How can you tell if an investment pitch is a scam? Here are 10 tell-all questions:

1) Is he promising "Low risk and high gain"? Click your heels three times and repeat to yourself, "There is no such thing as a free lunch. There is no such thing as a free lunch." It is a fundamental fact of investing that the higher potential return, the higher the risk that you may never see that return.

2) Will it be "too late" if you don't act now? Why will it be too late? Any legitimate investment will be there tomorrow and next week and next year. NEVER be pressured into investing in something because tomorrow maybe too late. Even if it turns out that the stock doubles tomorrow, you should feel better knowing that you were cautious and responsible with your money. Besides, if he's giving you an "inside hot tip," you've got a lot more to worry about than whether you should act quickly or not. (See question 10.)

3) Is he predicting the future? "It will double in 3 months." Oh, yeah? And where did he buy his crystal ball? Not only is this a ridiculous promise for a broker to make, it's illegal. Report this infraction to his sales manager (his next caller might not be as smart as you). And if the matter doesn't get satisfactory attention from his supervisor, contact the National Association of Securities Dealers.

4) What is the background of the caller and his employer? Any individual selling securities to the public must pass a background check, a series of examinations, and be registered with the NASD. Likewise, his employer must also be known to the NASD and the SEC. If you would like to check up on the background of your broker or his brokerage firm, use the NASD's information request page. But remember, even if they don't have any complaints against them, it doesn't necessarily mean they can be trusted. You could be "Scamee #1."

5) Has he "guaranteed" anything? It is not only impossible to guarantee any rate of performance, it will get your broker tossed out of the industry.

6) Has he offered to reimburse you for any losses you might incur? One more no-no that your broker isn't supposed to promise you. This one can get him tossed out too.

7) Are you one of the "lucky few who have been chosen" to invest in XYZ company? While this may make you feel special, don't fall for it. You just happen to be one of the lucky few who answered the phone.

8) Has the salesperson personally invested in the company himself? What difference does it make that he made a bad investment too? Do you trust him to call you when he decides that it's not a good investment anymore? And will he get out first?

9) Is he unwilling to supply a prospectus or financial statements? If it's a new company that is just going public (an IPO, which stands for Initial Public Offering) you must be given a prospectus. It is long and written in legalese and printed on very thin paper that you can barely read. Read it anyway. Especially the part called "Risks to Investors." If the company has been around a while, ask to see the financial statements for the past two years. If you need help understanding them, check out our collection of articles in the Fool's School on How to Value Stocks.

10) Is his information "a hot inside tip." This is especially important to pay attention to -- not because it could make you rich, but because it could land YOU in jail. It is illegal to pass on or act on material that is inside information. Anyone telling you otherwise is a liar.

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