Here are some basic checks to avoid getting into a ponzi scheme. I would add having an asset allocation chart and sticking to it.
A few basic checks can go a long way. Most important, know where your money goes when you hand it over. Whoever manages your portfolio should use an independent financial institution, known as a custodian, to hold your assets. Get the name of the firm and its contact information. Instead of relying on your adviser’s word, check out the custodian yourself. And if your adviser is producing his or her own statements, as Madoff apparently was, watch out. “The presence of a custodian ensures that money from new investors can’t be used to pay off old investors,” says John Coffee, a financial expert and law professor at Columbia Law School.
via Washington Post
You’ll also enjoy my article Asset Allocation beats the market every time.
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