I'm wondering about diversification using investment firms. I opened my first Roth individual retirement account with the same company where I have my 401(k) and stock investments. Is it a mistake to put all of my money in one place?
-- Corny Bushel
A common adage, which also applies to investing, is "Don't put all your eggs in one basket." The opposite idea is attributable to industrialist Andrew Carnegie, "Put all your eggs in one basket and then watch the basket." The question then becomes, "Which approach is right for you?"
The attraction to having your investment accounts held at only one firm is convenience and focus. When your investments are managed by a single firm, it's easier for the financial professional there to help you with asset allocation decisions and portfolio rebalancing.
Diversifying your investment accounts across firms will not protect you against investment losses. What you would be protecting yourself against is theft of your assets by a broker. Other potential worries include if the brokerage firm fails if your total investments are worth more than Securities Investor Protection Corporation insurance limits.
The specific company where you keep your investments, like many brokerage firms, offers insurance coverage over and above the SIPC coverage for its customer. The additional coverage kicks in when those limits are exhausted for the customer.
Are you really worried about the theft of your investment securities, or about the future of your company? You probably don't need to be. It is also unlikely that another firm provides much different investing options.
Stay focused on how you are investing. You don't need to worry so much about moving your money around.
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