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Are your investments FDIC insured?

September 26th, 2008 at 03:46 pm

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!

13 Responses to “Are your investments FDIC insured?”

  1. Broken Arrow Says:

    I believe it may be possible for IRAs that are offered by banks to be, because they generally invest in CDs, and those products are FDIC insured.

    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.

  2. onesexylady Says:

    Do you happen to know if ING orange accounts are fdic insured

  3. sharmanl Says:

    I'm not sure about ING, but I would call if I were you to find out.

  4. djudah Says:

    ING accounts are FDIC insured.

  5. gruntina Says:

    I have a workplace retirement accounts using Fidelity service which are held in a trust that is set apart from the employer's or record keeper's accounts. So if anything happened with the employer's or the record keeper%u2019s finances with their creditors, the 401k customer accounts are protected from them.

    There is no protection against the loss of market value.

  6. merch Says:

    Stocks and bonds are not FDIC insured. I won't worry about MMMF. The governement just gaurentted them not to fall below a dollar. You can keep your moeny at the brokerage house and move it to a govt fund. That will be govt gauranteed (better then FDIC insured).

    Also, I keep on reading that the big investment houses are putting cash into their funds so they don't drop below a dollar.

  7. fern Says:

    Investments, by definition, are not insured. That's why you shouldn't be investing in stocks if you can't stomach the risk, becus prices fluctuate. The risk/reward go together.

    Savings in a bank or credit union, on the other hand, accumulate interest, and they aren't considered "investments." Just savings.

  8. sharmanl Says:

    I understand stocks are not insured, but I thought IRA's and money markets were with security firms. I've made and lost money with stocks, so I get that. However, I was VERY surprised that investments like money markets and IRA's were not FDIC insured. Matter of fact, I never considered that security firm's investments were not insured at all.

    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!

  9. Broken Arrow Says:

    Well, an IRA is just a tax-deferred shelter. Within that shelter, you can house all kinds of investment products. Stocks, bonds, and mutual funds are the big 3.

    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
    Text is HERE and Link is
    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.

  10. sharmanl Says:

    I was told specifically by the representative that security firm's investments are not insured. I said to him, "So if something were to happen tomorrow, I've lost everything, right?" He then said, "Well, yeah, but our company is very conservative so that probably won't happen." I would assume if my investments were insured, that would have been a good time for him to say so. He specially stated, "None of the investments at security firms are insured."

    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.

  11. fern Says:

    BA's right. Think of words like IRA or 401k as just being terminology used to indicate a given financial product's tax status treatment. Meaning that they are tax-deferred instruments that come with their own set of rules for contributions, withdrawals and tax treatment. It's just a label, whereas the product itself could be a mutual fund, a CD, a money market, or whatever you wanted.

  12. Broken Arrow Says:

    Sharman, it's possible that your rep has indeed told you the correct information. Not all investment firms have SIPC insurance coverage, because, like any other insurance products, they cost the company money. However, most reputable firms will have it.

    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.

  13. sharmanl Says:

    Thanks everyone for the really good information!

    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.

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