We have a little toaster oven in our kitchen. Right on the glass door the following warning is painted:
“IF CONTENTS IGNITE, KEEP DOOR CLOSED AND UNPLUG OVEN.”
I like that. Right upfront, it warns you about the worst-case scenario and gives you sound advice about how to react in case such an event occurs.
Everyday when I use the toaster oven to make breakfast, I see that warning. Should my bagel ever catch fire, I’ll know immediately how to respond. 
Warnings on Credit Cards
What if credit cards came with warnings like that? What if (preferably somewhere on the card itself) a mandatory warning was included:
Warning: Do not purchase something if you could not buy it with cash. Doing so could result in a downward spiral of debt accumulation.
Or perhaps monthly credit card statements should come with the following disclosure:
Warning: Not paying off your balance in full will result in the payment of extremely high rates of interest.
Warnings on Mutual Funds
Or what if mutual funds came with better, more prominently displayed warnings?* Here are my votes for a couple:
Warning: Actively managed mutual funds have a less than 50% probability of outperforming low-cost index funds with a similar asset allocation.
Warning: Equity mutual funds tend to be extremely volatile. In all likelihood, this fund will experience dramatic declines in value from time to time. It’s generally a poor idea to sell immediately after such a decline.
*Yes, mutual funds come with many warnings in their prospectuses, but the reality is that most investors do not bother to read the prospectus before investing in a fund. I’m proposing including such warnings prominently in all mutual fund advertising materials.
Warnings on Stock Trades
And what if, prior to placing a stock trade, a pop-up window appeared with the following reminder:
Warning: Frequent trading leads to increased costs and increased taxes, with no increase in expected return.
What do you think?
Do you think such bold, in-your-face warnings would help people to avoid making serious financial mistakes? Or would they (much like the warnings on cigarette packages) go mostly unheeded?
If you do like the idea, what warnings would you suggest?
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{ 14 comments… read them below or add one }
I think the warnings would be ignored but here are some for your amusement:
ARM Mortgage:
Warning when this rate resets you could lose your home.
Interest only Mortgage:
Warning if you can’t pay the true mortgage now, how the #%@@ do you think you will be able to pay it later?
-Rick Francis
I think brokers and insurance agents ought to be required to display a prominent warning right on the face of their business cards that says, “Warning: I represent the interests of the companies whose products I sell. I do not represent your interests. I am expected to advise you to buy from me even if you are better off not buying what I am selling.”
Haha, well done, Rick. And yeah, I suspect you’re right. Admittedly, this post was primarily for entertainment purposes.
Agh! “better.”
Mike, can you add the ability to edit comments for a few minutes after submitting?
Rick, I love that last warning!
Dylan, I edited your comment. Yes, I’ll look into finding a plugin to allow for that. I’ve been meaning to do that anyway.
Update: Just installed one. Let me know if that works.
I’m glad you found that amusing, I thought of a few more.
Whole Life Insurance:
Warning: This can’t be a very good investment because we have to make money selling it!
Vegas:
Warning: The house wins in the end, how do you think we afford these giant luxury casinos?
Lottery:
Warning: You really need to learn more about probability.
Payday Loans:
Warning: This loan has staggering interest rates … Oh, forget it if you are willing to pay 911% interest for a week you’re clearly desperate and are not going to listen to any warning.
-Rick Francis
PS editing worked!
Warning: Active management has been proven to reduce returns more than it increases them among laboratory rats as well as actual human investors and may prove hazardous to your wealth.
Haha I love the list…..
Okay, one more. This should constantly be displayed at the bottom of the screen during any CNBC (or similar network) programming.
Warning: none of this actually matters and has been sensationalized in order to attract more viewers, for longer amounts of time so we can charge our advertisers more money. (We, here at CNBC, don’t actually follow Cramer’s recommendations; you should,’t either!)
Warning to All Investors:
“It’s easy to become emotionally invested in the strategies you have chosen, especially when they appear for a time to be working. Stay humble.”
Rob
Warning: The following warnings are me being brutally honest. I still like The Oblivious Investor’s post.
Warning: Too many warnings may cause you to stop paying attention to warnings.
Warning: Powerful interest groups will never let certain warnings be placed on certain products.
Warning: Risk doesn’t cease to exist because you don’t like it.
What do I think? – I think this is a very clever post. I also think that the warnings will go largely unheeded. And to some such a warning may even be an invitation to test the validity of the warning.
Here’s my warning about credit cards: Oh wait, not so much of a warning as it is a great way to “stick it to the man”. So what’s the tip? Rewards! I use my credit card whenever I can, from McDonalds to McConoco. I pay my balance in full each month, accrue no finance charges, and I get a $250 best buy card in the mail every few months (reward of my choice, I’m a tech junkie). So essentially I’m able to go on a free $250 spending spree just by using my credit card instead of my debit card, cash or checks for purchases. Pretty sweet deal I’d say!