William Penn Life, 2002 (37. évfolyam, 1-11. szám)
2002-02-01 / 2. szám
Is your money insured? A guide to what is and is not protected by FDIC insurance from www.fdic.gov, the website of the FDIC So~you feel your cash is safe and protected when you walk through the door of the bank, much safer than when you kept it under your mattress. And you should. BUT, are your funds all covered by Federal Deposit Insurance Corporation (FDIC) insurance just because you walked into a secure-looking building with iron bars and guards? Not necessarily. It depends on which of the bank's products you decide to use. What is Insured? You are probably familiar with the traditional types of bank accounts-checking, savings, trust, and certificates of deposit (CDs)--that are insured by the FDIC. Banks also may offer what is called a money market deposit account, which earns interest at a rate set by the bank and usually limits the customer to a certain number of transactions within a stated time period. Except for certain trust accounts (where the assets of the account consist of securities rather than deposits), all of these types of accounts generally are insured by the FDIC up to the legal limit of $100,000 and sometimes even more for special kinds of accounts. What is Not Insured? MUTUAL FUNDS Investors sometimes favor mutual funds over other investments, perhaps because they hold promise of a higher rate of return than say, CDs. And with a mutual fund, such as a stock fund, your risk-the risk of a company going bankrupt, resulting in the loss of investors' funds~is more spread out because you own a piece of a lot of companies instead of a portion of a single enterprise. A mutual fund manager may invest the fund's money in either a variety of industries or several companies in the same industry. Or, your funds may be invested in a money market mutual fund, which may invest in short-term CDs or securities such as Treasury bills and government or corporate bonds. Do not confuse a money market mutual fund with an FDIC-insured money market deposit account (described earlier), which earns interest in an amount determined by, and paid by, the financial institution where your funds are deposited. You should obtain definitive information about any mutual fund before investing in it by reading a prospectus, which is available at the bank or brokerage where you plan to do business. The key point to remember when you contemplate purchasing mutual funds, stocks, bonds or other investment products, whether at a bank or elsewhere, is: Funds so invested are NOT deposits, and therefore are NOT insured by the FDIC or any other agency of the federal government. Securities you own, including mutual funds, that are held for your account by a broker, or a bank's brokerage subsidiary, are protected against physical loss by the Securities Investor Protection Corporation (SIPC, pronounced si-pick), a non-government entity funded by assessments paid by members. SIPC protects customer accounts held by its members up to $500,000, including up to $100,000 in cash, if a member brokerage or bank brokerage subsidiary fails. A very important distinction between SIPC (and any other type of protection for investments) and FDIC insurance on deposit accounts is: NO type of protection for investments insures against loss in the value of an account (the value of your investments can go up-or down-depending on the demand for them in the market), while federal deposit insurance protects the amount in your deposit account(s) up to the $100,000 limit. TREASURY SECURITIES Treasury securities include Treasury bills (T-bills), notes and bonds. T-bills are more commonly purchased through a financial institution. Customers who purchase T-bills at banks that later fail become concerned because they think their actual Treasury securities were kept at the failed bank. In fact, in most cases Money Links For more information about protection for your finances under the Federal Deposit Insurance Corporation and other government agencies, you can log onto the FDIC’s website at 3 http://www.fdic.gov 4 William Fell Lilf, February 2002
