(MONEY Magazine) – Anyone old enough to read this column knows better, I hope, than to trust all the free financial advice floating around online. There are no bouncers at the door to cyberspace, and online investment conversation includes contributions from a fair share of know-nothings and blowhards, not to mention hustlers and con artists. In October, for example, the Securities and Exchange Commission halted an alleged Ponzi scheme being run by two Reno companies that solicited $3.5 million from 132 individuals nationwide over the Internet as well as through investment seminars, mass mailings and telephone cold calls. According to the SEC, investors were bilked into buying ATM machines for $23,950 apiece on the promise that usage fees on the ATMs would generate annual returns of 17.5%.

So you clearly need to bring a healthy dollop of skepticism with you when you log on. But if you reject online conversation altogether, you'll miss as much good stuff as bad. I think of investment forums, chat groups, bulletin boards and similar sites as the watercoolers of the digital age, places where the knowledgeable and the novice alike can gather to swap insights that can make them smarter managers of their own money. For example, I like the America Online site run by mutual fund tracking firm Morningstar (keyword: MORNINGSTAR) because its chat sessions often include Morningstar fund analysts. And I enjoy the Investors' Forum site on CompuServe (GO INVFORUM) because its message center attracts sophisticated investors who exchange some truly helpful tips.

[Also among the useful sites online--in our opinion, anyway--are the live conversations that MONEY sponsors with financial experts on CompuServe (GO MONEY). For this month's schedule of online conferences, see the contents page. --Editors]

So how can you capitalize on the worthwhile information in cyberspace without falling prey to scams or flawed advice? Here are three tips.

--Get to know your online neighbors. The widespread use of pseudonyms and screen names in cyberspace makes it tough to judge the credibility and credentials of many of the sources that are found online. The putative securities analyst touting a tiny high-tech firm as the next Microsoft may in reality be an unscrupulous broker talking up the stock so that he can dump his shares at an inflated price. To evaluate the quality of the advice, hang out for a week or so just reading the message traffic at a particular bulletin board or chat forum. You'll quickly get a feel for which participants you can trust and which you ought to ignore. One reason I prefer the forums on the three major commercial services--CompuServe, Prodigy and AOL--over the Internet is that the sponsors keep tabs on their site. Bank Rate Monitor, for example, has several staffers assigned to oversee the message boards and chat sessions on its MoneyWhiz site on AOL. These supervisors do not check the accuracy of the statistics and advice, but they do weed out overt sales pitches and delete postings that are off the point.

I generally avoid the Wild West of message boards--the unmonitored Internet Usenet newsgroups such as misc.invest.stocks, alt.invest.pennystocks, and misc.invest.futures--since these sites act more as breeding grounds for dubious investment pitches than as forums for intelligent discussion.

--Never invest solely on advice you pick up online. You should always do a thorough analysis with research from independent sources before putting money into any investment. If someone in a discussion group recommends an aggressive growth fund that has been tearing up the performance charts lately, check out the fund's risk profile as well as its investing strategy at a site such as NETworth (http://www.networth.galt .com), which provides data from Chicago fund rating firm Morningstar on more than 7,500 funds. (For the names of other sites for checking out stocks, funds and other investments, see "Surfing the Net to Make More Money" in MONEY's November 1996 issue.)

--Check in periodically at these sites that monitor online hustles. The National Fraud Information Center (http://www.fraud.org) issues reports each weekday about financial shenanigans on the Internet and online services. The SEC (http://www.sec.gov) and the National Association of Securities Dealers (http://www.nasdr.com) also maintain Websites that warn investors about the latest in online chicanery. You can also report incidents of fraud or suspicious activity online at any of these three sites. I recommend surfing over to one or more of these sites every week or so, just so you'll be able to keep abreast of the latest come-ons. After all, if you know what the scam du jour is, you are less likely to go for it when it's served to you.

Author of Personal Finance for Dummies (IDG Books, $16.99), Eric Tyson is a financial counselor who teaches personal finance at the University of California-Berkeley.