I got spooked by a bad news story about Charles Schwab. A top investor in Charles Schwab sold its entire $1.4 billion stake as the brokerage fell victim to the banking turmoil (msn.com) A top investor in Charles Schwab sold its entire stake amid turmoil in the banking sector in March. The investor sold their entire stake at a loss. And on one of the news articles that I read but not linked to, there was a comment to get your money out of there now! And I remembered that this is probably what usually happens before a big company collapses. The company says that everything is fine and provides great deals on its financial offerings, but the bad news stories keep rolling in anyway. Since Schwab is an investment bank, none of its products are FDIC insured. And I was somewhat suspicious that the negative earnings that my mutual fund had suffered from its investing in stocks for this year had mysteriously changed to positive in the past few days. So, taking heed of the warning signs, I sold my entire investment in my Schwab mutual fund on Friday at a loss, and I'm hoping the money transfers into my bank account before Schwab fails. I hear that this week, probably on Wednesday or Thursday, they will be releasing financial reports. So, it's the moment of truth. I hope my bank doesn't fail as they get tied into a cash exchange with Schwab. I'm done with investing for now. I'll be moving my money into an FDIC-backed savings account. I was thinking of taking the cash out of the bank and hiding it because the Republicans in the House will almost certainly let the federal government default on its debt, but, then, I realized at that point having a little extra cash on hand will be the least of my worries as society collapses around me. Who can spend a dollar then?
I would highly suggest speaking to an investment advisor. No investments in mutual funds are FDIC insured because they are not deposit. The FDIC insurance is if the bank collapses your deposits are safe up to $250K. If you own mutual fund the value is determined by the companies or investment instrument those mutual funds hold. Even if Schwab goes out of business those funds will still retain their value. What you would risk if the US defaults on it debt is the value of the mutual fund may go down but they will not simply disappear.
Where your money will slowly be eaten away at by inflation. Even if you're getting a 2% interest rate return, your savings will actually be dwindling away if inflation is at 3%. Inflation is a tax on those who are trying to save money.
There are good reasons why gold has jumped about 15% since January. I withdrew most of my cash from the bank a few weeks ago; 'FDIC insurance' doesn't mean squat when 100 million claims get filed at once. lol The Fed is already making sure the billionaires are getting theirs all back far beyond the '$250K' sums, and they're using the FDIC insurance reserves to make them whole. You really think they will have enough left over to cover the 'little people' in a crash? lol dream on. If they do it will take many months, probably years, to get everybody paid off if at all.
The purchasing power of the dollar went up between the depression and WWII because they were harder to come by as the economy tanked. Anyway, Schwab's problem is that it holds a lot of low yield bonds and has had to borrow a lot of cash to keep from selling those bonds at a loss in order to pay higher interest to customers to stop their client base from hemorrhaging. That spooks investors in their stock I suppose since there are plenty of big players out their hauling in huge dividends as opposed to having to borrow money to stay afloat.
Maybe I should speak to an investment adviser. But I was worried because the mutual fund is provided by Schwab. SWPPX Schwab S&P 500 Index Fund
I can get 3.75% right now. The end of cheap money has been good for savers. Not quite the 5% inflation rate, but it's better than losing everything.
The worse thing that can happen, on the odd chance that Schwab was to go out of business, is the holding of the funds will be liquidated and return to the investors. What you listed is an index fund for the S&P 500 meaning it hold a bundle of companies that make up the index. If the US defaults on their debt there is a good chance that the value of those companies on that Index will go down but that would be similar to investing in Amazon directly. If the US default the value of AMZN may go down but you would not lose your investment in AMZN. When you moved all of your holdings in that index fund to a bank deposit you chose to realize all gain or loses on that mutual fund. (Unless you are moving from and to a plan account). I don't no how long you have held that mutual fund for but if you had it for a long period you may have huge gains on that mutual fund which means you may have to pay a lot of taxes next year. Ultimately my suggestion is to speak to an advisor at Schwab or your bank.
I realized a loss. The advantage of the mutual fund is not the stock price but that it pays dividends every year.
You must not of held this mutual funds very long. The S&P has gone up approximately 350% since 2000 which is close to 7% a year well above the inflation rate. Combine that with some dividend payouts and it is a pretty good investment.
I wouldn't sweat it. Even if they are not covered by FDIC, they are covered by SIPC which is a different version of the same coverage. Besides, the securities belong to you, not the broker. They are held in custodial accounts so really what would happen if Schwab goes tits up is someone else will take over managing the funds.
