All the eggs in one basket?

[chinaco]

Quote:

Originally Posted by pb4uski I don't see any need to diversify across providers for mutual funds..... .

It is not what you know, but what you do not know... Sometimes it is about things you could never know (unforeseen events).


Not all companies are equal (and they control the investment decisions and access to the money in the investment).

Plus even with large reputable companies there seem to be many fund of funds now days! And some concentration in sub-advisors that manage those funds (careful... this often spans companies). What if a really bad decision were made (Illegal or not)?


Risk mitigation is about looking at what might go wrong and mitigating the risk or reducing the potential impact or both. Even if the chances of it happening is low... but the impact (if it did happen) is high... one should consider how they might mitigate the risk.

Consider this... If some unforeseen event prevented you from getting access to your money for 6 months or 5 years or perhaps permanently... would that matter? If so, how can you position your situation in a way that the event is avoided or the impact reduced?


However, it is your money and your decision.

[Arnie]

Quote:

Originally Posted by Ronnieboy (if you have $5 million would you keep it all in Charles Schwab)?Just curious.

If I had $5 million would I be posting here?

I don't think I'd have a problem with keeping it all with Vanguard.

[pb4uski]

Quote:

Originally Posted by walkinwood Each mutual fund is a separate corporation. Each mutual fund uses an investment advisor. So, what is Vanguard as far as mutual funds are concerned? I don't understand the organization and you seem to know what you're talking about.

Typically, the mutual fund is a separate company owned by the mutual fund shareholders (you and me) and the investment management company is a separate company owned by others and run for the benefit of those owners.

Vanguard is unique in that the various mutual funds own the investment management company - so in a sense it is sort of like a cooperative. That's my understanding of it anyway.

[Gearhead Jim]

Right now, we have most of our equities in Vanguard funds, and most of our fixed income stuff in CD's at 5 differenet CU's/banks.

[lowflyer]

Having all your money in one stock or bond is "all in one basket." Having your money in a diversified portfolio held at Vanguard or Schwab or Fidelity is not the same thing in my mind and is no issue. I have thought, however, that if I ever had a TON of money invested, I might spread it around a bit just for fun. Now if I can only figure out how much a "ton" of money is...

[East Texas]

We've got everything spread across several accounts at USAA.

[Ronnieboy]

Quote:

Originally Posted by Arnie If I had $5 million would I be posting here? I don't think I'd have a problem with keeping it all with Vanguard.

The only reason I mentioned $5 million is because I would think that if someone 'only' had $100 to $500 thousand (ha, ha I can't believe I said only) then one place might be sufficient, but if someone had $5-10 million then maybe they wouldn't keep it in one place?!? I don't know. Just a thought, I'd never hit $5 million, but hopefully $2

[photoguy]

From vanguard's site:

"How is my account protected?
Securities in your brokerage account are held in custody by Vanguard Brokerage Services, a division of Vanguard Marketing Corporation. Vanguard Marketing Corporation is a member of the Securities Investor Protection Corporation (SIPC), which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash subject to future adjustments for inflation). To obtain information about SIPC, visit SIPC - Securities Investor Protection Corporation or call SIPC at 202-371-8300.

To offer greater protection and security, Vanguard Marketing Corporation has secured additional coverage from certain insurers at Lloyd's of London and London Company Insurers for eligible customers with an aggregate limit of $250 million, incorporating a customer limit of $49.5 million for securities and $1.9 million for cash. Coverage provided by SIPC and certain Lloyd's of London and London Company Insurers does not protect against loss of market value of securities. The policy provided by certain Lloyd's of London and London Company Insurers is subject to its own terms and conditions."

Personally, I've tried to move everything to vanguard.

[chinaco]

I find it very odd that people who debate regularly about the risk of putting too much money with a single insurance company (much more regulation and scrutiny) or Bank (much more regulation and scrutiny)... and would attempt to stay under the insurance limit.... would believe it is a good idea to put their entire nut in one investment management company.


Look at the coast of Japan... natural disaster (1000 year event)... but planned for with contingencies... Hey those nuclear plants have back up generators and disaster plans and the defense force (their army) is ready to jump in and help!


Well, none of us would have any money at any investment company if we thought something was likely to happen that would result in losses through any event other than our own bad investment decisions. It is the unforeseen or unknowable event that can harmful or ruinous... even with safeguards and promises.

[Arnie]

Quote:

Originally Posted by Ronnieboy The only reason I mentioned $5 million is because I would think that if someone 'only' had $100 to $500 thousand (ha, ha I can't believe I said only) then one place might be sufficient, but if someone had $5-10 million then maybe they wouldn't keep it in one place?!? I don't know. Just a thought, I'd never hit $5 million, but hopefully $2

No need to apologize about all that money you're sitting on. Another recent thread on this forum discusses how your $5 million is not even rich. Just playing here, hope you don't mind.

[donheff]

Quote:

Originally Posted by chinaco I find it very odd that people who debate regularly about the risk of putting too much money with a single insurance company (much more regulation and scrutiny) or Bank (much more regulation and scrutiny)... and would attempt to stay under the insurance limit.... would believe it is a good idea to put their entire nut in one investment management company. Look at the coast of Japan... natural disaster (1000 year event)... but planned for with contingencies... Well, none of us would have any money at any investment company if we thought something was likely to happen that would result in losses through any event other than our own bad investment decisions.

I don't keep everything under one management company but I don't think natural disasters are germane. We all "anticipate" that things like the Japanese earthquake will happen all the time and affect the market widely although we can know precisely what they will be. In these cases your individual funds would suffer market effects but it wouldn't really matter who held them. A more realistic one company danger is disruption in access to your money as some others mentioned (e.g the administrative staff at a company could be disrupted by a massive event near their HQ but that would be a temporary effect).

[RetirementColdHardTruth]

For my 2 cents. Vanguard has additional insurance, but if you feel you are over the limits spread it around. It never hurts.

[TromboneAl]

Here's a thread that (literally) links to a thread that links to a thread that links to a thread that has a quote from an old thread on this topic:

http://www.early-retirement.org/foru...tml#post894948

[chinaco]

Quote:

Originally Posted by donheff ...but I don't think natural disasters are germane. We all "anticipate" that things like the Japanese earthquake ..

Oops... I shifted into a different type of disaster that had risk implications.

I was trying to cite an unforeseen (less common) catastrophic event that is fresh in people's minds. The point... "It might be a rare event, but it can happen"!

Sorry, It did not occur to me that you might not make the connection.

Risk Management... how it is achieved varies with different situations, but the concepts are essentially the same! It boils down to reducing the chance of it occurring or reducing the impact if it does or both.

So here you go: Just assume that you had invested with Bernie M... would you have mitigated some of your personal risk and the subsequent impact by splitting the money with only 50% of your money invested with him instead of 100%?

[donheff]

Quote:

Originally Posted by chinaco Risk Management... how it is achieved varies with different situations, but the concepts are essentially the same! It boils down to reducing the chance of it occurring or reducing the impact if it does or both. So here you go: Just assume that you had invested with Bernie M... would you have mitigated some of your personal risk and the subsequent impact by splitting the money with only 50% of your money invested with him instead of 100%?

I don't think the concepts are the same. A single insurance company - yes, you have risk from lots of directions. A single investment manager al la Madoff - yes, lots of risk and you would be better off with 50% (or better still 0%). But Vanguard, with funds in several independent funds which purchase underlying securities? Not comparable. I do agree that there may be some unknown risk that could pop up but I don't think it is on the scale of a single company risk.

[chinaco]

Quote:

Originally Posted by donheff I don't think the concepts are the same. A single insurance company - yes, you have risk from lots of directions. A single investment manager al la Madoff - yes, lots of risk and you would be better off with 50% (or better still 0%). But Vanguard, with funds in several independent funds which purchase underlying securities? Not comparable. I do agree that there may be some unknown risk that could pop up but I don't think it is on the scale of a single company risk.

That's funny.... reminds me of a real life situation.


There is this guy at work that does that (in person)... circular type of contradictory debate. We often wonder if he really thinks that way. He is really a pretty good guy... but he does that regularly... There is some underlying desire to debate and he dredges up any rationale to contradict some idea and goes for it. Of course when one uses analogies and examples to try to clarify what they meant... they wind up deeper in a twisted debate trap.

Often like this: "but if you really really think about it...." and "clearly this is not exactly the same."

It often leaves the person in the in the debate trap with him wanting to pull their hair out.

It is indeed strange... I think he gets some sort of delight out of it or feel some gratification if he thinks he gained the upper hand.

I haven't had the heart to tell him that his peers roll their eyes when he walks away thinking he bested the poor victim.

Imagine the joys of managing someone that!