Eggs in one basket?

[teejayevans]

Do most of y'all have all your accounts with 1 company, fido, vanguard, etc

For those that do, did you think about if/could your company go belly up or
the executives taking the money and running and maybe you should spread
it out? Other than obvious convenience, is there any other benefit of having it
with 1 company?

Tom

 

[Moemg]

I have all my eggs in the Vanguard basket .Love the service but I do wonder occasionally if this is a good idea.

 

[retire@40]

Some people only have one egg.

 

[smileydog]

I currently have all of my IRA with Fidelity but also have a 401K with Mass Mutual. Within Fidelity I have a majority of my funds with American Funds. I started with Ferris Baker Watts where I originally got into the funds but then switched to Fidelity. In my case I am more worried about having too much in American Funds even though they have been a great investment for me.

dog

 

[FinanceDude]

I currently have all of my IRA with Fidelity but also have a 401K with Mass Mutual. Within Fidelity I have a majority of my funds with American Funds. I started with Ferris Baker Watts where I originally got into the funds but then switched to Fidelity. In my case I am more worried about having too much in American Funds even though they have been a great investment for me.
dog

I don't think it's worth worrying about American or Vanguard.........

 

[Nords]

Do most of y'all have all your accounts with 1 company, fido, vanguard, etc

We have over 90% of it with Fidelity. I'd encourage them to buy Pentagon FCU, too, if they'd offer comparable CDs.

For those that do, did you think about if/could your company go belly up or the executives taking the money and running and maybe you should spread
it out?

That's what insurance policies and fraud legislation are supposed to avoid. I know that the big three could go under just as easily as anyone else, but I suspect that investors would get plenty of warning-- I'm trying to imagine a YouTube cell phone video of Ned Johnson on a Caribbean beach surrounded by topless babes. (Maybe I'm just thinking of his traders.) Or Abby... eh, never mind.

And I know that trading an account isn't foolproof, but the guys managing the money don't actually have it in their pockets. There's a layer of management and subcontractors between them and the actual shares, and that extra layer is supposed to avoid just this sort of thing.

Criminal managers? It's never disturbed my nighttime sleep. Or my naps, either. But incompetent self-dealing managers is quite another subject.

Other than obvious convenience, is there any other benefit of having it with 1 company?

"Convenience" doesn't do justice to the concept.

It's great to have consolidated statements, reduced fees for consolidated accounts, cost-basis tracking, free billpay, a hugely robust website, and the prospect of actually being able to contact the same customer-service rep more than once.

It's also much easier to have a conventional IRA and a Roth IRA held by the same custodian while you're doing the conversions.

We used to keep our Tweedy, Browne account with their custodian, but after a while there was a stark contrast between the way you're treated at T-B (the same voicemail announcement on the phone since the fund closed in 2005) and the way you're treated at Fidelity. We finally moved the remaining T-B shares to our Fidelity account, where we can continue to sell them without having to wait on hold or be condescended to.

 

[uncledrz]

While not insured by the Federal Government, accounts are insured, up to a limit, by the SIPC which is a private non profit set up by Federal Statute. Their website is here: http://www.sipc.org/ so, I do believe that the account is safe, within the limits.

While convienent to have accounts in one place, I also believe it is safer to have accounts spread out and to frequently check accounts. Many reason for this, all discussed in previous threads about access to accounts while in certain foreign countries, identity theft and security, other technical problems.

Overall, through, I have not problem with any of the large firm's safety, such as Merrill Lynch, Fidelity, Vanguard, etc. But it is worth keeping an eye open.

Tio z

 

[Texas Proud]

The money is not at risk of being stolen like it is at a normal corporation... there are many checks and balances on the funds...

And if the company that manages the funds go under... it still does not mean YOUR money is gone... but, you might have to wait a few days to get it.. and you returns might have suffered a bit when their focus was not on investing...

 

[audreyh1]

98% of my investments are with Fidelity.

I don't consider that having "all my eggs in one basket". By owning mutual funds, I own shares of companies - real securities. Also, I own funds across several different fund families. Ultimately, it doesn't matter who the "fund supermarket" is.

No, I am not worried about massive financial fraud from Fidelity. They can't just "help themselves to my money". Neither can the mutual fund.

It's incredibly convenient to have everything in one place - especially a place that has the excellent internet access as does Fidelity.

Also, Fidelity has a "customer guarantee" that will make you whole if you are a victim of unauthorized access to your account. That's a pretty hefty protection.

Audrey

 

[teejayevans]

98% of my investments are with Fidelity.

Also, Fidelity has a "customer guarantee" that will make you whole if you are a victim of unauthorized access to your account. That's a pretty hefty protection.

I've currently spread over 7 companies (not all by choice since I'm still working),
hence the question. You bring up a good point, I hadn't thought about identify
theft.

 

[MonarchDon]

I have about 25% of my eggs in Indy Mac Bank. In a 3 month CD paying 5.31% and I"m getting nervous. The term is up on March 31 and I'm pulling that money out and putting it somewhere else...Indy Mac is big into mortgages, and we all know how that market has gone lately

 

[TromboneAl]

Quoting from an old post:

I thought about this a few years ago, but decided the very, very small risk from having everything at Vanguard was outweighed by the advantages and convenience.

Here's what Vanguard has to say about this (full link here):

Diversifying by fund family: Limited benefits

Another misapplication of Sancho Panza's advice is investing with more than one fund company to protect against the risk that financial troubles in one fund will infect the fund family's other funds.

Such a scenario is impossible. Each mutual fund is its own corporation. A problem at one mutual fund wouldn't affect another, even if both were managed by the same company. If you own two funds from the same fund family, you have, in effect, put your eggs in two different corporate baskets. In addition, mutual funds are required by law to keep fund assets with a third-party custodian, large well-capitalized banks hired to safeguard shareholder assets. Daily checks are made between mutual funds and their custodians to make sure that assets are where they're supposed to be. The custodian banks, in turn, carry insurance coverage on their own to cover losses of securities and cash in their possession. And Vanguard, like most mutual fund companies, carries substantial insurance resources to protect against any illegal acts. (Thanks to Vanguard's vigorous fraud-protection efforts, though, we have never had to draw on this insurance.)

What about risks to your fund company's recordkeeping and administrative operations? Vanguard's approach has been to develop extensive contingency plans, backup systems, and multiple geographic locations. The Vanguard® funds' trustees are continually working with Vanguard's leadership to ensure that our operations are the industry's most secure.

 

[audreyh1]

Diversifying by fund family: Limited benefits

Another misapplication of Sancho Panza's advice is investing with more than one fund company to protect against the risk that financial troubles in one fund will infect the fund family's other funds.

Well the only problem here, is that some mutual fund companies have been found to pull a few fast ones on their investors, such as the late trading and timing scandals of 2003 where some mutual fund companies were found to allow some favored individuals to buy in after market close (or allowed certain favored individuals to buy in and out of a fund while more investors were disallowed). Very nasty stuff that! http://en.wikipedia.org/wiki/Mutual-fund_scandal_(2003)

I remember selling my last remaining Strong fund after this broke.

The best way to deal with this, of course, is to only invest with the most reputable fund companies. Morningstar does a decent job of "rating" fund companies in terms of "stewardship".

Audrey

 

[audreyh1]

I've currently spread over 7 companies (not all by choice since I'm still working),
hence the question. You bring up a good point, I hadn't thought about identify
theft.

Identity theft tends to more refer to someone opening accounts in your name or obtaining credit or leases, etc., because they have your name, address and social security number. That may still not be enough to get into existing accounts.

But all it takes to get into an on-line account is your account number and password. This is actually easier than "identity theft" in the classic sense. If you use a public computer, or respond to phishing, or someone finds your account and password numbers, or somehow you get spyware on your home computer that traps these things, etc., etc. That's all they need to access accounts on line and wreck havoc. They might not be able to transfer any funds out (this usually requires another account set up with your name or a signature guarantee), but they can make a big mess.

Audrey

 

[JohnDoe]

I have a friend who has all his eggs in 2 stocks. That's right - his entire life savings in 2 stocks...and they aren't blue chips and don't yield anything.

 

[Meadbh]

Two companies. I'm not worried about either going bust, nor about fraud. It's just that each has strengths and weaknesses and I get different perspectives. I learn from both. They each understand that I have performance expectations and they are competing for my portfolios.

 

[Jeb-NY]

I guess the idea of, someone, somehow, getting my account name and passwd, is keeping me spread out for now. I am still consolidating from multiple 401Ks that my wife has spread out but still undecided if I should have 2 baskets or 3. 2 would be a split between pre-tax and post-tax just because it is a natural break. 3 would be because of paranoia. Currently, not counting the smaller 401Ks of the wife's, I am 25%, 25% and 50%. The 50% is Vanguard and had planned it to be 75% before some of the treads I have read started the paranoia.

Probably should call Vanguard for a pep talk.

Jeb

 

[ex_CFO_now_RVer]

Vanguard 90%, of assets, over 20 years and never had a problem
DFA 10%, just 5 years and flawless service


Dave

 

[soupcxan]

Let me guess, are these two stocks BRK.A and BRK.B? And your friend is from Omaha?

I have a friend who has all his eggs in 2 stocks. That's right - his entire life savings in 2 stocks...and they aren't blue chips and don't yield anything.

 

[Gone4Good]

A hair less than 80% is at Vanguard. I don't lose sleep over this concentration, but I'm not particularly comfortable with it either (for all the reasons already mentioned, but I'm mostly concerned that security could be compromised). I'm toying with the idea of directing all future contributions to Fidelity to dilute my Vanguard concentration further.

 

[Nords]

I'm toying with the idea of directing all future contributions to Fidelity to dilute my Vanguard concentration further.

It'll be interesting to read your observations on their respective customer services...

 

[free4now]

The way I look at it, if anyone were to find a way of cashing out my stocks and funds without my permission, that would be an illegal act and I could sue the brokerage to be made whole. The burden of proof is on the brokerage to prove that I authorized the disbursements, and since I didn't authorize them, it's a fairly open and shut case.

Imagine some hacker in Albania installs spyware on my PC and gets my account login. He liquidates my account, which would be annoying, but I still am okay. I call up my brokerage and say I didn't authorize this liquidation. They either make it right, or I sue and they make it right. Either way I'm not out my full nest egg.

As far as the brokerage itself going under, again that is not a problem. The brokerage doesn't own my equities, I do. They can't raid my account any more than they could come into my home and cart off my possessions.

These regulatory protections are a large reason I don't do international investing. This is one area where the USA really is ahead.

 

[Gone4Good]

The way I look at it, if anyone were to find a way of cashing out my stocks and funds without my permission, that would be an illegal act and I could sue the brokerage to be made whole. The burden of proof is on the brokerage to prove that I authorized the disbursements, and since I didn't authorize them, it's a fairly open and shut case.

Are you sure this is how it works? I'm not saying that it doesn't, but I don't think there is a lot of case law about this topic. And I'm pretty sure that no existing laws specifically cover electronic theft from brokerages the way they do for ATMs and credit cards. Do you know of any instances where victims were successful in winning restitution from brokers in such cases?

 

[bssc]

The way I look at it, if anyone were to find a way of cashing out my stocks and funds without my permission, that would be an illegal act and I could sue the brokerage to be made whole.

I believe that you signed away your right to sue a brokerage, instead you agreed to binding arbitration. On the other hand, the arbitrator would probably agree with you if the brokeage let it get that far. In past cases, they have immediately settled to avoid any bad publicity.

 

[JustCurious]

I believe that you signed away your right to sue a brokerage, instead you agreed to binding arbitration. On the other hand, the arbitrator would probably agree with you if the brokeage let it get that far. In past cases, they have immediately settled to avoid any bad publicity.

bssc is correct...you signed away your right to sue Vanguard or any other mutual fund or brokerage company. Your only recourse is to file a demand for arbitration, and your case is then decided by someone from the brokerage industry, and if they rule against you, you have no right to appeal.

And it would not be an open and shut case either, you would have to prove that you did nothing to contribute to the theft, ie, you used a strong password, you didn't use the same login or password as any other site, you used anti-spyware software which was updated regularly, you checked your account regularly, you didn't login from any public computer, you changed your password regularly, you didn't share it with anyone else, etc. If you failed to do even one of these things, you may be found at fault for contributing to the loss.