When it comes to investing, the old saying, "If it sounds too good to be true, it probably is," is excellent advice. Yet statistics issued by the Federal Trade Commission (FTC) show that every year Americans lose more than a billion dollars to fraudulent investments.

How can you avoid becoming the victim of an investment scam? Common red flags are: promises of high returns on no-risk investments, requests for personal financial information and demands for immediate decisions.

Don't Believe Everything You Read on the Internet. Used properly, the Internet can be a valuable tool for researching legitimate investment opportunities. At the same time, the Internet has made it easy to create the illusion of a credible investment and to reach millions of potential victims with minimal cost and effort. Using a range of Internet tools, including mass emails, bulletin boards, online newsletters and chat rooms, a swindler can generate a significant and credible-sounding buzz around an investment.

Never Invest in Anything That You Don't Completely Understand. The right investment for you will make sense because you understand it and feel comfortable with the degree of risk involved. Do your homework before you invest.

Verify the Brokerage Firm's Listing. Under federal securities laws, many - but not all - public companies are required to register with the Securities and Exchange Commission (SEC) and file annual reports with audited financial statements. Before you invest with a company, check to see if it's registered in the SEC's EDGAR database (www.sec.gov/edgar.shtml).

Smaller companies do not have to register their securities or file reports on EDGAR. Instead, they may need to file a hard copy of the "offering circular" or Form D. If a company is not registered or has not filed a Form D with the SEC, another option is to check with your state securities regulator. You can visit the website of the North American Securities Administrators Association (www.nasaa.org) for more information about securities registered in your state.

Ask for a prospectus and other written information. But don't be sold by this information alone. Con artists often produce glossy brochures and a false prospectus in an attempt to boost their credibility. Be sure to thoroughly research and verify any information you receive.

Beware of Testimonials. Fraudulent companies sometimes go so far as to pay false references to claim that they have invested successfully with the company in question. Be on the lookout for Ponzi schemes, a type of illegal pyramid plot in which early investors are repaid with money from later investors who ultimately lose their money.

Never Make a Check for an Investment Payable to the Salesperson. Always make your payment to the investment company.

Don't Let Anyone Pressure You to "Act Today." Legitimate investments will be there tomorrow and the next day. Say "no" to any salesperson who pressures you to make an on-the-spot decision.

Report Fraud. Don't let embarrassment or fear keep you from reporting investment fraud. If you fall victim, keep in mind that you're not the only one to allow the promise of a big payoff get in the way of a sound investment decision. By alerting authorities, you can help others avoid the same trap.

Ask the Salesperson to Speak with Your CPA or Attorney. A legitimate broker wouldn't object to - and might even offer to - discuss an investment's merits with your CPA and other professional advisors. A salesperson that declines your offer may have something to hide.