Warnings on Financial Products

After a thoroughly enjoyable discussion with the National Capital Financial Bloggers (and some honored added guests), I feel reinvigorated. The discussions around the table were about many topics and my guess is I will be writing about a few of them over the next few days, but one excellent topic came up from a representative from Horizen ETFs who was visiting with our highly regarded group (why I was included in this group is again a mystery).

The observation made was that some investment and savings vehicles might need to have better warning labels on them, and in fact Rob Carrick (an honored special guest) pointed out that if you put a strong warning sign on an investment, some folks might just buy it because of the warning (I believe you would call that the “Cigarette warning syndrome”).

With this in mind, let me give you a possible scenario:

If you were on your standard On Line Broker web site and you started a new BUY transaction, and you selected say BCMETF.XXX (hopefully a fictitious ID for the Big Cajun Man Exchange Traded Fund (the Nitroglycerin and Blasting Caps version of the fund)), and the following warning icon came up on your screen, when you attempted to finalize your transaction:

Danger sign

Dangerous Investments Warnings

My question would be, having seen this warning come up on your screen (hopefully with a loud klaxon noise in the background), what would you do?

  1. Would you turn off your computer, and run and hide in your bed with the covers over your head? (which I think is the correct answer)
  2. Get all macho and say, “I can handle it!”, and plow on ahead?  (the wrong answer IMHO)
  3. Go back and read the prospectus on the savings vehicle one more time to be sure?  (an OK way to deal with it, because at least you go in with your eyes open)

Please reply in the comments, I am very curious, since I might try to start a side business publishing financial warning signs.

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{ 3 comments… add one }

  • Paul G April 27, 2012, 12:34 PM

    I’d go and check up the prospectus, and see whether or not there are articles or blog entries about this ETF.

    Then again, I’m very cautious: I’m still too chicken to buy HXT.

    Reply
  • Beardie April 26, 2012, 7:31 PM

    Warning. Side-effects of investing in this ETF may include anxiety, insomnia, premature hair loss, and frequent urination. Consult a financial advisor if symptoms continue.

    Reply
    • bigcajunman April 27, 2012, 4:41 AM

      NOW we are talking!!! That is an excellent addition to that sign, or maybe as a voice over when the Claxon noise finishes, good take!

      Reply

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