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My Roth IRA is invested with a company that allows

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investments in real estates and...
My Roth IRA is invested with a company that allows investments in real estates and notes. I am concerned about my investment being protected against things like fraud and insolvency ? How can I protect my Roth IRA against similar things that happened with Enron ?
Submitted: 1 month ago.Category: Tax
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3/15/2018
Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 1 month ago
Chad EA, CFP ®
Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional
Category: Tax
Satisfied Customers: 2,183
Experience: Federally licensed IRS Enrolled Agent, Certified Financial Planner (R), MBA
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Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 1 month ago

The best way to protect your investments from a single company or industries fraud or insolvency is by creating a diversified portfolio.

Typically, this is done using exchange traded funds, mutual funds or a professional money manager.

Alternatively, certain annuities offer guarantees of a return of principal. The annuities do charge an annual fees for guarantees.

Please let me know your follow up questions.

Thank you,

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Customer reply replied 1 month ago
Is there any type of bond that would cover the investment against fraud or insolvency ? Roth IRAs are not protected in anyway correct ? Similar to FDIC accounts ...
Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 1 month ago

Brokerage accounts, whether held as a Roth, traditional IRA or taxable brokerage account are generally covered by SIPC, SECURITIES INVESTOR PROTECTION CORPORATION. Below is a link which describes what SIPC covers.

"SIPC protects against the loss of cash and securitiessuch as stocks and bonds – held by a customer at a financially-troubled SIPC-member brokerage firm. The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash. Most customers of failed brokerage firms when assets are missing from customer accounts are protected. There is no requirement that a customer reside in or be a citizen of the United States. A non-U.S. citizen with an account at a brokerage firm that is a member of SIPC is treated the same as a resident or citizen of the United States with an account at a brokerage firm that is a member of SIPC."

https://www.sipc.org/for-investors/what-sipc-protects

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Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 1 month ago

There is not a bond, such as a specific insurance that would cover the insolvency of a particular bond or stock, other than what is offered through an annuity company. Annuity companies are insurance companies that offer investment products.

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Customer reply replied 1 month ago
the SIPC covers insolvency, what about fraud ?
Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 1 month ago

SIPC covers the brokerage account from failed brokerage firms.

Insolvency is considered when pricing bonds and stocks. Companies that issue stocks and bonds have reporting requirements quarterly and annually to the Securities and Exchange Committee, which is suppose to combat fraud and notify of insolvency.

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