How much is too much in a brokerage?

Can one have too much in a brokerage account? I know the sipc limits but past that do you really need to open another account?

Depends if you think your shares could be mishandled

Provided the shares remain in your account and not to pay towards the brokerage’s debt, you’re fine

That said, I always thought to limit my assets to $500,000 just like limiting my assets to $250,000 at an FDIC bank so that my money was not over the limits

Of course FDIC and SIPC protect different things

If you have too much, send us some

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Ok so after you hit the 500k you move to another brokerage?

If you desire. Depends on the paperwork and your level of comfort with having all your money with one brokerage. If you’re wanting to be insured for $1M even if your shares are mishandled, use two brokerage firms like Schwab and Fidelity

The SIPC doesn’t protect against lost of value. It only protects you if your shares are mishandled by a bankrupt brokerage firm

I personally am most comfortable being insured so am considering opening another brokerage account to stay covered. Im also on the overly cautious side and at the same time not wanting to complicate things so im interested in hearing what others tend to do once the are nearing the sipc limit. It sounds like you would have multiple brokerages to stay insured correct?

I probably wouldn’t have more then two

Ok thanks. Yes, that makes sense. 3 would get hard to keep track of. Do you know if sipc covers stolen funds in case someone hacked your account?

The major brokerages will cover you 100% if it’s proven the access was unauthorized. That said, information security basics are on all of us:

  1. highly complex, long, unique password
  2. use the Symantec VIP authenticator app for Schwab and Fidelity, I don’t know what others use. Don’t just use text messaging for the authentication
  3. Use a VPN
  4. Use anti-virus
  5. Keep browser and operating system up-to-date

If you do those things, you really won’t be facing a hack, unless it’s someone in your house.

Eric, I have always maintained 3 separate investment accounts, due to the old advice not to put all you eggs in one basket. Bad things can happen, and if you have all your assets in one account, you could lose all of them. Ask the people who invested with Bernie Madoff. Most of them eventually got most of their money back, but after 12 years had passed.

Many think this is foolish, but now with online accounts and computer spreadsheets, it is not really hard to keep up with 3 investment accounts, and it is certainly not illegal as long as they are not offshore and not foreign accounts. You are allowed to own US mutual funds that hold the stock of foreign companies. For the past 10 years, mutual bond funds that hold bonds from foreign countries have paid much higher dividends than US bonds. That is slowly changing now.

Consider investing in something besides paper. Like real estate, small business startups, etc.

That’s true diversification.

Ha! Im trying to be more generous these days but not that generous!

Yes, i have text authtication so need to look at switching. lll have to look at some of these other things too. Im not as tech savy as i should be.

Not sure i have the time for any rental properties. Or are you talking about real estate funds as well?

Thanks, ill stick with 2 for now but its good to know some people can manage with 3 ok without confusion. I also use a couple of banks and my 457 plan for work so dont want to lose track.

Eric, I mostly avoid individual stocks because that does require a lot of research. Buying mutual funds with very low expense rates means that the fund managers do practically all of the work, leaving me free to enjoy life. That gives me expert management for my investments with little effort on my part. That keeps the housekeeping on each group of investments to a minimum. I do vote on fund management on the funds that allow it. Vanguard Funds are different in that they are owned by the fund shareholders, not the investment company.

Most major brokerage firms such as Schwab or Vanguard have private insurance to cover any client losses in excess of 500k. Just contact the firms directly to verify that they have excess coverage. If they don’t respond, they probably don’t.

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I would get rid of one or both of those banks. Banks are a great profit source–for their owners! I find credit unions (who do not have to make a profit) to be cheaper for my banking needs. Most of your savings (except for a reasonable checking account and an Emergency Savings fund) should go into investments that have a chance to keep up with inflation. That will not be inside a bank.

No, I’m talking about bricks and dirt. SFR rentals can be a pretty lucrative investment and managing one or two (a $300K to $1M) total is worth a little bit of time & trouble. Based on original cost, mine have returned 5 to 10% a year on the rental income and at least tripled in value over the last 12 years.

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Agreed. Though you can also have your money market at Fidelity or T-Bills for those emergency savings. Then maybe you hold your investments in excess of $500,000 at Schwab for instance