SIPC

Necessary_Paradox

Here’s w quick rundown of pros and cons; Pros Passive income generation: You can earn a small amount of extra money on stocks you already own, simply by making them available for loan. Continued stock ownership: You retain ownership of your shares and can sell them at any time, even while they are on loan. No additional fees: Robinhood does not charge extra fees for participating in the program, meaning the income you earn is pure upside. Cash collateral: Robinhood provides cash collateral, at a minimum of 100% of the loan value, to a third-party bank to protect your loaned shares in case of default by the borrower or Robinhood itself, according to Robinhood. Cons Loss of voting rights: While your shares are on loan, you temporarily lose your voting rights on company matters. Dividend impact: If a lent stock pays a dividend, you may receive a "cash-in-lieu" payment instead of a qualified dividend, which can be taxed as ordinary income at a higher rate. However, Robinhood attempts to recall shares before dividend payments to avoid this issue in most cases. Minimal earnings: The income generated from stock lending is often small, especially for individual investors with average-sized portfolios. Default risk: Although rare and mitigated by collateral, there's a risk that the borrower or Robinhood Securities could default and fail to return your loaned shares. No SIPC protection: Loaned securities are not protected by the Securities Investor Protection Corporation (SIPC), according to Robinhood. Hope this helps.

mp0295

Technically there likely wouldn't be a bankruptcy trustee, but rather the b/d would go into SIPC recievership because, under the Securities Investor Protection Act, b/ds are encouraged to use a special b/d alternative to bankruptcy proceedings under the bankruptcy code.

greytoc

All brokers that provide accounts in the US are members of SIPC and regulated by the SEC and FINRA. Just to be clear - only accounts domiciled in the US are regulated by FINRA and protected by SIPC. If the account is not domiciled in the US - the account may not be managed by a US entity. As for Moomoo - like many brokers that have international subsidiaries - they have a US brokerage business. If you goal is to diversify into US listed ETFs which provide access to non-US assets such as in HK - any broker can do that. Taking advice from youtubers is not always a good idea. If you want to choose a broker - see the factors in how choose a broker in the wiki here - [https://www.reddit.com/r/investing/wiki/index/gettingstarted/#wiki\_how\_do\_i\_choose\_a\_broker\_to\_invest.3F](https://www.reddit.com/r/investing/wiki/index/gettingstarted/#wiki_how_do_i_choose_a_broker_to_invest.3F)

thor_barley

SIPC is not there to watch while you lose your nest egg. SIPC wants you confidently back in the market. That’s not charity. SIPC’s members want hands on your money. 100% recovery is the objective. Members pay in, but SIPC also litigates to recover. And with the backing of the industry if you got a big transfer out of a failed fund you might feel like you’re chased by a governmental agency staffed by big law attorneys. No guarantees above the pledged amount but that’s not the end of the story.

Qel_Hoth

That's what SIPC is for.

geniusboy91

If funds aren't there, and the stocks aren't there, and you're over the SIPC insured limit, and no other broker wants to buy up the obligations, you'd just become a bankruptcy creditor like everyone else. If the government arbitrarily decides the fallout would be too economically calamitous, they could step in above and beyond their obligation to do so.

Ok_Appointment_8166

When you deposit money in a bank account, it is the bank's money, on their books and liable to be paid out to other creditors in a bankruptcy before you. Hence the need to FDIC insurance. When you buy funds or stocks through a brokerage, it is still your money and the brokerage has no claim to it. If they go bankrupt it may make it complicated to track things, but they can't use your money to pay off any other claims. The value of the thing you bought through the brokerage may decrease so you can still lose money. There is SIPC insurance to cover fraud but not a legitimate loss of value in whatever stock or funds you own.

ChiAndrew

SIPC has so little it couldn’t bail out a ham sandwich

Phuffu

Fidelity’s private insurance far exceeds the SIPC limit. They have a page on their website. If Fidelity or Schwab or Vanguard failed, we’d be in a financial crisis worse than 2008. I wouldn’t worry too much about it.

vpoko

Assuming that Fidelity was properly keeping records and keeping your assets segregated from theirs, you would most likely get your shares back once the bankruptcy trustee worked through their dissolution. On the other hand if they mingled your assets with theirs and ended up losing them, or never actually bought the shares they were supposed to buy, etc., then your compensation would be limited to the SIPC coverage limits.

brrods

They have the same protections as any other company that handles investments SIPC

Nudes_Are_Food

Yeah this is what confuses me. Robinhood agrees to provide the asset to you when public, but what if they don’t? What’s your legal recourse? Are there any SIPC assurances or are you just shit out of luck?

bobdevnul

RH customer support can be atrocious. Otherwise RH is ok. RH's SIPC insurance should be as good as anywhere else. Understand what it is. It is not the same as FDIC. Opening an account at the other big discount brokers is the same level of difficulty as RH. Go online and open an account. For fractional shares Fidelity is best. I had RH for a couple of years as a small side account. I ran into a bad problem the last year getting my 1099 for taxes. Customer support was very bad at fixing that. I would not use RH again. I prefer traditional brokers.

solanawhale

That’s not how that works? When you buy stocks, you legally have equity in a company. You get certain rights and benefits. You own part of the company (to some degree). You can take your stock and transfer it to another broker if you want. With “stock tokens”, all you own is a digital token that mirrors the asset. You don’t get dividends, voting rights, or SIPC protection. You don’t legally own any equity in the company. The assets are not liquid. You can only sell them via Robinhood (because no sane person would take an IOU in exchange for real money).

discodropper

That situation is complex, but the TLDR is the SIPC is still ‘recovering’ money, and his Ponzi scheme wasn’t a brokerage firm. First, the SIPC is [still recovering funds](https://en.wikipedia.org/wiki/Recovery_of_funds_from_the_Madoff_investment_scandal) for people who lost money through that Ponzi scheme, but it’s difficult to verify claims on legitimate losses since none of the profits ever actually existed. Total liabilities are estimated at $64.8B, whereas SIPC has $1.7B in assets and $1B in credit. In other words, no way they can cover the losses in full. That said, SIPC initiated one of the two lawsuits that got the ball rolling on recovering funds, and as of March 2025 about $19B has been recovered. That’s far more than the $500,000 per account guaranteed by SIPC. Second, Madoff’s Ponzi scheme was run in parallel to [a legitimate trading arm](https://en.wikipedia.org/wiki/Madoff_investment_scandal) that acted as a major market maker. The fraudulent fund was set up as an LLC and handled through his personal accounts. (He borrowed money from the legitimate arm to cover his liquidity issues when the fraudulent one started unraveling.) In other words, although he was a legitimate broker-dealer and the head of a legitimate brokerage firm, for the Ponzi scheme he was acting as an asset manager. He wasn’t acting as a brokerage firm at all, he targeted people through word of mouth and his reputation on Wall Street, essentially guaranteeing returns.

8yba8sgq

Didn't SIPC screw over the Bernie Madoff clients?

discodropper

> risk of your broker becoming insolvent Unless you have over $500,000 in assets, your broker going insolvent is covered by SIPC in the same way the FDIC insures standard bank accounts. Even above that threshold, unless you’re trading on margin, it’s unlikely you’d take a massive haircut. SIPC will usually arrange for another brokerage firm to step in, so most of your assets would be transferred over from the insolvent firm. If they can’t arrange the transfer (unusual for individual cash accounts), you’ll lose a fair amount during liquidation, but unlikely everything above that $500k threshold.

greytoc

Is this a serious question or is this some kind of weird troll? Just do whatever you want if you have such odd beliefs. You cannot remove infinitesimal risks like this - you may as well do this in multiple brokerage accounts if you don't trust the brokerage holding the funds given the limits of SIPC coverage.

rifleman209

All securities are not FDIC insured, they are under SIPC which protects the amounts of shares you own not the value of the shares Many investment products have no downside. The reason they can offer that is they scalp you on fees and take the risk themselves. It’s not that this advisor is misrepresenting per se, it’s just a way to earn way less than if you took the risk yourself.  Probably appropriate for someone on the lower end of the wealth scale with a problem to their retirement portfolio if the market falls. Having said that, I wouldn’t touch it

SirGlass

I remember reading some WSB drama where a guy was posting how he bought puts on FRC or SVB one of those two, his gamble paid off and the stock was tanking Of course 99% of the sub was telling him to hold it to zero , 1% was telling him take profits now as the stock could be halted what would complicate things In true WSB fashion he did not listen to the good advice and held, then you guessed it the stock was halted as his puts were ticking to expire He was then posting how he needed an attorney as he was planning to sue his brokerage , the FDIC , SIPC, SEC , FINRA , Nasdaq or who ever. It was an entertaining saga .

SirGlass

The difference is when banks fail since the money is commingled , that means there is not enough money to cover depositors Brokerages do not do this, the assets has to be legally separated. Meaning when brokerages fail , usually nothing happens assets are just transferred out Basically SIPC is not needed unless there is fraud ; a normal brokerage going bankruipt like bear sterns or Lehman didn't even need SIPC to step in because the assets were segregated . Even in the case of FTX, they also allowed you to purchase stocks/ETFs. Even though the company was a fraud due to regulations if you had bought stock or ETFs through FTX, those were segregated and could be transferred to another brokerage . The crypto side was completely unregulated so on the crypto side you were toast but if you have 1 million of VOO in FTX, you would not have been affected except maybe some hassle of transferring the VOO out to a different brokerage . Technically FTX was not a brokerage but for stocks/ETF they partnered with an actual USA based regulated brokerage so if you bought 1 million of VOO through FTX , your VOO was fine as it was held at an actual brokerage ; your cash and crypto would be lost however

SirGlass

What country do you live in? Most countries have some sort of mandatory insurance that would cover missing assets or other brokerage fraud, in the USA its called SIPC however the "limit" is 500k of assets what 250k could be cash It also should be noted that brokerages and banks work different . A bank commingles money , people deposit money into a bank, the bank can use the money to loan out or for its own expenses . If the loans go bad or there is a bank run it might have to try to liquidate and there may not be enough money to cover deposits Brokerages really do not commingle assets , its very illegal if they do and would be fraud, in overly simplistic terms they work more like a safty deposit box to store assets If you buy 1 million dollars of VTI the brokerage"stores" the shares . The brokerage cannot use the shares to pay expenses or it creditors cannot lay claim to the shares. If the brokerage goes bankrupt your 1 million dollars of VTI is still stored there and can be transferred out. So when brokerages go bankrupt its usually not a huge deal because of this segregation . You transfer your assets out to a different brokerage or usually some other brokerage steps in and takes over . I think the biggest issue what I will fully admit I am not a expert on is fintechs that seems to offer brokerage or banking services but are not an actual regulated bank or brokerage The whole Yotta debacle were they sort of advertised themself as a "bank" but they were not actually a bank, or brokerage so when they went bust there was little recourse for depositors Meaning use an actual bank or brokerage not some new fin-tech company that is not a regulated bank or brokerage but just offers "bank or brokerage services"

Legaon

Do you mean that: “you are about to reach an insurance cap”? 80k is your insurance cap? Ex: My investment platform is (SIPC insured). SIPC insurance cap is ($500k US dollars). Once I have manually allocated exactly ($500k US dollars/have reached SIPC insurance cap) — I will then: —>(1)stop manually allocating money to the “investment platform that I reached the max of SIPC insurance.” —>(2)I might open up another investment account, at another investment platform, “in which there is a new insurance cap.” So that I never exceed the insurance cap limit.

Slick_McFavorite1

SIPC covers up to $500K. I don’t know where the $80K amount you are referring to is coming from.

OurNewestMember

> Best case scenario, you're looking at account freezes and SIPC stepping in. "Best case" is more like the brokerage's private insurance kicks in

ShootFishBarrel

["UNCOVERED CALL SELLING CAN ONLY BE PERFORMED IN A MARGIN ACCOUNT"](https://support.tastytrade.com/support/s/solutions/articles/43000435195) Furthermore, only a moron would place their retirement with a brokerage that *actually* allowed naked calls in an IRA. Why? Because when some *other* trader's naked call blows up and they lose 10x the value of their account balance, **someone has to pay the fucking bill**. And guess what? IRAs have strict legal limits. If an IRA account racks up $1 million loss, it's illegal for the account holder to just wire in more cash to cover it. They're capped at $7,000/year in contributions (or $8,000 if they're over 50). You can't just "make it right," *the law prohibits it.* So who would eat the loss? The brokerage and potentially other investors who did nothing wrong. If enough of those accounts implode in a fast-moving market, the firm's capital reserves gets vaporized. And if that happens, **every other customer**—even the cautious ones—are suddenly exposed to counterparty risk. Best case scenario, you're looking at account freezes and SIPC stepping in. Worse-case? You lose everything even when your trades and investments were sound. No legitimate brokerage allows truly naked calls in an IRA because ***someone has to pay the fucking bill.*** And IRAs can't be backfilled with new funds beyond yearly contribution limits. So if someone blows up their account and owes negative $1M, guess what, it's illegal for them to contribute more than $7000.00 per year to make up for the loss. Tastytrade flirts with these limits because it’s run by people who think they’re volatility gods. But regulators should’ve shut this shit down years ago.

Greenappleflavor

>> those $30 would be paid monthly (usually), Never for 9 months brokered CD. Over a year would pay either annually, monthly or semi-annual but never monthly under 1 year. That’s how clients can decide what cash equivalent to go with. Broker CDs can’t be redeemed early (even with forfeit of interest), only sold on secondary market which is why the price will fluctuate but as long as it’s held to maturity, it’s not an issue. Brokered CDs are FDIC insured. They may be callable. Fully taxable but the rate is locked. Etf like sgov or money market funds are SIPC covered. They are liquid (money market funds esp since the NAV is $1 and there’s been only less than a handful of mmf that “broke the buck”). But the rate is not locked and the interest (mmf) is paid monthly and compounds. I could go on (tbills, single premium deferred annuities, etc.) but most doesn’t need anything past those two for parking cash.

snoosnusnu

SIPC is federally mandated, was created via federal legislation, and is overseen by the SEC. Similarly, the FDIC was also federally mandated and created via federal legislation. SIPC and the FDIC are both government corporations. And while SIPC does differ from the FDIC in some ways, to say it isn’t “backed” by the government is disingenuous at best. If you want to dive deeper into the semantics of it, FDIC insurance is “backed by the full faith and credit of the government of the United States.” Faith doesn’t have any substantial meaning or backing and the credit of the government can fail. The US credit rating was just reduced for instance. Furthermore, the purpose of the SIPC is to “expedite the recovery and return of missing customer cash and assets during the liquidation of a failed investment firm.” Which is SIMILAR to the FDIC and banks. You know, if you want to play semantics and all.

aristotelian74

It's really not that similar. Money market funds are very safe but if there is a bank failure on a Friday, you will have your FDIC covered funds on Monday. SIPC would be a longer process.

Yossarian_Matrix

Right, but if your bank fails FDIC guarantees your money. SIPC just guarantees your securities will still be there if the broker fails, but if they fall in value that's on you. Money Market Funds are 99.9999999999999% safe. Worst case scenario is they go down by a tiny amount temporarily during an apocalypse, but you will still be better off than anyone with stocks or bonds. 

mp0295

So what was your original point? FDIC guarantee and treasuries are each US gov credit risk so no difference there. SIPC covers against fraud at your brokerage. There's also Rule 15c3-3 to segreate assets which protects assets in a broker default (plus SIPC protection). So how is a FDIC bank account safer? Maybe can argue that SIPC doesnt have full faith and credit guarantee of US like the FDIC does, so if Fidelity decided to do massive fraud the SIPC can run out of funds. But that seems vanishingly unlikely for several reasons

snoosnusnu

Money Market funds are covered by SIPC, which is similar to FDIC. No, it’s not the same, but it is similar and effectively the equivalent for brokerages.

snoosnusnu

Money Market funds are covered by SIPC, which is similar to FDIC. No, it’s not the same, but it is similar and effectively the equivalent for brokerages.

SenatorAdamSpliff

Well conceptually it’s similar; FDIC covers your deposits in the case of a bank failure; SIPC covers your assets if your brokerage fails and for whatever reason your assets were not properly segregated.

Successful-Tea-5733

SIPC insurance doesn't insure the actual asset. If you own AAPL and it goes to $0, SIPC doesn't do anything for you.

Physical-Flatworm454

May be insured by SIPC.

greytoc

Fwiw - the type of fraud perpetrated by Madoff is highly unlikely to occur at a typical retail brokerage. Madoff's fund only accepted investors through other funds, feeder funds, and uhnw accredited individuals and family offices. Even today when there is systematic fraud like what occurred with FTX's crypto fraud, no investor in a regulated US equity account lost their assets. And SIPC didn't even have to step in with FTX because of how custodial processes operate.

Beautiful-Parsley-24

*In theory*, if you're the registered shareholder of record, then you have less risk of a "Bernie Madoff" type event. But, in reality SIPC is more than enough for most investors. Plus Bernie Madoff operated as both a stockbroker-dealer **and** as an investment advisor-manager, which helped him hide his fraud.

anotheranon223

A lot of that negative sentiment game from the exchanges halting during the GameStop rush. I was not exposed to any of that but I understand the emotion behind it especially when the movement behind the GameStop squeeze was against the "institutions". In the past I haven't had any issues withdrawing money. Now there probably is some exposure to less protection from SIPC but RH is one of the most used exchanges for retail traders, because it's simple, and im as simple as they come. Now whether or not that means it's good is a different story. I am limited to $50,000 ACH withdrawal per day. which is on par with most exchanges, so I don't feel the need to move it. With all that said, I'm just a regular dude on the internet. make your own assessment.

TheNguyenBro

I've been trading for years and never heard of this. This sounds appealing. What about for dividends? I'm assuming the % must be varied per stock but what kind of return can you expect for owning a dividend stock. From what I read the only thing negative is no SIPC coverage in the situation if fidelity goes bankrupt you are no protected with the 500k

omgpuppiesarecute

I just put 30k into SGOV yesterday. 6 months of emergency fund (also keeping 1 month cash, 1 month in a HYSA). This is making me think twice. Then again FDIC and SIPC both get funded by the Treasury, and bond holders legally get paid first so maybe it is safer?

reaper527

> Is investing on a app (cash app) bad apps in general, definitely not. cashapp specifically? maybe. you want to make sure that you can transfer your shares out if you ever waned to, and you probably want to see if the platform supports option trading. outside of that, it mainly comes down to if it has all the shares you want to buy, if it's covered by SIPC (the insurance if the company fails, kind of like FDIC but for stock brokerages) and if there are any fees. (and i guess if you want to use margin at some point, if they offer that and what the rate is)

Typical_Two_5746

It’s technically not as safe. I’m not sure it’s all that relevant, but SIPC protects the shares in your account while FDIC protects the *value* of your account. For example, you have 1000 shares of SGOV which is worth roughly $100k. If the value of SGOV dropped to $0 (more on that later), SIPC would guarantee the shares but they would be worthless. That same $100k at an FDIC insured bank would be secure. You would get your $100k, unless we went full mad max and the U.S. government ceased to exist. Now of course, short term treasury bills are the backbone of the global financial system so in the event of a collapse that severe, I’m not sure the dollar would have any value. But, it’s worth noting that there could be a scenario where the U.S. treasury completely defaults but there is still a U.S. government which would insure the dollars.

sleepyjuan

From ChatGPT O3 model: TL;DR – keep it in cash-equivalents, not “investments.” Here are the usual suspects, all virtually risk-free and liquid inside 12 mo: 1. 6-month T-Bills – Buy on TreasuryDirect or in a brokerage account. Yield ~5.1% today, exempt from state tax, backed by Uncle Sam. Redeem or roll when they mature. 2. High-Yield Savings (FDIC-insured) – Ally, Capital One 360, SoFi, CIT, Marcus… all floating around 4.3-4.6% APY and you can pull the cash anytime. 3. No-Penalty CDs – Ally’s 9-mo at 4.55%, CIT’s 11-mo at 4.90% etc. FDIC coverage, but you can break early with zero penalty if you find a house sooner. 4. Prime Money-Market Fund (VMFXX, SPRXX, FDLXX, etc.) – ~5% 7-day yield; not FDIC, but ultra-short gov’t paper and SIPC-protected in a brokerage. For a down-payment you must have on a fixed timeline, don’t chase anything with market risk—stick to cash, CDs, or Treasuries and sleep easy.

SirGlass

Unless the brokerage was committing fraud and co-mingling assets (what IS illegal and would be fraud) nothing, your assets are transferred to another brokerage SIPC insurance protects against this fraud , the brokerage losing your assets . Example if you have 1000 shares of VTI , and somehow your brokerage loses them SIPC will work to return you those 1000 shares SIPC will not insure the value of those 1000 shares, if VTI drops by 50% thats just an legitimate investment loss

AICHEngineer

Well they have the full backing of the united states government, and since its a brokerage account I assume they have standard SIPC coverage which replaces missing stock and other securities on the order of half a million dollars. Just use one of the big name brnad brokerages and youre safe as can be

ViolaKiddo

Two things. If you want to park it somewhere and make a decent return. A money market mutual fund may be your friend. And the second part to that is liquidating a portion to buy equities, bonds, or commodities(but mostly equities). This allows you to take advantage of different price points in the volatility. A lot of FAs would start like this when building a portfolio. That being said this isn’t financial advice I’m just a funny guy on the internet. Money market mutual funds are not FDIC guaranteed and is a security investment that can result in the loss of principal. Past president doesn’t indicate future results. That being said they are insured by SIPC in the sense as if the investment firm you invest in goes bankrupt or loses your securities they will spend up to 500,000 to recover your assets. Please correct me if I have anything wrong.

SecretInevitable

Money you will need in the next five years should be in cash. My funds for this purpose are in high yield savings, not even in a brokerage at all. You could also use a money market fund at any broker, I just favor FDIC insurance on the HYSA over SIPC for MMs, and also to resist the temptation to YOLO that money.

Efficient_Top_811

Fidelity’s Cash Management Account is a great place to park cash for an emergency fund. For the following reasons: 1) pays a decent interest rate… 2) allows access to my money by…Debit card/ATM card 3) allows me to write checks 4) allows me to pay bills in Bill-Pay 5) allows me to manage on my phone/tablet 6) money protect by SIPC or FDIC , depending on your core set-up. 7) Fidelity has 57.1 million customers….somebody must like them.

gumbo_chops

Money markets are covered by SIPC which protects up to the same amount of cash per account as FDIC, i.e. $250,000

AccidentalPickle

Money market. Check out Vanguard Money Market VMFXX. Pays more than 4%, is SIPC insured and you can easily tap it to invest whenever you’re ready.

Christopher_Ramirez_

Semantics. I can say insurance is a bet on the future solvency of the counterparty. In this case, your broker and the SIPC program.

Mrbusiness2019

SIPC gets its money from annual fees that brokerages are required to pay (kind of like insurance premiums). They have a ~$4B reserve fund, and if that’s not enough, they can borrow from the U.S. Treasury…so it’s not taxpayer-funded by default, but it has a government backstop. It only kicks in if a brokerage fails and customer assets are missing… not if your investments just lose value. SIPC is like a co-op safety net funded by brokers, with a federal credit card in its back pocket if the financial world catches fire. It’s solid for individual broker failures (like MF Global or Lehman’s brokerage arm), but not designed for system-wide collapse. In that case, you’re on your own unless Congress steps in.

Dull_Principle2761

Where does the SIPC get its cash from. I didn’t know this.

Mrbusiness2019

Many major brokerages (like Fidelity, Schwab, IBKR) also have additional private insurance that goes beyond SIPC—often hundreds of millions. In the U.S., SIPC (Securities Investor Protection Corporation) protects brokerage accounts up to: • $500,000 total per customer • Of which $250,000 can be cash

Embarrassed_News6103

I’ve had 90 shares of PNC and 30 shares of Pepsi since I was born, I guess given to me by my grandpa. I’ve never touched any of it. I also have this third account with PNC that says QPNCQ- PNC BANK DEPOSIT SWEEP PROGRAM NOT COVERED BY SIPC and I have no clue what it is, but there’s like 3 grand in it. Wtf should I do with these stocks? Not planning on selling or anything because of the market but are they good ones to have? Do I need to diversify in the future? I also have like $40K in my bank account I’m not doing anything with. Should I buy more stock?

Many-Enthusiasm1297

Ahh yes 1929 before the FDIC and SIPC existed, stop fear mongering

JunkReallyMatters

SIPC coverage doesn't insure the value of your investment—it protects you if your broker fails. Having said that if it’s a money market that invests in government securities that should be pretty safe, although who knows these days..

Work2Tuff

Aren’t they SIPC insured?

FourteenthCylon

Just like the money in your bank account is insured through the FDIC program against loss caused by the bank failing, federal SIPC insurance covers brokerage accounts from the risk of the brokerage going bust. There's a $500,000 limit per account, but I'm nowhere near that yet. https://www.bankrate.com/investing/sipc-insurance/

ServerTechie

Leave the money in Fidelity, it’s perfectly safe there, you’re not required to invest it. In fact you should keep Brokerage money it in FDLXX, it’s a high yield money market fund that barely taxes the interest earned. For the Roth, if you don’t wanna buy equity then consider FCNVX. It pays a little more than FDLXX and you needn’t worry about taxes on Roth gains. It’s not uncommon folks to leverage brokerage as savings accounts, in fact it gives you more choices on how the cash is stored. Cash in Fidelity is also protected by SIPC, which actually insures higher than FDIC does.

std_phantom_data

The cash is FDIC insured because it's held by other banks. There was a case of another fin tech losing track things. i try to keep most of my cash with them in SGOV.   They have SIPC insurance and equities are held by a 3rd party. be sure to turn off security lending, they is not covered by SIPC I am concerned that I was told not long ago that they will no longer support TOTP for 2fa, only SMS. 🤮 But they might add support for passkeys( currently I think it's limited to not all devices).

meshreplacer

If you hold over SIPC yes net-cap would be of concern. I would not feel comfortable having an account over SIPC size limits there.

limestone2u

Not interested in the Vanguard funds per se. More interested in diversifying my money.. With Musk/Trump braying about getting rid of the FDIC and their going after law firms & media outlets that offend them; want to make sure that if Schwab makes a misstep, or Musk/Trump go after SIPC that I will not be cut off from my IRA & brokerage account. Me Paranoid much?

DebtLife_Projects

I personally keep mine in a MM fund. Earns 4.2% (higher than a HYSA), SIPC insured, and easy enough to access if I need it (only takes a business day to sell and transfer the money).

AccidentalPickle

Right now I have basically all of my cash in VMFXX. It’s got a 4.3%ish yield which is better than my HYSAs and it’s SIPC insured.

SirGlass

It depends how. If the brokerage is hacked or suffers a security breach SIPC should cover it. However if you fall for a scam and accidentally give scammers your user name and password and they log on using your credentials well generally that's not covered .

Legaon

You are only insured, if the investment account falls under the aspect of being (SIPC insured). —>SIPC insurance = your investment account is insured to the maximum of $500k dollars. Aka: if you were to manually allocate $500k dollars, that is “the maximum of SIPC insurance.” If you were to manually allocate MORE THAN $500k dollars, the extra amount — will not be covered by SIPC insurance. —>If your account gets hacked, by a 3rd party. And the 3rd party starts (selling shares for cash + etc). SIPC insurance, does not cover for (investors who have their accounts compromised). Although, it depends on circumstances. —>If (Robinhood platform), were to (get hacked) or (go bankrupt) — because the platform had experienced some unexpected event. SIPC insurance, would cover for that. Although, you are responsible for SIPC insurance aspects. It is a much safer aspect, to just open up your investment account with (Schwab) or (Fidelity). Name brands matter, in the investment world.

claywhat

Where do you think insurance companies like FDIC and SIPC park their money?

greytoc

No - you are incorrect, And you are misunderstanding what that means. That is not how SIPC works. "SIPC protects cash in a brokerage firm account from the sale of or for the purchase of securities. Cash held in connection with a commodities trade is not protected by SIPC. Money market mutual funds, often thought of as cash, are protected as securities by SIPC. SIPC protects cash held by the broker for customers in connection with the customers’ purchase or sale of securities whether the cash is in U.S. dollars or denominated in [non-U.S. dollar currency](https://www.sipc.org/for-investors/investor-faqs#does-sipc-protect-foreign-currency-in-my-brokerage-account)." Source - [https://www.sipc.org/for-investors/what-sipc-protects](https://www.sipc.org/for-investors/what-sipc-protects) A money market mutual fund is treated like a security under SIPA as you said. What that means that the protection is from loss of the security - not the loss of value of the security. If a money market mutual fund breaks the buck - that difference is not protected. SIPC protects the account if a brokerage becomes insolvent and there is a shortfall in the account value. That's the 250k limit. It has nothing to do with protecting a money market mutual fund's NAV to be set at $1. "Investments in the stock market are subject to fluctuations in market value. SIPC was not created to protect these risks. That is why SIPC does not bail out investors when the value of their stocks, bonds and other investment falls for any reason. Instead, in a liquidation, SIPC replaces the missing stocks and other securities when it is possible to do so."

baby_budda

It is accurate. A money market mutual funds held in a brokerage account are covered by SIPC insurance. They are treated as securities under the Securities Investor Protection Act (SIPA) and are protected up to the $500,000 limit per account, which includes a maximum of $250,000 for cash.

AccidentalPickle

SIPC insured. Some risk in the underlying securities but next to zero. I am carrying a ridiculously high amount in VMFXX currently as it pays nearly 4.5% and is darn safe. Letting the recession winds blow before I invest it back in equities.

BRK_B94

SIPC

McKnuckle_Brewery

Your 529 isn't insured like a bank either. Nothing in a brokerage or tax-advantaged plan is. So please don't let that guide your decisions. There are FAR more prevalent risks to contend with. Brokerages are insured through SIPC however. I have 529 plans with Fidelity and Franklin Templeton. Both have a money market option inside the plan, so earnings remain tax-free. In prior years, I withdrew known expenses to a money market fund in my brokerage account and staged it there. I simply transferred it to my student or had it debited by the school during the year. I left a small "catch-up" withdrawal for the very end that was precise, so I didn't exceed qualified expenses. But this was in 2022-2024. I still held 30% stocks in these accounts then. 2025 is a whole 'nother story. I de-risked the whole ball of wax. I also hold individual bonds in a taxable account, but these are very different from a bond fund. For context, in 2022 my freshman entered college. Now I have a junior and another freshman. Both will keep using funds for grad school as well.

Greedy_Fondant_1188

This is what I learnt recently. SIPC protection means nothing to individual retail investors. When Lehman brothers went bankrupt, they did not allow the account holders to transfer their trading accounts to another broker. They instead filed for bankruptcy and every retail individual investor like us (who are not banks or financial institutions and thus not secured creditors), received only 41 cents on the dollar from SIPC. So if Charles Schwab or Interactive Brokers were to go bankrupt, don't for a minute think that they will allpw us to transfer our accounts to another broker. They too will file for bankrupty and trap us. We too will only get some cents on the dollar since the financial institutions will extract all their money first and then the leftover will be distributed to us individual investors. SIPC protection is useless. 

Greedy_Fondant_1188

This is what I learnt recently. SIPC protection means nothing to individual retail investors. When Lehman brothers went bankrupt, they did not allow the account holders to transfer their trading accounts to another broker. They instead filed for bankruptcy and every retail individual investor like us (who are not banks or financial institutions and thus not secured creditors), received only 41 cents on the dollar from SIPC. So if Charles Schwab or Interactive Brokers were to go bankrupt, don't for a minute think that they will allpw us to transfer our accounts to another broker. They too will file for bankrupty and trap us. We too will only get some cents on the dollar since the financial institutions will extract all their money first and then the leftover will be distributed to us individual investors. SIPC protection is useless. 

Greedy_Fondant_1188

This is what I learnt recently. When Lehman brothers went bankrupt, they did not allow the account holders to transfer their trading accounts to another broker. They instead filed for bankruptcy and every retail individual investor like us (who are not banks or financial institutions and thus not secured creditors), received only 41 cents on the dollar from SIPC. So if Charles Schwab or Interactive Brokers were to go bankrupt, don't for a minute think that they will allpw us to transfer our accounts to another broker. They too will file for bankrupty and trap us. We too will only get some cents on the dollar since the financial institutions will extract all their money first and then the leftover will be distributed to us individual investors. SIPC protection is useless. 

Greedy_Fondant_1188

This is what I learnt recently. SIPC protection means nothing to individual retail investors. When Lehman brothers went bankrupt, they did not allow the account holders to transfer their trading accounts to another broker. They instead filed for bankruptcy and every retail individual investor like us (who are not banks or financial institutions and thus not secured creditors), received only 41 cents on the dollar from SIPC. So if Charles Schwab or Interactive Brokers were to go bankrupt, don't for a minute think that they will allpw us to transfer our accounts to another broker. They too will file for bankrupty and trap us. We too will only get some cents on the dollar since the financial institutions will extract all their money first and then the leftover will be distributed to us individual investors. SIPC protection is useless. 

Greedy_Fondant_1188

When Lehman brothers went bankrupt, they did not allow the accountholders to transfer their accounts to another broker. They instead filed for bankruptcy and every retail individual investor like us (who are not banks or financial institutions) and thus not secured creditors, received only 41 cents on the dollar. So if Charles Schwab or Interactive Brokers were to go bankrupt, don't for a minute think that they will allpw us to transfer our accounts to another broker. They too will file for bankrupty and trap us. We too will only get some cents on the dollar since the financial institutions will extract all their money first and then the leftover will be distributed to us individual investors. SIPC protection is useless. 

inkslingerben

File a complaint with SIPC.

IlIllIlllIlllIllllI

I sold off a lot of my VOO and QQQ a few weeks ago, shortly after the mid-Feb peaks. Got laddered orders queued up to execute as things drop, and have plenty of brokerage cash and SGOV collecting interest/dividends in the meantime. I don't think I would truly panic unless SIPC collapses or the entire economy crashes.

Lazy-Industry2136

Yeah, no way they would/could operate without SIPC insurance

BytchYouThought

You're wrong. They're insured. You're don't seem to know brokerages fall under SIPC anyhow.They have both SIPC and literally millions in FDIC insurance.

Kwhip

RH cash account is insured through a combination on SIPC and FDIC.

VenJules

Good question. A HYSA is FDIC-insured up to $250K, so even if your bank goes under, the government steps in. Money market funds work differently. They’re covered by SIPC. They basically make sure you get your money back but don’t guarantee it holds its value. They usually stay at $1 per share, but every now and then, one dips below that. When that happened before, it was mostly funds holding junk assets, not ones backed by U.S. Treasuries. I suggest going with a HYSA if you just want something stable and easy to access. Rates are around 3.5 to 4.5% right now, which isn’t amazing but still decent. If you're looking, I suggest going with ones that have been around for several years, and you can find them on [HYSA rate comparison sites](https://banktruth.org/savings/?ttcid=hysa-rate-comparison-sites-v). Now, for some additional research, go for ones that have already made a name for themselves and have generally good customer service. You can find a lot of threads about different HYSAs here on Reddit as well.

CardinalNumber

Individuals are the weak link. Keep your phone/computer secure, don't give out your login info, don't blindly click links, don't give anyone your MFA code, don't provide important info to people you aren't 100% sure about, etc. Giving your account away to a scammer is not covered by SIPC or any other depository insurance.

xiongchiamiov

Good for asking, although next time it's good to understand before you invest in something. A bank account is insured by the FDIC, a federal institution, up to $250k. If the bank fails (which [happens surprisingly frequently](https://www.fdic.gov/bank-failures/failed-bank-list)) the federal government ensures you will get your money, albeit perhaps after months. Money market funds are usually held through a broker, in which case they're covered by SIPC insurance. This differs from FDIC in that they only guarantee you will get your funds, but not that those funds retain any particular value. Money market funds aim to stay pegged to a dollar. If the value goes below that, it's known as "breaking the buck". This happened three times before 2008, and then I think one fund then. So there's no guarantee you won't lose money. However: 1. Those returned around 95 cents on the dollar - people weren't losing everything. 2. They were funds invested in trashy securities, not ones in high quality bonds like treasuries. 3. The federal government stepped in in 2008 to make sure investors were made whole, though they'd no guarantee they will again. 4. The dodd frank act added additional regulation to enforce liquidity. If you are in a month market fund that's invested only in treasuries, the value of those is guaranteed by the federal government. So: a money market fund invested in treasuries is not the same amount of risk as a bank account. It is, however, very close.

AndrewBorg1126

Note that SIPC insures against the custodian doing fraud. The value of the things held by the custodian is not guaranteed against dropping. When the thing held by the custodian is *very* short term debt, the biggest reason it is unlikely to drop in value is because of how short term the debt is.

AdhesivenessMotor139

If the FIDC and SIPC was eliminated tomorrow. What would you do with your funds now that they are no longer secured?

burner46

SIPC

EcrofLeinad

Money Market Deposit Accounts (MMDAs) which are offered by banks/credit unions *are* FDIC insured. [https://www.fdic.gov/resources/deposit-insurance/faq](https://www.fdic.gov/resources/deposit-insurance/faq) Money Market Mutual Funds (MMMFs) which are offered by brokers are not FDIC insured, but are SIPC insured. SIPC insurance does not protect against a decline in value of the fund but rather guarantees that in the event that a broker fails you will retain ownership of the number of fund shares a broker was holding on your behalf. [https://www.sipc.org/for-investors/what-sipc-protects](https://www.sipc.org/for-investors/what-sipc-protects)

mewalkyne

It's SIPC, and it only insures cash held by the brokerage that isn't invested in anything and the holdings. It doesn't insure the value of your MM funds if they were to drop.

Icemelon77

Literally this — all stock holdings are insured by SIPC up to $500k and any cash is insured by the FDIC up to $250k… I’m pretty sure most people here are fine even if Robinhood goes under

Mean-Performance3940

Yes, if you look back at past events you will find lots of instances where brokerages had technical problems during times of extreme market volatility. Robinhood is not a real brokerage in my opinion. Look at them the past 2 leap years, they had problems both times! I would say there is a small benefit to having 2 accounts with the larger firms if you want to buy individual stocks during rough times in the market. It’s nice to say SIPC, which helps long term to recover any lost securities due to fraud, but there is no recovering lost opportunities due to technical difficulties at a brokerage.

AstockcollapseNow

Coming soon: administration removes FDIC and SIPC protections.

Relevant-Highlight90

Let's say your two factor auth is compromised and somebody empties one of your brokerage accounts. SIPC doesn't cover fraud. Do you want to lose everything? Open accounts in multiple brokerages.

Organic_Morning_5051

\>For example, when it comes to saving accounts, since FDIC insurance is limited to $250k per account, I believe it makes sense in opening a new account when you hit the limit. The SIPC is 500k per brokerage. Regarding holdings in multiple places outside of the protection limit funds and such do not have interactions with the broker at that level. So, let's say you buy into a Vanguard fund but you are with the broker Fidelity. If Fidelity went under you have 500k protections for the cash / equivalents / contracts held presuming that there was complex elements for their execution. If, however, the Vanguard fund goes under unless there was material misstatement in their financials you're just out of luck. So for most people there's no reason to open multiple accounts but if you did putting all the eggs in one basked across those accounts offers zero protection.

Successful-Tea-5733

No not really. First off you have SIPC insurance which is $500k but really you own the equity positions, if your brokerage went under and you owned 100 shares of nike, you still own those 100 shares. There definitely is no benefit to opening multiple accounts at the same brokerage for the same reason you wouldn't open 10 checking accounts at the same bank; no additional protection. Also to your point about opening new bank accounts once you hit $250k, the ultra rich don't do that. If Patrick Maholm's has $50 mil in the bank, he's not banking at 200 different banks. Chase, BOA, Wells Fargo, those 3 for sure are not going under. If they do, your FDIC insurance is probably going down with them.

ScottishTrader

SIPC is for brokers - [Account protection with SIPC for no additional cost | Robinhood](https://robinhood.com/us/en/support/articles/Account-protection-with-SIPC/)

greytoc

That is not true. Brokers don't work that way. And neither does RH. Customer assets are held in custody and not on the balance sheet of the broker. In the event that a broker becomes insolvent, the common practice is for the accounts to be sold to another broker. If there is no buyer - which is rare, the accounts are liquidated and cash returned to customers. In the event of wide-spread fraud - customers assets are recoverable and the recovering process is funded by SIPC. It's exceeding rare for an SIPC member broker to fail and for customers to lose their money. Even when FTX failed speculator from wide-spread fraud - investors in the regulated brokerage portion of FTX recovered all their assets because those assets were held in custody. That doesn't mean that RH is a broker that I would recommend - but if you spread misinformation - it does not help your argument about why an investor shouldn't use RH as a broker.