Is Your Money Safe in an Online Investment Account?

Written By Mary Beth Eastman
Last updated November 22, 2019

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If you’re ready to invest your money, it’s important to know the basics. One of the most important fundamentals to know about investing your money is that you need to invest through a licensed broker. Some brokerage firms have brick-and-mortar investment houses while some are completely online.

Deciding whether to open up an investment account with a traditional brick-and-mortar investment house versus creating an online investment account can be confusing. Potential investors often worry if their money is safe with an online investing website. But if you’re wondering whether or not your money is safe in an online investment site, you can put your worries to rest. Often, online investment sites offer the same services and level of protection as brick-and-mortar investment houses. Here’s is what you can expect:

If you’re new to investing or just need some advice to make better decisions, you can count on the help of advising services with online investment accounts. For instance, online investment accounts often provide advising services from robo-advisors, which can easily execute tax harvesting strategies and even automate rebalancing your investment portfolio. Moreover, robo-advisors help you save on fees, which often are less than what most banks or traditional brick-and-mortar investment houses charge. We’ve compiled a list of the best robo-advisors for investing here.

Any brokerage firm involved in trading securities must be licensed. The Securities and Exchange Commission (SEC) regulates these firms to ensure these firms are abiding by securities and trading laws, including enlisting the security measures to safeguard your personal information from potential identity theft or fraud.

Federal Deposit Insurance Corporation or FDIC insurance does not cover securities, such as stocks and mutual funds. However, brokerage firms that are members of the Securities Investor Protection Corporation (SIPC) provide insurance that protects against the loss of cash and securities up to $500,000. That’s double the protection FDIC insurance provides. This means if your stocks go missing for from your account due to fraud or theft, you won’t have to worry about incurring a huge financial loss.

Opening up an online investment account provides the safeguards you can expect even if you were to open an investment account with a brick-and-mortar investment house. The key is to understand which brokerage firm offers the features and services you need for the type of investments you want to make. By evaluating the investment company’s features and services, you can choose the investment company that is right for you.

About the Author

Mary Beth Eastman

Mary Beth Eastman serves as the content manager for Simple. Thrifty. Living, where she is dedicated to helping readers use money and credit wisely. Mary Beth believes that access to the right financial information paired with a growth mindset are essential tools for getting out of debt and building wealth. Mary Beth has a degree in Journalism from Bowling Green State University and has focused her 20-year journalism career on putting readers front and center, carefully considering their concerns and presenting information that will help them in their everyday lives. She has won numerous statewide journalism awards. Her writing on personal finance as been featured on numerous websites in addition to Simple. Thrifty. Living, including Huffington Post and Lexington Law blog. Mary Beth resides in Pittsburgh, Pa., with her family and two rescue dogs.

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