Keeping all money with same broker (annuity, bonds, IRA, brokers)

[ilovebdj]

I am not well versed in investing and would like some advice.

I have a Roth IRA with Vanguard and a mutual fund with Vanguard. I max out the IRA and just put a little into the mutual fund each year. I'd like to invest a couple of thousand more each year in another mutual fund. Is it safe to keep it all with Vanguard?

This may seem like a silly question...I know that we should diversify our investments, should we diversify our brokers as well? I just keep getting images in my head of the Madoff scandal, how all their money was in one spot essentially. Am I worrying over nothing? Thanks!

[ragnarkar]

The SIPC protects the market value of your assets up to $500,000 in the case your broker goes under.. however, only $250,000 of the cash portion is insured. If you have more than $500,000, consider using 2 brokers if it's not too troublesome to keep track.. Mint.com will help with that.

Securities Investor Protection Corporation - Wikipedia, the free encyclopedia

[ilovebdj]

Thank you, I was not aware of that! I'm no where near that but hopefully in a decade or two that will be a worry of mine.

[chet everett]

First off when you say "broker" I tend to think of RETAIL brokerage accounts with firms like Merrill Lynch, Vanguard is properly called a "Fund Company" (though they probably are technically licensed as a "broker/dealer" ...)

There is NO reason to spread your investments around needlessly. If you are happy with the way that Vanguard presents information to you and like the investment products they offer you are just as safe having $500 dollars their as $500,000 and in all honestly the relative "risk" even in you had $2,500,000 and split that among the top five fund companies would almost certainly be larger than keeping it all one of the biggest most cost efficient firms ever. Hypothetically if Vanguard imploded and there were any bailout getting you back all your principle be it $500 or even $5M would be sorta the same problem and frankly such a remote possibility that I doubt anyone could contemplate how this come about.

I further believe that ragnarkar is incorrect in that SIPC does NOT automatically extend to all mutual fund in the same way that they cover listed securities -- funds that include commodities, currencies and futures are all specific exclusions

Investing with a consumer oriented firm is NOT like going to some hedge fund type operation like MF Global -- MF Global - Wikipedia, the free encyclopedia and Vanguard in particular is so focused on offering "little guys" the kinds of investment products that are inherently self stabilizing that there is an 180 degree opposite philosophy to firms that play fast and loose -- The Vanguard Group - Wikipedia, the free encyclopedia

[ragnarkar]

Originally Posted by chet everett

First off when you say "broker" I tend to think of RETAIL brokerage accounts with firms like Merrill Lynch, Vanguard is properly called a "Fund Company" (though they probably are technically licensed as a "broker/dealer" ...)

There is NO reason to spread your investments around needlessly. If you are happy with the way that Vanguard presents information to you and like the investment products they offer you are just as safe having $500 dollars their as $500,000 and in all honestly the relative "risk" even in you had $2,500,000 and split that among the top five fund companies would almost certainly be larger than keeping it all one of the biggest most cost efficient firms ever. Hypothetically if Vanguard imploded and there were any bailout getting you back all your principle be it $500 or even $5M would be sorta the same problem and frankly such a remote possibility that I doubt anyone could contemplate how this come about.

I further believe that ragnarkar is incorrect in that SIPC does NOT automatically extend to all mutual fund in the same way that they cover listed securities -- funds that include commodities, currencies and futures are all specific exclusions

Investing with a consumer oriented firm is NOT like going to some hedge fund type operation like MF Global -- MF Global - Wikipedia, the free encyclopedia and Vanguard in particular is so focused on offering "little guys" the kinds of investment products that are inherently self stabilizing that there is an 180 degree opposite philosophy to firms that play fast and loose -- The Vanguard Group - Wikipedia, the free encyclopedia

SIPC covers most types of securities, such as stocks, bonds, and mutual funds. But SIPC does not protect you against losses caused by a decline in the market value of your securities. And it does not provide protection for investment contracts not registered with the SEC.

Securities Investor Protection Corporation

They say mutual funds are covered but I'm not sure about ETF funds..

Furthermore, it doesn't protect against poor decisions made by the mutual/ETF fund managers.. if the fund blows up, you're sol. But if the broker pulls an MF Global and the fund is fine, you can file a claim with the SIPC.

[mathjak107]

etf's are stocks and are covered the same as any equities are .

fidelity covers your entire account with no limits. they have additional insurance beyond sipc that they carry.

only exception is cash awaiting investing is covered up to 1.9 million.


heres whats not covered:

Not all investments are protected by SIPC. In general, SIPC covers notes, stocks, bonds, mutual fund and other investment company shares, and other registered securities. It does not cover instruments such as unregistered investment contracts, unregistered limited partnerships, fixed annuity contracts, currency, and interests in gold, silver, or other commodity futures contracts or commodity options.



the big question is how long will it take to get your money back. i believe most havent seen a penny yet from the madoff scandel. i use both fidelity,vanguard and local banks.


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Protecting Your Account Assets

Fidelity's brokerage businesses (Fidelity Brokerage Services LLC and National Financial Services LLC (NFS)) are members of the Securities Investor Protection Corporation (SIPC), and brokerage accounts maintained with Fidelity are protected by SIPC, which protects brokerage accounts of each customer when a brokerage firm is closed due to bankruptcy or other financial difficulties and customer assets are missing from accounts. SIPC protects brokerage accounts of each customer up to $500,000 in securities, including a limit of $250,000 on claims for cash awaiting reinvestment. Money market funds held in a brokerage account are considered securities. For more information on SIPC coverage, please review the brochure "How SIPC Protects You" available for free download at SIPC - Securities Investor Protection Corporation . This page will open in a popup window..

In addition to SIPC protection, Fidelity, through NFS, provides its brokerage customers with additional excess of SIPC coverage from Lloyd's of London together with other insurers1. The excess of SIPC coverage would only be used when SIPC coverage is exhausted. Like SIPC, excess of SIPC protection does not cover investment losses in customer accounts due to market fluctuation. It also does not cover other claims for losses incurred while broker-dealers remain in business. Total aggregate excess of SIPC coverage available through Fidelity's excess of SIPC policy is $1 billion. Within Fidelity's excess of SIPC coverage, there is no per account dollar limit on coverage of securities, but there is a per account limit of $1.9 million on coverage of cash awaiting investment. This is the maximum excess of SIPC protection currently available in the brokerage industry.