Hey Everyone, Lately I have been consolidating all my investments from multiple brokers into one i.e. fidelity. I have noticed that fidelity has the most superior order routing and overall I feel much comfortable trading at fidelity compared to my other brokers Robinhood, webull, chase! I am just curious on is there any risk in having investments worth more than 1 million USD in a single brokerage account?
You should try TDAmeritrade
Curious - why? I heard good things about IBRK instead.
best user experience and intuitive interface
There is always counterparty risk. I wouldn't do this with a small firm, but Fidelity is close to your lowest risk possible. Moreover, if Fidelity were to go under the assets there would already be too much for SIPC to truly cover, and the situation where they go under likely involves contagion anyways...so assets elsewhere wouldn't really help. It's a real too big to fail situation, so I say go for it. The biggest risks are more cyber security. If they get hacked, you leak your password, etc. But typically a consumer's exposure is actually greater with more accounts (more likely to be hacked anywhere, most folks reuse passwords, etc). So I find that a low surface area for attacks - i.e. only one or two brokers/banks - and really strong security at those (incredibly long, complex, unique, randomly generated passwords; robust, ideally physical key based 2 Factor authentication; withdrawal limits, etc) are actually safer all things considered.
Even if fidelity goes under, I don’t think the stocks you own will be affected. Fidelity is just the custodian of the record of stock ownership
Yes, hence exceedingly low risk. Almost always assets are fine and just transferred. But SIPC does exist for a reason and brokerages can go to liquidation. Cash is arguably the biggest asset at risk, but securities are technically at risk.
Risk is that the brokerage goes under. During the last bust there were concerns on E*TRADE after Lehman Luckily they pulled through. Brokerages are covered under SPIC. $500k max which includes 250k cash max.
If bank goes down you probably are insured for 250k. Figure that out
A lot of these brokerage companies are owned by the same company
Invest excess cash over insured limit in short term treasury ETFs from other institution. But you should be doing it anyway since most brokers lowball on interest.
Just curious. How old are you? And is the 1M just after tax money? Or does it include 401k , IRA ? Thanks. Good work
I am 29. This is just stocks and yes, I will have to pay tax on gains when I sell them. Bloomberg uses empower for 401k so no it does not include it. Thanks :)
Even if fidelity goes under, I don’t think the stocks you own will be affected. Fidelity is just the custodian of the record of stock ownership
If a brokage goes under you still own the stocks you bought right? The SPIC is only for the "univested cash" right? I am newbie to this so very interested to know.
Yes I think so
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Pragmatically risk increases with broker count. But yes, you probably want to split your holdings between two brokers so that you always have the money to sue the other.