10 Investment Traps to Avoid

Investors tired of paltry returns and battered portfolios may be tempted to look beyond traditional investments, such as stocks, bonds and mutual funds. But they should be wary of any products and practices that promise a path to riches. Here are the top 10 traps on the North American Securities Administrators Association's annual list released today.

See also: Be a better investor today.

1. Leveraged ETFs. Exchange-traded funds, which hold a basket of securities that track the performance of a specific stock index, bond index or other benchmark, aren't necessarily dangerous. But leveraged ETFs, which seek to double or triple there turns of an index, use complex maneuvers that don't benefit long-term investors. These funds can guarantee achieving their goals only on a daily basis. Investors who hold these ETFs longer than a day can lose big.

2. Foreign exchange trading schemes. This is a real money loser for most investors because promoters of foreign currency (forex) trading charge high commissions and some are merely running Ponzi schemes.

3. Gold and precious metals. Watch out for sellers who offer to retain “purchased” gold in a “secure vault” and promise to sell the gold for the investor when it gains in value. In many instances, the gold does not exist, according to NASAA. If you're interested in owning gold, you might consider investing in a gold fund.

4. Green schemes. Scammers try to lure people by offering opportunities to invest in new green technologies. They also try exploit the headlines with claims that investors can profit from environmental disasters, such as the Gulf of Mexico oil spill.
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