Diversifying among fund companies?

[jitterbug]

Thanks to some inheritances and conservative living, my husband and I have now accumulated a sizable nest egg. (>$1 million). However...the bulk of our money is in one fund company - American Funds. We are diversified within American Funds - growth funds, foreign funds, stock funds....but we are a little nervous about having all our eggs in one basket.

Would it be wise for us to invest new money into other fund companies? Should we take any capital gains in cash this year and spread them out to other areas? American Funds has treated me well for almost 20 years now....but Putnam used to do well, too and now it's been in the tank for years!



And if the answer is yes - what percentage is recommended? 20% in 5 different companies? 50/50?

[Driftr]

If FTI were here I bet I know his answer. American Funds FTW! (sorry, old joke) I'm not a fan of funds personally, so I don't know much about them, but from what I've heard over the years, American is a good 'name'. I think you'll have different managers in charge of each fund, so IMO you're safe enough even if they all start with American.

If that were my money and you haven't done so already, I'd consider spreading it out amongst 5 brokerages to keep it all under the 250k insured limits. Or breaking it into his/hers to double the amount insured at each? Not sure how or if that works because I'm going with the spread it around approach for us.

[Ombud]

Not a buyer of funds but are you stating that they are insured to 250k? Thought only bank accts & cds were fdic insured

[Deleted]

Brokerage Accounts are covered By SIPC insurance.

[Ombud]

Oh yeah, that's right. I've been space since mom died last Thursday

[Driftr]

Sorry for your loss.

[decoy409]

Ombud, my condolences.

[Deleted]

Condolences on your loss.

[phil5185]

Jitter, I split it 50/50 with two companies. We used Vanguard & Fidelity, have about the same holdings in each. The idea is that if some morning the News says that X declared bk - or their computers were hacked - or an earthquake/fire/tornado trashed their main center - the other 50% of our portfolio would be OK & available.

In general, your holdings are recoverable & safe for any of those events - but it might take a few days/weeks/months to get access. In our case (retired) the wait would be painful if 100% of our holdings were in one spot.

[jitterbug]

I believe SIPC coverage would only be for the CASH held at a brokerage firm, correct? And we keep very little cash at the brokerage firm - if it's not invested in a stock or mutual fund, it's actually in our bank savings account because shockingly, we're getting better interest! I admit we keep too much around in cash, but it's all spoken for (taxes, vacations, Christmas, future Roth IRA's) - but we were getting $.05 in interest (CENTS!) each month in a money market at Jones and we're getting $24 at the bank!! It's some promo account and we have to meet special criteria - but we met all the criteria before we even opened the new account!

Ombud, I also am sorry for your loss.

[jitterbug]

And Phil...I'm more concerned about shady dealings or whatever it was that caused Putnam to tank - but losing even 50% of my holdings would make me cry - A LOT! That's why I'm wondering if we need to split it out even more.