim to offer substantially higher returns could be very risky.

High risk may mean that you lose your entire investment. Claims of investments being a “breakout stock pick” or having a “huge upside and almost no risk” are signs of outright fraud or extreme risk.

The “Everyone is Buying It” Line

Be wary of pitches that stress how “everyone is investing” and you should, too. If the main premise of the pitch is to sell you on how everyone else is investing in the product, take that as a red flag and run the other way.

Think about whether you’re truly interested in the product and do your research. Don’t let FOMO (fear of missing out) let you fall victim to a scam.

Pressure to Send Money Immediately

Anytime anyone pressures you to send money right away, you should take that as a serious red flag. It’s an even a bigger concern when an investment is involved.

Scammers will try to convince you that this is a once-in-a-lifetime opportunity and that you need to act now. Resist the pressure to give money before investigating the product.

What to Do If You’re the Victim of Investment Fraud

What should you do if you’re the victim of investment fraud?

Start by reporting the incident and getting in touch with a lawyer that specializes in investment fraud.

“When you trust a stockbroker or financial advisor with your investments, you are entrusting that advisor with your future financial security,” says Meyer Wilson. “When that trust is broken and the broker commits fraud, mismanages your investments or engages in unethical or illegal conduct, consult an experienced investment fraud attorney.”

A lawyer will help you seek compensation for your losses and walk you through the process of reporting the scam. Reporting the scam will help prevent others from falling for the same scheme and losing their hard-earned money.