I will come straight to the points on the strategies you can follow to safeguard your hard earned money from another investment scam.

1. Avoid hedge funds

These funds have way more leeway in the way they use your hard earned money without any transparency of what's being done with your money. General mutual funds have stricter rules from SEC that they need to follow and disclose everything to the investors but Hedge funds play with different rules.

2. Never fall for guaranteed return

If one thing is guaranteed in the stock market then it is uncertainty. If anyone approaches you and tells you that she can guarantee x% of return on your investment then you should stay clear of that investment adviser.

3. Beware of steady rate of return

Madoff's hedge fund never had a down year and it was a perfect 45 degree straight line. Any such funds touting extraordinary return should raise an alarm in your mind.

4. Trust your low cost index investment

We are all humans and nothing can show it more obviously than the recent economic crisis caused by the so-called geniuses of the financial worlds. Add to that rock star hedge fund manager Madoff and you would wonder whom you can trust. Simple answer is no one but yourself. Be a common investor and get a common market return by investing in the low cost index fund like Vanguard Total Stock Market(VTSMX). At least you are guaranteed to make whatever overall market makes.

5. Don't try to beat the market

Owning complete market has the best return to risk ratio. Invest in index fund and have a peace of mind that you will do as well as the market does and you won't be a victim to another Madoff's Ponzi scheme.

BTW, Ponzi scheme is named after a swindler called Charles Ponzi who created a pyramid like scam to pay old investors with the money obtained from the new investors without any money went into buying any share, bonds or other forms of assets. More on Ponzi...