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Is E*TRADE FDIC Insured?
Is ETRADE SIPC insured? For how much brokerage and IRA accounts' cash and
funds have SIPC and FDIC insurance coverage at ETRADE?
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Is E*Trade FDIC Insured and SIPC Protected?
If you are wondering if it’s safe to invest at E*TRADE, the answer is yes.
E*TRADE is insured by FDIC and the broker is a member of SIPC. Your uninvested cash and your portfolio are covered at E*TRADE, but how much protection does the popular broker offer and how does it work? Keep reading to learn more.
Is E*TRADE FDIC Insured?
E*TRADE is FDIC insured and a member of SIPC. Because of that, the broker offers protection for
investment funds, securities, and uninvested cash. Although, your assets are secure at E*TRADE, they are not always covered by the same type of protection.
For uninvested cash in your trading account, E*TRADE’s FDIC insurance covers
up to $1 million dollars
(more details and specifics further along). All other assets that make up your portfolio are covered by
SPIC. Standard SIPC covers up to $500K. However, there are limitations that you should be aware of.
E*TRADE FDIC Protection Explained
Since E*TRADE is now owned by Morgan Stanley, brokerage account holders at the popular broker can take advantage of the same FDIC protection that bank account customers can, through the cash sweep program.
The cash sweep program is designed to keep your uninvested cash in an insured bank account, instead of simply leaving it in your brokerage account.
You can have up to $500K insured by FDIC if you have an individual account. For joint accounts, that coverage goes up to the $1 million mentioned above. International cash sweep accounts cover individual and joint accounts for as much as $250K - $500K respectively, and retirement cash sweep accounts are protected to the $500K?
E*TRADE SIPC Protection Explained
E*TRADE also offers the Cash Balance Program for investors that do not want to take part in the cash sweep program. Instead of sweeping funds to a variety of partner banks, investors can keep their money at E*TRADE Securities (in their trading accounts). Opting out of the cash sweep program means that your cash is protected by SIPC instead of FDIC.
SIPC provides coverage for a total of $500K in cash and securities in your brokerage account. The maximum amount of cash that SIPC will cover is $250K, and the max overall is set to $500K.
It is important to note that SIPC only covers assets loss resulting from broker-related problems. If investor assets are put at risk by the broker in any way, and those funds are lost, the SIPC steps in to replace lost assets.
As stated on their website and elsewhere, SIPC does not cover devaluation as a result of investments losing value.
E*TRADE and Competitors
Which Assets Are Insured at E*TRADE?
Other than the cash balance in your brokerage account, most securities are protected.
Notes, stocks, bonds, trust certificates, CDs, and advanced options positions, are all considered insurable securities by SIPC.
There are a few securities that are not covered. These are; currencies, commodities contracts, and futures.
Other Forms of Protection
E*TRADE seems to understand that the standard coverage may not meet the needs and expectations of everyone. Therefore, the brokerage added some extra layers of protection and peace of mind.
The first of these is called, “Excess of SIPC” insurance. E*TRADE maintains a $1 billion insurance plan that the brokerage can use as a backup to support its customers. Once the initial claim limits have been hit, Excess of SIPC provides additional protection.
E*TRADE also offers fraud protection and will investigate any potential fraudulent actions. When enough evidence is gathered, E*TRADE will cover losses associated with the fraudulent activity.
E*TRADE Pros and Cons
E*TRADE is a popular broker that has served investors of nearly every type for many years. E*TRADE is now a part of the Morgan Stanley family and brings several unique features to the investment world.
If you are considering taking advantage of E*TRADE’s many services, you might want to look at the pros and cons first.
There is a lot to like about E*TRADE and the services on offer. However, depending on your needs and expectations, the broker may not be the right solution for you.
To help you decide, here are the E*TRADE pros and cons as we see them.
E*Trade Pros
- Professional-level trading software
- Zero-commission fee schedule
- Solid range of account types
- Extensive education suite
- No account minimums to maintain
- No inactivity limits or fees
- Good promotions
E*Trade Cons
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Updated on 1/19/2024.
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