Money Girl Q&A: Can I Protect Investments from a Failed Brokerage?
Although there’s no insurance against losing money in an investment, there are some cases in which the Securities Investor Protection Corporation can help.
Laura Adams, MBA
by Laura Adams
Q. I know investment funds can underperform and cause you to lose money. But is it possible that an entire brokerage—like Vanguard or John Hancock—could fail and all your money invested there would be lost?
A. It’s possible, but highly unlikely, that a large, well-known brokerage firm would suddenly go out of business. But the good news is that investors do have protection from the Securities Investor Protection Corporation (SIPC) in certain situations.
There’s no insurance against losing money in an investment; however, if an SIPC-member 
brokerage fails and doesn’t have enough money to satisfy all customer claims, the SIPC steps in and supplements distributions.
The SIPC works to return your missing securities—such as stocks, bonds, mutual funds, and exchange-traded funds—up to $500,000 per customer. This amount includes $250,000 for cash in a brokerage account that isn’t invested.
Therefore, consider using multiple brokerages when you have more than $500,000 to invest. You can find brokerages with SIPC coverage and learn more at sipc.org.
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Protect Money photo from Shutterstock
About the Author
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.