'Too good to be true' newspaper ad may be an attempted swindle

''I'm constantly amazed at how many people will send in money to someone they've never heard of, for investments they've never looked into.''

In this case the amazement comes from James Carabina, legal counsel of the securities division of the Massachusetts Secretary of State. But similar expressions of concern can be heard from a variety of people who have watched thousands of consumers respond -- sometimes with $10,000 or more -- to investment advertisements in the business pages of their newspapers.

These ads promise fantastic returns on investments such as gold and silver coins, ''limited edition'' collectibles, contracts for home-heating oil, ''gasoline futures,'' limited partnerships in real estate, or trust deeds (a form of mortgage contract).

Most ads are placed by legitimate companies and honest individuals who have a proven record of performance. They do not need to make outlandish claims to attract investors.

But in many cases, ads are placed by people making claims they can almost never live up to -- or have no intention of living up to. Sometimes they promise ''40 to 80 percent per annum,'' or they claim to be able to ''double your money'' in a year or less. Often these ads are placed by convicted swindlers who have used aliases or have not disclosed their names on the documents submitted to the newspaper.

A recent Wall Street Journal article said newspapers have had varying degrees of success in identifying and eliminating ads that are either totally fraudlent or simply make exaggerated claims. So it is up to the reader to check the advertisers and their claims before writing a check.

''The first line of consumer protection is the consumer himself,'' said Thomas Ziebarth of the consumer protection division at the United States Postal Service.

Mr. Ziebarth suggests checking first with a local broker who deals in the type of investment being advertised. A coin dealer, for instance, could point out that a set of coins being advertised could be obtained for much less from a dealer or broker. And often the set of coins would be more complete.

In a specific case of this type the Postal Service filed a complaint against a firm advertising a ''complete set'' of 21 Eisenhower-dollar coins for $507. In the first place, Mr. Ziebarth said, a complete series would include 30 coins. In the second place, those 30 coins would normally cost about half as much. Any reputable coin dealer could have pointed this out to a consumer, he said.

A person considering responding to an ad for investments in real estate, stocks, futures, oil and gas leases, or similar deals should also consider checking them out with a broker or two in their area, affirms Richard Donahue of the US Federal Trade Commission's fraud unit. ''Even if it costs a couple of percentage points for a commission, it can save a lot of money to keep someone away from a bad deal,'' he says.

In many cases local offices of the Better Business Bureau (BBB) have compiled a list of complaints about some of the misleading ads. The BBB's national office does not yet have a computerized file of complaints available to its local branches (though it is developing such a system), so it can not yet spot the many people moving quickly from town to town as they place ads. Still, a phone call to the local BBB doesn't take long, and may prove valuable.

On the state level a call or letter to a consumer protection agency may also prevent problems. These units are often part of the state attorney general's or governor's office.

Many states also have agencies to keep track of securities and commodities trading. In most cases any firm that is incorporated has to file with the state the names of all its officers, even those not listed on forms filed with a newspaper's advertising department. These names are usually kept by the secretary of state, and can help consumers determine whether any of the officers have criminal records.

Flexibility of CD investments

I currently have several certificates of deposit (CDs). I feel they are the safest investments for me at this time. My only problem is that they are 21/2 -year CDs. In another year, I will be going to college and will need good security and growth for my money. So I am wondering if these CDs are my most practical choice. -R L.

When you are in college, you will probably want to be able to get your money fairly easily for things like tuition payments or room and board. Many of these payments have to be made every semester. So you will want your money to be more ''liquid.'' This means you have quick and easy access to it. If your CDs are scheduled to mature between now and the time you go to college, consider switching them to six-month CDs or money-market funds. However, if the 21/2-year CDs have not matured, there will be a penalty of six months interest for early withdrawl. In that case, you will have to look at each CD and decide if the money lost by cashing them in early is too much. On the other hand, even with the penalty, you may be losing more by not cashing in old, lower-interest CDs early and putting the money in investments earning higher current yields.

If you would like a financial question considered for publication in this column, please send it to Moneywise, The Christian Science Monitor, One Norway Street, Boston, Mass. 02115. No personal replies can be given by mail or phone. References to investments are not an endorsement or recommendation by this newspaper.