Why It's Hard to Fight Brokers

Mad as hell over losses? You can go to arbitration, but the deck will be stacked against you.

In her stage act, Tissa Hami, a stand-up comic who was born in Iran, boldly skewers stereotypes about her ethnicity and her Muslim religion. (Those who disapprove will be taken hostage, she jokes.) But when it comes to her finances, Hami, 36, tends to be cautious. For years, she kept her savings in a money-market account, unwilling to accept any amount of investing risk. But frequent, unsolicited entreaties from advisers in a San Francisco branch of discount broker Charles Schwab ultimately wore down her resistance. In early 2007, she agreed to invest $50,000 in Schwab Yield Plus, a mutual fund described to her as a low-risk but high-yielding alternative to a money-market account.

It was anything but. The fund had a substantial stake in securities backed by subprime mortgages. Its share price began to plummet in March 2008, and it ended up losing 35% for the year. By the time Hami dumped her shares, she was out $13,000, a devastating loss for someone who earns only about $20,000 annually. "I feel like I was totally duped," she says.

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Contributing Editor, Kiplinger's Personal Finance