Keep all Your Investments in 1 Place?
Dear Dr. Don,
I'm wondering about diversification using investment firms. I opened my first Roth individual retirement account with the same company where I have my 401(k) and stock investments. Is it a mistake to put all of my money in one place?
Thanks,
-Corny Bushel
Dear Corny,
A common adage, which also applies to investing, is "Don't put all your eggs in one basket." The opposite idea is attributable to industrialist Andrew Carnegie, "Put all your eggs in one basket and then watch the basket." The question then becomes, "Which approach is right for you?"
The attraction to having your investment accounts held at only one firm is convenience and focus. When your investments are managed by a single firm, it's easier for the financial professional there to help you with asset allocation decisions and portfolio rebalancing.
Diversifying your investment accounts across firms will not protect you against investment losses. What you would be protecting yourself against is theft of your assets by a broker. Other potential worries include if the brokerage firm fails if your total investments are worth more than Securities Investor Protection Corporation insurance limits.
The specific company where you keep your investments, like many brokerage firms, offers insurance coverage over and above the SIPC coverage for its customer. The additional coverage kicks in when those limits are exhausted for the customer.
Are you really worried about the theft of your investment securities, or about the future of your company? You probably don't need to be. It is also unlikely that another firm provides much different investing options.
Stay focused on how you are investing. You don't need to worry so much about moving your money around.
Get more news, money-saving tips and expert advice by signing up for a free Bankrate newsletter.
Ask the adviser
To ask a question of Dr. Don, go to the "Ask the Experts" page and select one of these topics: "Financing a home," "Saving & Investing" or "Money." Read more Dr. Don columns for additional personal finance advice.
Bankrate's content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate's Terms of Use.