10 Investment Traps to Avoid

5. Oil & gas schemes. Although investments offering profit participation in oil and gas ventures can be legitimate, NASAA warns that revenues can be absorbed by high sales commissions and dubious expenses. Some promoters structure these ventures to avoid regulation and deprive investors of protections. A better option: pipeline master limited partnerships, which own and operate oil and gas pipelines.

6. Affinity groups. Scam artists target members of religious, ethnic, professional and other affinity groups by using the group's name to promote an investment and asking potential investors to trust the legitimacy of it. NASAA encourages people to always seek further information from an independent source.

7. Undisclosed conflicts of interest. Some securities sales people don't disclose their financial incentives (such as big commissions) for selling certain products that may be risky or inappropriate for an investor. Always ask the sales person how he or she is compensated.

8. Private or special deals. There are legitimate issuers of private deals -- opportunities for a small number of investors to invest in businesses that are trying to raise capital. But there are plenty of fraudulent ones, too.

9. “Off the books” deals. These are investments brokers offer on the side rather than through their employers. Not only are they risky because they're being sold without oversight from the broker's employer, but also they may be illegal.

10. Unsolicited online pitches. Just because you've seen an investment promoted on Facebook, Twitter or any other social media site doesn't mean it's legitimate. Con artists use these sites to promote fraudulent offshore investments with high-yield, tax-free returns or to spread misinformation about a stock to inflate its value before selling in a "pump and dump" scheme.

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