One Stop Perils
Busy pre-holiday week has kept me out of the blogosphere but I have gotten some interesting comments this weeks. One of them came from "Guest" regarding my personal policy of holding all of my money at Fidelity for simplicity of record keeping.
Guest writes:
Be very, very careful with putting all your eggs in one basket. All you need is one big scandal at Fidelity and there will be a 'run' on the institution and you may be left out.
I just experienced it with Refco.
To summarize for you:
1. CEO hid debt and possibly lied about it.
2. Stock crashes
3. Everyone wants out, pulls money out of their trading accounts.
4. Refco loses liquidity, freezes accounts and bounces checks.
The big suprise: Refco does not have enough liquidity to pay people back. It now seems that Refco is claiming that customers accounts that had "real" money were in fact part of Refco's Debt that should be handled under their bankruptcy (i.e. wiped out).
Bottom line: People got royally screwed.
And this from one of the oldest and most "reputable" firms in the currency trading and futures business.
Point well taken and that's why I wanted to call attention to it. Two major themes here regarding my personal preference to use a brokerage account as a checking account.
- NO FDIC PROTECTION - if the company goes away so does your money.
- No diversification to scandle - It's true, if the market were to sour against Fidelity I could feel a hit from that, not only because I own some of their funds.
All that said, I do believe Fidelity is solid enough to warrant my trust. There's a difference between a company like Refco and a company like Fidelity. Just check out their service offerings. This isn't a company that's catering to small investors with IRA rollovers.
Still, like I said, point taken and it's a good one. You have to weigh the risk against the gain. In my case I have decided that the gain is higher by having my money all in one place.
I'm planning on doing a series on Disaster Recovery methods employed by our readers. I'm talking about the measures you use to make sure your personal data and paperwork/media are protected in the event of a massive emergency. Read
Back from a Thanksgiving weekend today (left early to avoid NY-bound traffic from central PA). Three family dinners left me full of turkey, laughter and some sage advice from my wife's aunt Janine. Read
I was pleased to receive the first paycheck from my new promotion today. I'm bringing home about $250 more per pay period (2-weeks) which represents a nice increase. Beyond that I will receive a quarterly incentive package as well assuming our company makes revenue targets. Read
Remember that great ad campaign Washington Mutual ran when they went fee-free on their ATMs? I thought it was quite clever - "The buck fity stops here." Looks like they fired that ad agency this week - starting 11/17 they will charge fees on all ... Read
Irony of ironies, there was another Headline Post about all the "changes" going on at Fidelity right now:
http://www.pfblog.com/fidelityobserver/4280_big_changes_at_fidelity_and_what_it_means_for_you.shtml
This is exactly the kind of thing that would make me nervous about keeping all your money in one pot. If you're willing to live with the risk so be it.
I've also begun to reconsider having all my insurance products (auto, home, life) with one company as well for similar reasons.
