Are Your Investments Safe? The Fed's emergency decision to offer a multibillion-dollar loan to rescue insurance giant AIG is the latest in a week of financial meltdowns that have left just about everyone who doesn't work on Wall Street wondering how safe their savings, investments and insurance policies are.
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Are Your Investments Safe?

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Are Your Investments Safe?

Are Your Investments Safe?

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RENEE MONTAGNE, host:

And now we ask whether your money is safe given all the upheaval on Wall Street. NPR's Wendy Kaufman has been talking to the experts.

WENDY KAUFMAN: Christine Fahlund is a senior financial planner with T. Rowe Price. She says some investors are asking if their portfolios contain stocks that are in freefall.

Ms. CHRISTINE FAHLUND (Senior Financial Planner, T. Rowe Price): They're also asking more questions about FDIC insurance. And surprisingly, a number of investors are saying, are my mutual funds insured? Which of course, they're not.

KAUFMAN: Nor are individual stocks and bonds insured against investment risk. But they are insured in the unlikely event that securities held by a brokerage firm are lost or stolen.

Mr. STEPHEN HARBECK (President & CEO, SIPC): We replace missing assets. It's really that simple.

KAUFMAN: Steve Harbeck heads an entity known as SIPC, an industry group established by federal law in 1970.

Mr. HARBECK: If you had 100 shares of XYZ stock in your account, it doesn't matter what price you purchased it at, and it doesn't matter what price it is today. If it's missing, it's our job to go out and buy it for you, whether it costs us one cent, whether it costs us 100 dollars a share to buy it for you, and regardless of what you paid for it.

KAUFMAN: If you're wondering what happens if your brokerage account is at Merrill Lynch, which earlier this week was bought by Bank of America, or Lehman Brothers which just filed for bankruptcy, Harbeck says there's no need to worry. Your stocks and bonds were segregated from the firms' own holdings and are safe. Regarding cash deposits, most people know that the Federal Deposit Insurance Corporation guarantees accounts for up to 100,000 dollars, or in the case of many individual retirement accounts, up to 250,000 dollars.

It's possible, however, to have more than 100,000 dollars in deposits covered at a single institution. It all depends on how ownership of each account is set up. The FDIC has an online calculator that can help you determine how much coverage you have. Laura Bruce, a senior reporter at Bankrate.com says if your bank fails and you're over the FDIC limit, you're likely to get only about 72 cents on the dollar for the deposits that weren't covered.

Ms. LAURA BRUCE (Senior Reporter, Bankrate.com): Only about 60 percent of deposits in FDIC insured banks are insured. So there's billions of dollars that are uninsured. And obviously with the banking situation that we're in, you know, the money is at risk, and people need to be smarter about that.

KAUFMAN: And finally, the timely subject of college tuition. Some states offer prepaid tuition plans with guaranteed or principal-protected options. But plans offered by other states don't. As with any investment, caveat emptor, let the buyer beware. Wendy Kaufman, NPR News.

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