I just called my investment company to inquire about our money market account being FDIC insured. It isn't. Then I asked if our IRA's were insured (I thought they were). I was told that only banks and credit union's money is FDIC insured. The Merrill Lynches, Lehman, Vanguard, and Fidelity types are not. So if something happens, all your money goes bye-bye. I'm not trying to cause panic, however I do want you to be informed.
I'm transfering our money over to our credit union today. Better safe than sorry.
Are your investments FDIC insured? You better find out quick!
Are your investments FDIC insured?
September 26th, 2008 at 04:46 pm
September 26th, 2008 at 06:15 pm 1222449312
Most investment companies and brokerages are not covered by FDIC. Stock, bonds, and mutual funds. However, they may be insured under SIPC, but you have to read the fine print on what is exactly covered and what isn't.
Credit unions are typically insured as well, but under NCUA.
I don't intend to move my money anywhere. They're fine where they are, and I don't recommend bank runs.
September 26th, 2008 at 07:49 pm 1222454944
September 26th, 2008 at 07:52 pm 1222455170
September 26th, 2008 at 08:56 pm 1222458975
September 26th, 2008 at 09:16 pm 1222460176
There is no protection against the loss of market value.
September 26th, 2008 at 10:22 pm 1222464151
Also, I keep on reading that the big investment houses are putting cash into their funds so they don't drop below a dollar.
September 27th, 2008 at 08:10 pm 1222542628
Savings in a bank or credit union, on the other hand, accumulate interest, and they aren't considered "investments." Just savings.
September 27th, 2008 at 11:38 pm 1222555101
Also, I feel that any money I'm investing anywhere is part of my investment portfolio. Rather they are risky or not. Just my thinking!
September 28th, 2008 at 03:26 am 1222568765
In other words, you can have a money market mutual fund in an IRA, but you can also have the same money market mutual fund in a taxable account. The only difference is how they will be taxed because one is designed for retirement while the other is just for normal investing.
As for the differences between a money market savings account and a money market mutual fund, I've written an overly-lengthy explanation HERE. Perhaps that will help shed some light on the matter. The short version is that money market savings account is a bank savings account, and bank savings accounts are covered by the FDIC. Money market mutual funds are not covered by the FDIC, but they may be under SIPC.
To be exact, it's not so much that investment firms are not insured at all. They are, and typically with the SIPC. However, they're just not insured by the government's FDIC program. Only banks are covered by the FDIC.
September 28th, 2008 at 03:33 am 1222569236
Is it possible I received wrong information? Maybe, but I kind of doubt it. I will call again to ask about SIPC, because I didn't know to ask, and he certainly failed to mention it.
September 28th, 2008 at 03:36 am 1222569375
September 28th, 2008 at 05:47 am 1222577228
Even so, there is a range of insurance products available, with differing levels of coverage. A popular choice, in this case, is opting not to pay coverage for money market mutual fund products. That's because the likelihood for money market mutual funds to default are extraordinarily low. Low enough that some companies are willing to forego that particular coverage to save some money.
It is possible that perhaps your investment firm is one of those without MMMF coverage, but again, that's also why I always recommend everyone to read their SIPC fine print, to make sure they know what is covered and what isn't....
You may or may not agree, but even without insurance coverage, so long as you're with a reputable investment firm, I don't think you have to worry about your money market mutual fund being at risk from defaulting. Most don't even want to "break the buck", much less default.
September 28th, 2008 at 02:15 pm 1222607713
You know, I know someone that lost $500,000 with Enron. They were only in their 40's, but they had saved and lost everything overnight. I know stock investments are a risk. However, when a company goes under, and so many are doing just that today, then my concern is I do not want to lose everything based on a company's mismanagement or incompetence. If I lose everything because it's the nature of the market, that's my risk. If I lose everything from greed and incompetence of the company and they go under, I want my money insured and returned.
I'm not going to say the specific name of the investment company I'm with. But it is one of the four I mentioned in my blog.