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Wednesday, February 08, 2006

Perils of Stock Ownership

When you buy a stock or mutual fund, you get a fancy prospectus with all sorts of exciting information. But no where in there do they warn you about any of these annoying things that are about to start happening after you purchase shares:

- You will be getting letters about once a month to announce to you the important fact that "We are happy to announce the following change to our Board of Directors: Replaced H. Whitworth Shipley with Woodruff Alabaster Bigglesby"

- You will be getting letters about once a year to announce "Widget Co. is happy to announce the spinoff of Widget Inc. and the merger of Widget Trust. you will receive 0.018 shares of common stock for each share of Widget Co. unless you inform us otherwise before March 1. Otherwise, your holdings will be converted to dividend shares. For additional information, please consult your tax attorney." (My tax attorney?)

- You will be getting letters about once every three years to announce "A class action lawsuit has been filed for all stockholders who purchased shares between July 9, 1994 and April 6, 1997. Please send all paperwork from that period to the above address. At the completion of the litigation, you may receive an amount between $0.04 and $0.07 per share unless you opt out of the settlement."

- You will get a thick envelope once per quarter with a quarterly report explaining that the reason the fund lost 4% while the benchmark went up 6% is that there were instabilities in the Middle East that affected the price of oil.

That really licks my envelope.

2 comments:

BrianM said...

I feel horrible every time I throw out one of those prospectus updates, but they come so often. I feel like I should glean some deep knowledge from them, but I only feel stupid. Kinda like when I pop the hood on my car and look inside. I don't really know what is going on, but I feel that I should.

BrianM said...

Slightly unrelated - I once received a letter notifying me of a class action lawsuit against a hotel I stayed at 6 months earlier. The hotel was in Newark, NJ and cost $300 a night (a rip-off). In the settlement I received a "$30 off" coupon for my next visit. Yeah, right.