Protect Yourself in Post-Madoff Investing World

Sure, hindsight is 20/20. But complacency and greed are the enemies of investment success. No one is smarter than the market every single moment. That is, no one except scam artists.

It may not be easy to prove your doubts. But just because you can't "put your finger" on the worry, doesn't mean you should get involved. Yet that's just what so many people do: ignore their own doubts and figure they're just not "smart enough" to understand this great deal. In fact, that's what con artists rely upon.

And by the time the fraud unravels, there may be little in the way of assets to recover, as the Madoff investors are learning to their dismay. Securities Investor Protection Corporation may cover some losses (up to $500,000) because of theft from brokerage accounts. But that SIPC insurance may not apply to all the Madoff accounts. And certainly billions of dollars are down the drain.

Fraud, Greed or 'Unsuitability'?

Sometimes investment losses aren't produced by fraud, but they are accelerated by both greed and ignorance. People want to believe they can outperform the market. And some newsletter writers, brokers and advisers are only too happy to make money off that desire. Then who is to blame?

Chicago attorney Andrew Stoltmann specializes in representing investors in lawsuits. He notes that investors who haven't actually been the victims of fraud might also have legitimate claims these days. Older investors who have lost a significant portion their assets might be able to claim their advisers sold them funds or investments that were not "suitable" for their situation.