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Learning, Sharing, and Teaching => Investor Alley => Topic started by: earthshine on May 31, 2018, 05:52:18 AM

Title: SIPC Insurance and cash investment at Merrill Edge
Post by: earthshine on May 31, 2018, 05:52:18 AM

I am getting moving some funds around, and considering how much to place where based on FDIC / SIPC coverage.

Is the concern noted in this article regarding SIPC insurance coverage still an issue?

https://www.huffingtonpost.com/laurence-j-kotlikoff/why-no-one-should-use-bro_b_5508633.html

Also, any input on these two options through Merrill Edge?

Preferred deposit: 1.56% interest, Cash deposit – FDIC insured (250K – separate for each account), money fund – initial buy in is 100K – does not need to be maintained

BlackRock Liquidity – 1.88% interest, Floating net asset value, PMCXX, Camp Cash fund – not FDIC Insured- brokerage product, initial buy in is 100K – does not need to be maintained, has SIPC insurance
(The advisor indicated the floating net asset value influence over past three years has been quite small)

Thanks for any input.

Title: Re: SIPC Insurance and cash investment at Merrill Edge
Post by: protostache on May 31, 2018, 06:33:12 AM

Bank accounts have insurance because they are in the business of turning your risk less deposits into risky loans and capturing the interest rate spread. A brokerage is legally barred from doing that in a non-margin account. Brokers hold your assets. If you have cash in a brokerage it is sitting in an account at the broker’s custody firm. It’s not being loaned out.