Investing scams have been around for a long time and, thanks to the Internet, small time scam-artists have access to a larger potential market than ever. In fact, the North American Securities Administrators Association (the association for State securities agencies in the U.S. and Canada) estimates that securities scams are costing investors $40 billion dollars annually. Scottrade helps keep you protected with online security features and by ensuring the news and research they provide is from reliable sources, but it's important for you to do your part by carefully researching your investment decisions.

Regardless of the market a scammer is targeting, they almost always share one or more very common red flags. These warning signs are relatively easy to spot, and doing your own research is easier than you think. This article will help you understand the warnings signs most of these scams share and what you can do to investigate an investment opportunity before you make a decision.

Scammers usually prey on the desire of investors to achieve unrealistic gains or to avoid risk or both. These scams can take the shape of a Ponzi scheme, or they can be a trading system or newsletter that is guaranteed to produce extraordinary returns for short-term traders who are willing to subscribe to a large monthly payment.

Regardless of the form investing scams take, they usually share some common attributes. I have outlined the four most common features most scams share.

1. Promises of Large, Low-Risk Profits
Although the returns promised vary from scammer to scammer, they almost always indicate that those profits will be large, regular and smooth.

History has shown us that markets that offer large potential returns are irregular. They are difficult to predict, and large losses are not only possible but probable at some point in your investing experience. The riskier the asset is, the more volatile those returns may be. Assets that are considered "safer" and offer smoother returns generally offer very small potential profits.

2. Using Techniques or Information That is Only Available to Wall-Street Insiders
I call this the "What the Wall Street fat cats don't want you to know" pitch. A scammer will try to convince you that what they know about investing is not available to the general public, and therefore you could never learn it or find it on your own.

The reality is, legitimate finance professionals working on Wall Street are actually very interested in selling their strategies to you as services and management. It doesn't take much effort to find out for yourself what institutional "elites" are doing. The financial markets are surprisingly transparent, but it does take time, effort and education on your part to understand how the financial world works and what is appropriate for you as an investor.

3. The Scammer Has "Special Credentials"
Scammers will suggest that only they can unveil the mystical signals of the stock or options markets. This is an example of the "scarcity" pitch. Many scammers will exaggerate their credentials or experience with degrees, awards or fake work experience that sounds remarkably impressive considering the inferior Web site, junk-mail piece or seminar they are offering.

Most investing information is available online for free for anyone willing to put in some effort. There are also vast selections of books on just about every investing strategy possible that cost very little. Scottrade also offers live seminars in our branch offices and educational materials on the Knowledge Center, all of which provide reliable, factual information. Before you invest, make sure you can check out a service provider's "credentials" yourself.

4. Limited Time Offers
If a scammer can convince you that what they have to offer is only available for a limited time, then they can create a sense of urgency. If you feel like you are missing a once-in-a-lifetime chance, then you are more likely to make a hasty decision. I have seen several scammers with the same limited time offer for the "first 100 buyers" since 2004. That offer is "limited" only in the cosmic sense.

The logical question to ask at this point is, why would an investing expert limit access to their services and therefore limit their income potential? The financial services world is competitive and acquiring new clients is difficult and expensive. It will be very rare that an investment expert will limit their clientele without a legitimate reason.

Do Your Own Due Diligence
The most common investment scams take the form of investment newsletters or stock-picking services. The authors of these publications promise large returns but are probably not telling you everything. You should do your own research. Here are just a few things you can do to protect yourself from becoming a victim of this kind of scam.

• Ask for references. Can this author or stock picker provide references that you can speak with? If their answer is no, so is yours.
• Does the newsletter have a long-term track record that can be independently verified? This is usually not likely, as extraordinary returns are inherently short-term in nature. You are probably better off doing your own stock research. You can search for stocks that match your investment criteria through the Scottrade Online Stock Screener within the Quotes & Research tab in your Scottrade account.

When you are doing your own research, you can be better informed about your decisions and the possible risks and rewards. Although research and due-diligence take time, being fully informed and watching for the red flags above to protect yourself from an investment scam can "pay dividends" in the long run.