Red flag alert: don't invest in a Ponzi scheme

Mistakes are an inevitable part of investing. The key is to learn from them and avoid making the same missteps again.

- Matthew Matthee

However, some errors—like falling victim to fraud, scams, or Ponzi schemes—can be catastrophic, leaving no path for recovery and wiping out a lifetime of savings.

Jason Zweig recently shared a tragic example: investors who entrusted their entire retirement savings to what appeared to be a promising yield strategy, only to discover it was a scam.

Here's what happened:

Through a friend, he heard about a firm called Yield Wealth and the 'guaranteed' 15.25% return it was offering to investors.

'I figured this is an amazing opportunity, and I'll be set for life,' recalls Whitacre, 60. Whitacre withdrew his entire 401(k) from Fidelity—$763,094.21—and rolled it over into an individual retirement account with Yield, which was affiliated with a firm called Next Level Holdings.