Question about Vanguard

I'm surprised nobody else asked this. Maybe it's just too dumb a question, but what the hell:
How does a company like Vanguard or Fidelity compare to Lehman
Bros.? I am, of course, concerned about bankruptcy.
I apologize if this is a really dumb question but most of my retirement money is in Vanguard funds.
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The simple answer is that Vanguard and Fidelity are mutual fund companies, Lehman Bros is an Investment Bank. Entirely different.
Elizabeth Richardson
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In fairness, it's a bit more complex than that - Lehman owns Neuberger-Berman, an asset management and mutual fund company. And both Vanguard and Fidelity also own brokerage services companies in addition to their asset-management and mutual fund businesses.
That said, in all cases, the asset-management parts of the companies are all doing quite well. When Lehman gets broken up, N-B will in all likelihood keep operating just as they have been, as a profitable business, whether standalone or if they are owned by someone else.
Moreover, the solvency of a fund management company like N-B, Vanguard or Fidelity is quite distinct from the safety of the funds one owns. When you own shares of a mutual fund, the fund *itself* is an independent entity separate from the people who the fund pays to manage the money - the shareholders in a mutual fund own the assets inside the fund. If the management company goes under, the fund hires a new management company.
It gets just a touch more complicated in that there are really more entities involved than just fund shareholders and a management company - there's also the fund sponsor who put together the fund in the first place (often by putting up the seed money) and who hired the management company and original fund board of directors. In the case, again, of Vanguard, Vanguard is the sponsor - and Vanguard is owned cooperatively by the funds it sponsors. And Vanguard either acts directly as the fund manager or it hires third-party fund managers to do the portfolio management (ie. Wellington manages a lot of money for Vanguard).
At the end of the day, though, your fund holdings are as solid as the portfolio the fund itself owns, NOT the management company.
So the more important question is not one of who is the management company for your fund, but rather, in what is your fund actually invested.
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Hardly a dumb question on a day like today.
Check with your broker and ask if your accounts are covered by SIPC insurance. Most major brokerages carry that insurance for retail accounts. Most have limits that start at $250K or $500K, but the limits can vary (which is different from FDIC), and the limit on cash is normally smaller.
-john-
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wrote:

This does not pertain to Lehman's bankruptcy at the present time. Lehman's brokerage services were not included in the Chapter 11 filing.
Elizabeth Richardson
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John A. Weeks III wrote:

I also believe Vanguard's annuities are through AIG. Another NAME to be concerned with today.
If AIG goes down, how "Insured" are their Annuities? by who?
Chip
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Vanguard Annuities are issued by Lincoln Life & Annuity Company of New York. One has only to look at Vanguard's website.
However, your question about AIG is of interest, so if anyone would care to wade in and profer a guess . . .
Elizabeth Richardson
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The thing that was going bankrupt and is now apparently about to be bought by the Federal Reserve is the holding company.
The entities that issued the annuities, etc. are legally separate subsidiaries of AIG with their own separate from the holding company capital reserves, regulated by each state they operate in.
-- Rich Carreiro snipped-for-privacy@rlcarr.com
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surprised nobody else asked this. Maybe it's just too dumb a> question, but what the hell:> > How does a company like Vanguard or Fidelity compare to Lehman> Bros.? I am, of course, concerned about bankruWow, Jane, we are of like minds!! I have just been all over the Vanguardsite trying to find an answer to this. My concern is that we have allof our funds at Vanguard; this includes IRAs and a joint account. Iknow banks are covered by FDIC and there is a limit of coverage. Butare we foolish to have everything at one company? We are diversifiedamoung bond and stock funds and even hold some non- Vanguard funds inthe accounts. Thanks in advance for response
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In article

In general, retail brokerage accounts are insured by the SPIC, which is kind of like FDIC for stocks and mutual funds. But since there are all kinds of accounts and all kinds of relationships you can have with Vanguard, your best bet would be to call them and ask. Don't rely on what someone says on a website.

If you are insured, everything will probably be OK. The insurance companies step in and work fast when needed. If you are over the account limits, they you should go to other companies to stay covered. I have a thin streak of paranoia, so I keep accounts at two different brokerages.

Note that insurance only covers the risk of a brokerage house going under, and not being able to deliver your account to you. It does not cover investment risk. So, if you invested in Lehman stock, you do not get covered for the fall in the stock price. You do get covered if Lehman is not able to deliver your stocks and bonds to you, that is covered.
-john-
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John A. Weeks III 612-720-2854 snipped-for-privacy@johnweeks.com
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