you have to understand the sipc insurance and the extended insurance on your account and when it apply's and does not apply .
take fidelity as an example:
"the SIPC will cover up to $500,000 in securities, including a $250,000 limit for cash held in a brokerage account.
What Fidelity accounts are covered?
All Fidelity brokerage accounts are covered by SIPC. This includes money market funds held in a brokerage account since they are considered securities. Learn more about SIPC coverage at
www.sipc.orgOpens in a new window..
Excess of SIPC
In addition to SIPC protection, Fidelity provides its brokerage customers with additional "excess of SIPC" coverage. The excess coverage would only be used when SIPC coverage is exhausted. Like SIPC, excess protection does not cover investment losses in customer accounts due to market fluctuation. It also does not cover other claims for losses incurred while broker-dealers remain in business. For example, fraud claims would not be covered if the brokerage firm was still in operation. Total aggregate excess of SIPC coverage available through Fidelity's excess of SIPC policy is $1 billion. Within Fidelity's excess of SIPC coverage, there is no per customer dollar limit on coverage of securities, but there is a per customer limit of $1.9 million on coverage of cash awaiting investment. This is the maximum excess of SIPC protection currently available in the brokerage industry.
Both SIPC and excess of SIPC coverage is limited to securities held in brokerage positions, including mutual funds if held in your brokerage account and securities held in book entry form..
but then:
"While the following investment products are not insured or eligible for FDIC, SIPC, or any specific coverage, Fidelity is proactive in keeping assets safe.
Mutual funds
If you own Fidelity mutual fund shares directly, not through a brokerage account, your investment is in assets that are the property of the funds, not Fidelity. The funds and Fidelity are separate and distinct legal entities. The assets of each Fidelity fund are held by its custodian separate from any other assets belonging to Fidelity or any other fund. Neither Fidelity nor its creditors may access the funds' assets to satisfy financial obligations of Fidelity.
While SIPC and Lloyd’s of London protection applies to brokerage accounts, it does not apply to directly held mutual fund accounts. "
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looking at it initially it appears you have unlimited coverage but when you read the details you learn you may have no extra coverage.
unless the funds and assets are held in street name in a brokerage account your IRA'S AND FUNDS BOUGHT THROUGH A MUTUAL FUND ACCOUNT
are not covered .
it makes sense since if you buy the funds directly and not own them through your brokerage account the funds are held in your name .
your funds or stocks are held in street name in your brokerage account and as such ONLY CREDITED TO YOUR ACCOUNT BUT ANYONE CAN STEAL THEM AND SELL THEM .
they get the additional coverage , but anything held directly like you ira's or funds you bought through a mutual fund account have no extra coverage since they are held only in your name in a separate legal entity from the brokerage ..