Simple rules that work for me are:
1. IF someone calls on the phone, don't talk to them until they mail you the information with a letter explaining the investment. You then read the information and call them back if you wish to get more information or invest. NEVER talk to them if they call you back.
2. ALWAYS ask, "if I buy this today, how much can I sell it for tomorrow and how much of my original money will I get back if the investment value doesn't change?" Get the answer in writing on company stationary. I've heard people can buy heating oil futures and get back something like 50% of their original investment if they sell the next day meaning commissions are something like 25% for buying and another 25% for selling.
3. IF the return sounds too good to be true, IT IS!
4. Ask the salesman, "if this is such a good investment, how much do you own and why are you not getting a loan from the bank at 8% interest to buy more rather than offering to let me buy?" Think about it. If you had a goose that laid a golden egg every day, would you sell the goose? I'd only sell the goose if the money I got for it were worth more than all future golden eggs (discounted for the time value of money, of course).
Time shares are my favorite joke investment. IF they had good resale value, do you think they would have to give you free vacations to consider buying them?
In summary, pay off credit card debt before investing. Next, fund your 401K and IRA accounts. Once these are fully funded and if you have additional income available, then consider buying index mutual funds and other investments with the help of a "fee only planner" where the only charge you pay the planner is for his or her time. RUN if the planner gets a commission for anything they recommend and demand your money back if they suggest a load mutual fund. Lastly, ask the salesperson, "do you own this investment and why are you selling it to me?"
