Investment Candy From Strangers

Probably most of us view ourselves as too savvy to be taken advantage of by a scam. But NASD, a private-sector organization that regulates financial services, uncovered surprising results when it set out to study who the victims of investment scams really were. New NASD chief executive Mary L. Schapiro has made preventing fraud one of her top goals.

It turned out that the victims of investment scams were more likely to be married men and higher earners than were non-victims. They also were more likely to be college graduates, to score higher in financial literacy and to rely on their own experience and knowledge when making investment decisions. Investors who think of themselves as the smart money may be more vulnerable than they thought.

"Investment fraud victims tend to be Type A" personalities, said Anthony Pratkanis, a psychology professor at the University of California at Santa Cruz, who helped produce the study by the NASD Investor Education Foundation. "The con criminal picks up on that: 'You want to be in charge? I'll put you in charge in such a way as to sell you the investment.' "

Beyond out-and-out fraud, investors face the more basic risk of being sold unsuitable investment products. For instance, if there's a chance you need your money soon, a product with steep withdrawal penalties may not be right. Brokers and financial advisers are required to know enough about their clients to make sure investments fit their needs and their assets.

"I think sometimes people have a hard time identifying when they have been scammed," said the SEC's Richards. "A bad investment can be a fraud, too," she said.

One of the best protections against either a con or an unsuitable investment is an investor's willingness to ask tough questions. The SEC has a Web site ( http://www.sec.gov/investor/pubs/askquestions.htm ) that suggests some excellent questions to ask.

"It's your money," said Schapiro. "If you don't understand it, don't buy it."

And if you get a special offer in a hot pink envelope: Toss it.

Have you had to sort out a parent's finances? What were the lessons you learned? E-mailhamiltonm@washpost.comif you are willing to talk on the record about your experiences.