Is it risky to have all your assets in one mutual fund family?
July 20th, 2010
If I have my money all in vanguard ( in a variety of funds), would I lower my risk by adding another fund family (ex: fidelity)? Since all the money is ultimately in the stock market, I can’t see how it would be less riskier to invest in 2 fund families. After seeing banks fail, people lose houses, huge financial firms go bankrupt, I’m nervous about having all my assets in one institution, but even in Vanguard went bankrupt, I’d still have all my mutual funds in the stock market, right?
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Tags: assets, banks, fidelity, financial firms, fund families, money, mutual funds, risk, stock market, vanguard
Thinking old fashion traditional way there is nothing wrong to invest in one Mutual Fund family (Vanguard or Fidelity as an example) if you split your assets among multiple funds with different objectives. The problem is that “old fashion way thinking” could be unsuitable for nowadays financial reality. And one day Vanguard or similar mutual fund’s family could declare that something went fundamentally wrong in our approach and we are going belly up. Unfortunately the re is no real prudent advice what to do and where to invest in this type of financial insecurity.
Vanguard is a good, solid & reliable brokerage. Also Fidelity. I believe the risk of failure is remote for both companies – quite remote.
However, , there is always a risk of loss if a firm fails,. and no matter how good it is now, who knows what things could be like a few years down the road? Who knew in 2005 that Lehman and Bear Stearns could fail? No one.
In my opinion, it would be a prudent move to try and spread the risk a little by putting a portion of your assets into Fidelity.
I have my IRA ( Trad & ROTH ) with Vanguard, but have my taxable investments and 401K with other companies.
There are some fund families (Janus, for example), where there have been with many funds investing in more or less the same stocks, so that all the funds are hurt if one of those stocks does badly. However, Vanguard invests in such a broad range of companies that it should not have this problem.
Legally each one of your Vanguard funds are different companies than Vanguard itself. So if Vanguard fails, the SPIC would find another fund family to take over the funds. The only problem is there might be a delay in redeeming your shares.
Better to invest in different funds and not necessarily with different firms’ funds. Have a good asset allocation to diversify and have protection. Good luck!