Is There Insurance Against Losing Investments?

Money Girl explains what systems are in place to keep your investments safe, up to certain limits.   

Laura Adams, MBA
4-minute read
Episode #328

One of the most uncomfortable things about investing is that it involves risk. We all want to make money, but no one likes the idea of potentially losing some, or all of it.

However, there are limited protections that investors have against loss. In this episode I’ll answer a listener question and tell you what systems are in place to keep your investments safe, up to certain limits.   

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A Money Girl reader named Julie asks:

"I’m looking for insurance to protect my investments from losing value. I’ve heard that the FDIC protects your money when a bank goes out of business. Is there something similar for retirement accounts?"

What Is the FDIC?                                                                                                                            

Before we talk about investments, let’s briefly review the FDIC coverage that Julie mentioned in her question.

FDIC is short for Federal Deposit Insurance Corporation, which is an independent agency of the federal government. It was created by Congress in 1933 as a response to thousands of bank failures that occurred during the Depression in the late 1920s and early 1930s.

The FDIC isn’t funded by taxpayers, but by premiums that banks pay. An institution that has FDIC insurance covers deposits up to $250,000 per depositor. This coverage applies to each ownership account type you might have, such as single ownership (in just your name), jointly-owned accounts, and trust accounts.

However, the FDIC only insures deposits, such as money in checking, money market deposit accounts, and CDs. It never insures investments like stocks, bonds, mutual funds, or annuities—even if you buy them through an FDIC-insured institution.

Can You Insure Investments Against Loss?

Although FDIC-insured bank customers can rest easy knowing that their deposits will be returned up to certain limits no matter why an institution fails, there’s no similar insurance for investors. However, you can get some relief if your stock broker or mutual fund family closes due to financial trouble and your money is missing. 

Continue reading to find out about how the SIPC can help protect your investments.....


About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.