If viewed as an industry, fraud is pretty resilient. It does well when the economy is up and people have speculative cash combined with big, optimistic dreams. It also does well when the economy is low and people are trying desperately to recoup losses, regain retirement nest eggs and generally stay afloat. Fraud cuts investors deep at the best of times, but with the current economy pushing baby boomers to the edge of desperate measures to assure retirement, the damage is potentially on a larger scale. The key to avoiding the growing legion of scams out there is to temper your desperate hopes with a healthy dose of sober second thought and careful research.

A Little Knowledge Is a Dangerous Thing
It's unfair to see victims of fraud as thoughtless people caught up by modern snake oil salesman. Many people who get caught by investment frauds are financially capable. At the very least, they have the habits that have allowed them to accumulate the wealth that makes them a target for people selling genuine investments as well as fraudulent ones.

In many cases, the people caught in frauds are sophisticated investors – Bernie Madoff among others have beguiled professionals right along with regular folks – and the failure is not a lack of knowledge but a lapse in due diligence. Afterwards, almost everyone hurt in a fraud realizes they should have known better, but they get caught up in the same way as investors in a bubble. (Identity thieves are using home equity lines of credit to commit their crimes. Find out more in Protect Yourself From HELOC Fraud.)

Count to Three
Hindsight is pretty useless when it comes to your portfolio, so there are three basic steps that can help you avoid getting caught up in an investment scam. They take time and, much like counting to ten when you're angry, can help dampen some of the emotion that can cloud an investors head when phrases like "iron-clad, double-digit returns" are being thrown about.

1) Research the Company and the People Involved.
You can find out a lot now by simply running an internet search, although an internet search isn't enough in itself. People often build up to big frauds and have a paper trail of their previous attempts. You might want to know if the guy selling you condos in Barbados has been the subject of any investigations or angry complaints. Asking for credentials, checking them, and looking up names in regulatory filings can uncover a host of interesting facts, including whether or not the person wanting to sell you investments is in anyway certified. Being certified isn't a badge of virtue, but a lack of any formal training can be a red flag.

2) Dig Into the Numbers
Revolutionary forms of investing that are so complex, yet so sure in yielding results should be viewed skeptically. Ask for a prospectus or explanation of any such investment in writing and work through it until you understand how the profits are made. If you don't, and no one around you does, then you have another red flag. Most highly complex investments aren't sold door-to-door, so don't underestimate your own smarts. When you don't understand where the money comes from, the chances are good that the person selling the investment doesn't either.

3) Delay
One of the easiest ways to avoid fraud is to delay. High-pressure sales tactics are at the heart of most frauds, as if this superb investment opportunity that is so solid that you'll be drinking daiquiris in a New York high-rise by years end will paradoxically vanish in moments. When someone is insistent that you don't have time to think about things, it's usually because they're afraid of what you'll figure out. People who are confident that they're selling a great investment should be happy to explain it in detail rather than imposing time deadlines and talking about you "missing the chance of a lifetime."

Scammers generally go for the easy and quick money to maximize their profits, consequently giving up fast in the face of delaying. If someone tells you they'll be sold out in a week, then wish him the best and let him go on to people who are less cautious with their money. (These fraudsters were the first to commit fraud, participate in insider trading and manipulate stock. Read more in The Pioneers Of Financial Fraud.)

A Truly Great Investment
The best investments are the ones you feel completely comfortable holding, whether land, stock, precious gems or anything else. Part of being comfortable is knowing the facts behind an investment and understanding the economic machinery that makes it tick. Taking your time and discovering all you can is the surest way to protect against fraud and build an investment portfolio you can truly believe in.