The common thread that binds these different types of fraud is the psychology behind the pitch.

We've all heard the timeless admonition "If it sounds too good to be true, it probably is"which is great advice, but the trick is figuring out when "good" becomes "too good." There's no bright line. Investment fraudsters make their living by making sure the deals they tout appear both good and true.

In a 2006 study funded by the FINRA Investor Education Foundation, the Consumer Fraud Research Group examined hundreds of undercover audiotapes of fraudsters pitching investments scam. The tapes revealed that fraudsters are masters of persuasion, tailoring their pitches to match the psychological profiles of their targets. They look for an Achilles heel by asking seemingly benign questions about your health, family, political views, hobbies or prior employers.

Once they know which buttons to push, they'll bombard you with a flurry of influence tactics, which can leave even the savviest person in a haze. Some of the most common tactics include:

Ÿ The "Phantom Riches" Tactic: Dangling the prospect of wealth, enticing you with something you want but can't have. For example, "These gas wells are guaranteed to produce $6,800 a month in income."

Ÿ The "Source Credibility" Tactic: Trying to build credibility by claiming to be with a reputable firm or to have a special credential or experience. For example, "Believe me, as a senior vice president of XYZ Firm, I would never sell an investment that doesn't produce."

Ÿ The "Social Consensus" Tactic: Leading you to believe that other savvy investors have already invested. For example, "This is how (famous name) got his start. I know it's a lot of money, but I'm in and so is my mom and half her church and it's worth every dime."

Ÿ The "Reciprocity" Tactic: Offering to do a small favor for you in return for a big favor. For example, "I'll give you a break on my commission if you buy now half off."

Ÿ The "Scarcity" Tactic": Creating a false sense of urgency by claiming limited supply. For example, "There are only two units left, so I'd sign today if I were you."

If these tactics look familiar, it's because legitimate marketers use them, too. However, when we are not prepared to resist them, these tactics can work subliminally. Little wonder that victims often say to regulators after they have been scammed, "I don't know what I was thinking" or "It really caught me off guard." That's why an important part of resisting these common persuasion tactics is to understand them before encountering them.

Source: AARP