What’s Worrying Investors?

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Every year or two, a new round of worries crops up. Some of them are real—the war in Ukraine, inflation, politics—but a surprising number are not. The challenge, of course, is telling which is which.

One good approach is to figure out what the agenda is for those reporting the worries. If they are trying to sell you something, that is a clue that you should take a closer look. If they are sharing "knowledge" that only they have figured out, you want to ask why (in the age of the internet) only they know this. If they claim that you must act quickly on whatever it is, question why it is so urgent that it can't be checked.

Today, I’d like to provide a summary of the latest round of worries showing up in my emails from advisors and clients. In all cases, one of the three filters above shows why they are not as big a problem as presented—and why, when you look at the details, there is much less to worry about than some would like you to believe.

Do You Own Your Investments?

Let’s start with one that is showing up in multiple media, including a documentary, which is that you don't really own your investments. That somehow if they are held in "street name," they can be taken away by the broker or by the government. Not true. If you bought and paid for the securities, according to Fidelity Investments, they are held in segregated accounts that can’t be used by the broker/dealer to finance their business. It is your money, and they are your securities.

The exception is for securities bought on margin, where the broker does have a lender's security interest and may use that as security for their business loans. This is something to keep an eye on, but it is your decision to margin your securities and, even more, to work with a broker that does that. For the record, Commonwealth and our clearing firm do not pledge even your margin securities—so you are safe here.

So, why are people calling this issue out? Generally speaking, as in most cases like this, they want to sell you something. Usually, it is gold, but it could also be bitcoin. Offering alternatives to the regular financial system by someone with a vested interest is a common pitch, with the end goal of getting some of your dollars.

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