We all recognize the importance of investment diversification (Cash, Stocks, Bonds, Real Estate, etc.).

Does anyone ever consider/ worry about diversification of where investments are held?

For example, if 80% of my net worth is tied up in assets held by Fidelity, and Fidelity collapses, I'd be kicking myself about not splitting assets across Fidelity and Vanguard... but also what a headache to maintain two separate brokerage accounts.

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If fidelity collapses, which is not something I am overly worried about, your assets will get picked up by someone else. You may be locked up for some short period of time but I am confident my emergency fund and credit cards would get me by if I needed funds

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This is correct. Fidelity just holds your shares for you. They belong to you. Fidelity can’t lend them out or borrow against them. If fidelity collapses maybe you cant access them for a short period but you will get them back.

Also, if Fidelity collapses then society has also probably collapsed so in this situation I’d be long canned goods and ammo. 🤣

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No, I don't worry about that.

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That's not how it works. As others said, you'll be fine.

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Agree with others on your specific question. What you should consider beyond typical diversification, is the account type. Google the 3 bucket strategy.

Check out SIPC

Yea they call that counterparty risk

And anyone who has more than the SIPC limit should consider this a real risk

Unless you have over $500k it isn’t a problem to most.

As long as you trust the SIPC. It isn’t exactly the same as FDIC but we all know the FDIC wouldn’t be able to handle a nationwide bank run (eg March 2023 event)

The Fed had to step in.

If something similar happened on the brokerage side, I’m assuming the FED would step in. But I wouldn’t bet on it

No ur probably fine

I mean what are the chances right?

Fidelity is just a custodian.

If you’re not actively using margin and don’t have a margin debit balance, the assets are always segregated from the broker’s balance sheet and are 100% in your name, and the brokerage firm can’t lend them out. They are never at risk in the first place. They’re not subject to the firm’s creditors. You could have $500m in securities, and it’s all safe from a brokerage firm bankruptcy if you’re not using margin.

Cash balances inside a brokerage account may be in a bank sweep. If that’s the case, watch the FDIC insurance limits. Better yet, if you’ve got that much cash, you should be putting it into a money market fund or Treasuries or CDs inside the brokerage account.

Banks have FDIC insurance because banks don’t keep your cash. They keep 10% and lend out 90% to borrowers. So when you go to withdraw it, they might not have it on hand, and they obviously can’t go ask borrowers for it back. That’s what FDIC insurance is designed to protect. Brokerage firms operate differently (as stated above, they’re not lending out your paid-for assets in the first place).

Schwab and Fidelity both have excess SIPC insurance policies (Schwab’s covers up to $150m/client). Check your brokerage firm—not all of them have it, or they may have a different amount of coverage. But keep in mind SIPC is there to protect when a brokerage firm collapses *AND* assets are missing due to fraud/theft. Absent of any fraud, paid-for assets won’t be missing. Most bankruptcies have no fraud associated with them, they just went bankrupt for liquidity issues or other normal reasons. Not once in history has an excess SIPC policy ever had to pay anything out because it hasn’t been needed.

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