Expert: Steve Hach - 9/17/2008

Question
I'm concerned about the safety of investing with financial institutions and insurance companies after the disastrous events of the past week involving Lehman Brothers and AIG. Is there any protection for investment capital in mutual funds and annuities with such companies if they go under?  Are they insured? Is there any place to safely park your money other than a savings account with Bank America?

Answer
Hi Oliver,

Thanks for the question.

The short answer to your inquiry is "no."

Unless your money is in an FDIC account-- and below the limits for insurance, your money is at risk if you have it in products provided by the firms mentioned.

Of course, insurance policies may be slightly different and AIG had several branches not all of which would be effected--although I suspect at this point that there are no guarantees there either.

Of particular concern to many recently is the fact that MONEY MARKET FUNDS ARE AT RISK AND ARE NOT INSURED.

One of the real warnings during the recent crisis was the fact that a major money market fund provider "broke the buck" and found that it could not meet its obligations.

Currently, the safest place for your money is in Treasury securities and FDIC institutions.

Hope this helps.

Best,

Steve