Keep it simple. Don’t be discouraged by the new web of questions spun every time you check an item off your to-do list. It means you’re making progress. Don’t take for granted how much you’re learning.
Have enough cash for your peace of mind. If you’re losing sleep worrying about safekeeping, then you have too much. Open a safety deposit box, like I have, and keep it there or keep it in your checking account. Cash in your checking account is FDIC insured—$250,000 per person, per account, meaning $500,000 for a joint account.
Back up your survival cash—your U.S. dollars—with something of value. But don’t get too complicated. I backed mine up with gold, silver, and Canadian dollars. I did it in about an hour. You may already have done it through a lifetime of accumulation, whether it’s your collectible car, baseball cards, or diamond ring. Work with what you have.
Crossing off “learn about FDIC protection” on my to-do list created its own list of questions. For one, does FDIC apply to cash at Fidelity Investments or the Vanguard Group? It does not.
Securities in accounts carried by National Financial Services LLC, a Fidelity Investments company, for example, “are protected in accordance with the Investor Protection Corporation (SIPC) up to $500,000 (including cash claims limited to $250,000).” But NFS has arranged for additional protection for cash and covered securities to supplement its SIPC coverage. “This additional protection covers total account net equity in excess of the $500,000/$250,000 coverage by SIPC.”
There’s more. NFS added Lloyd’s of London as a provider of excess SIPC coverage up to an aggregate limit of $1 billion. “There is no per account dollar limit on coverage of securities, but there is a per account limit of $1.9 million on coverage of cash awaiting investment. This protection represents the highest level of excess SIPC coverage currently available.” None of this coverage protects against a decline in the market value of securities.
That’s about as clear as wax paper. But I’m comfortable saying Fidelity has your cash covered up to $1.9 million. This doesn’t mean money markets. They can fluctuate in value like a stock or bond—and even fall below your initial investment, which is known as “breaking the buck.” That makes choosing the right money market fund crucial. You see what I mean about the answer to one question leading to another question? I’ll leave that one for another day.