Editor: Crass Cash
Last week I moved $54,190.76 from one brokerage account to another. Why?
There are two types of insurance for your money, there's the FDIC and SIPC insurance. Both of these were instituted in the 1930's during the Great Depression. They are meant to protect investors/consumers in the event that a bank or brokerage goes under. These are actually quasi-private insurance companies backed by the federal govt.
Just 9 years ago in order alleviate concerns about deposits not being secure during the Great Recession, the FDIC increased the deposit insurance from $100,000 to $250,000 and has kept it there ever since. SIPC has their limits at $500,000, but the cash is limited to $250,000. So what does this have to do with me moving money?
Well I had too much money in one brokerage that would exceed these limits. Or at lease possibly exceed these limits. This is something that concerns me after talking to bankers. Nobody seems to know anything for sure. I've heard conflicting things as to whether this applies to $250k in total accounts per bank/brokerage or for all accounts within the same firm. These are career bankers people and they don't even know!
So instead of relying on people who don't know their job, I'm going to play it safe and make sure that I keep $250k or less in each bank or brokerage FOR ALL MY ACCOUNTS with them. Relying on what some banker told you at a cocktail party isn't something to fuck around with when you're talking about a big chunk of your net worth. There are plenty of banks/brokerage firms out there to keep your money.
There's another aspect to this as well: diversification of risk. No I'm not talking about investment diversification, I'm talking about cyber security. Having your funds spread over multiple accounts alleviates some of the risk that some asshole in Russia or China doesn't empty your accounts while you're sleeping. Happens all the time. As a matter of fact it happens so much it's not even news worthy. "But won't the govt protect me??" Are you fucking stupid! 1. They can't even protect themselves from these hacks. 2. Do you think you're at the top of the FBI's worry list when somebody takes a few hundred grand out of your account?
This is a good problem to have. Totally a first world problem. If you find yourself in this fortunate situation, count your blessing for 5 seconds and then go and open more brokerage accounts with different firms. Preferably discount brokerages who don't charge for investing in ETF's. I like Charles Schwab, Etrade, Fidelity, and Vanguard. NO I DID NOT RECEIVE ANY COMPENSATION FOR FROM ANY OF THEM.
Just 9 years ago in order alleviate concerns about deposits not being secure during the Great Recession, the FDIC increased the deposit insurance from $100,000 to $250,000 and has kept it there ever since. SIPC has their limits at $500,000, but the cash is limited to $250,000. So what does this have to do with me moving money?
Well I had too much money in one brokerage that would exceed these limits. Or at lease possibly exceed these limits. This is something that concerns me after talking to bankers. Nobody seems to know anything for sure. I've heard conflicting things as to whether this applies to $250k in total accounts per bank/brokerage or for all accounts within the same firm. These are career bankers people and they don't even know!
So instead of relying on people who don't know their job, I'm going to play it safe and make sure that I keep $250k or less in each bank or brokerage FOR ALL MY ACCOUNTS with them. Relying on what some banker told you at a cocktail party isn't something to fuck around with when you're talking about a big chunk of your net worth. There are plenty of banks/brokerage firms out there to keep your money.
There's another aspect to this as well: diversification of risk. No I'm not talking about investment diversification, I'm talking about cyber security. Having your funds spread over multiple accounts alleviates some of the risk that some asshole in Russia or China doesn't empty your accounts while you're sleeping. Happens all the time. As a matter of fact it happens so much it's not even news worthy. "But won't the govt protect me??" Are you fucking stupid! 1. They can't even protect themselves from these hacks. 2. Do you think you're at the top of the FBI's worry list when somebody takes a few hundred grand out of your account?
This is a good problem to have. Totally a first world problem. If you find yourself in this fortunate situation, count your blessing for 5 seconds and then go and open more brokerage accounts with different firms. Preferably discount brokerages who don't charge for investing in ETF's. I like Charles Schwab, Etrade, Fidelity, and Vanguard. NO I DID NOT RECEIVE ANY COMPENSATION FOR FROM ANY OF THEM.
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