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Fifth Street Finance Corp. Message Board

  • thewisejman thewisejman Mar 25, 2013 5:00 PM Flag

    Is it really that safe to hold large cash balance

    in your brokerage accounts (including IRA accounts)?

    because most of the cash balance of your accounts will be swept at the end of each day to a bank for temporary holding. Although this cash balance will be covered by FDIC insurance according to E-trade:

    "Your account is set up for the ERDA (Extended Insurance Retirement Sweep Deposit Account) sweep option. This is not the highest yielding option, but it is the option with the greatest insurance. The ERDA is FDIC-insured for up to $500,000. The funds are accessible at any time through the brokerage account. The sweep to E*TRADE Bank is done for FDIC insurance purposes.

    If you decide to change your sweep option to SweepMax retirement, you would earn 0.50% APY as long as your cash balance is $100,000 or more and the FDIC insurance limit on that account is $250,000. (Rates are subject to change)"

    My question is: how safe is this FDIC insurance? I heard it will run out of money soon if not already did.

    Therefore, will it be much safer to won some GOOD stocks instead?


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    • Government guaranteed money is as good at the government. Maybe we (USA) prints more money, but it's not possible to run out of money. It's a very, very big streatch to compare USA to something like Cyprus. Cyprus needed a bailout equilivant to 100% of its GDP. Their banking system was their major source of income. Russians will be taking their laundry somewhere else now. Hopefully, that natural gas things works for them.

      Nevertheless, I've always made it a point to never keep too much in one borker account or bank account. Then again, I don't have millions. I'm still working on my first million. ;-(

    • tulsadevlin Mar 25, 2013 5:31 PM Flag

      My acct. is insured up to 5mil.I assume that includes the cash balance.
      The FDIC insurance is 500K for a joint acct. @ most FDIC insured banks/ credit unions.
      However, since I do not trust banks and brokers, I spread the risk by having multiple accts.with different firms and banks.
      Who could believe Washing Mutual , Leman Bros., Bear Sterns, etc. went belly up? WAMU was a 100 yr. old co.
      Will it be much safer to own some GOOD stocks instead?
      YES!.....And more profitable... But I still have a large cash position.

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