How investors, policy holders are affected
The events rattling financial markets are raising questions about personal finances. We talked to several experts to find some answers.
What if I own Lehman Bros. stock or have a mutual fund that has Lehman shares? How would its collapse affect my investments?
You will probably have to write off the stock, but don’t make any drastic market moves, said Kelly Campbell, president of Campbell Wealth Management in Fairfax, Va. “I would sit back and wait until the dust settles,” he said.
If you have shares of Lehman in a mutual fund, all you can do is hope that Lehman is a small piece of the portfolio. A mutual fund should be diversified enough to withstand one bad investment.
What if I have a brokerage account with Lehman or its subsidiaries?
The Securities Investor Protection Corp. covers investors in the event of a brokerage failure, guaranteeing up to $500,000 of assets. But SIPC President Stephen Harbeck said that no liquidation proceeding against Lehman was in progress and that all customer cash, stocks and other securities were accounted for.
The SIPC was ready to “intervene as necessary to protect the cash and securities of customers,” he said. “However . . . such an action is considered unlikely at this time.”
What if I have a brokerage account at Merrill Lynch?
Bank of America’s takeover of Merrill Lynch should not affect brokerage accounts. Bank of America Chief Executive Kenneth D. Lewis said his bank intended to keep Merrill’s name and organization intact. So it’s business as usual.
What if I have a life insurance policy or annuity with AIG, which is struggling?
Life insurance policies are covered by each state’s guaranty association. The amount of coverage you get if the company fails varies by state, but typically, you will be able to recoup up to $300,000 in life insurance death benefits, $100,000 in cash surrender or withdrawal value for life insurance, and $100,000 in withdrawal and cash values for annuities. Check with your state’s guaranty association or consult the National Organization of Life and Health Insurance Guaranty Assns. Its website, www.nolhga.com, lists state rules.
One caveat: State guaranty associations don’t cover any policy or annuity in which the policyholder bears investment risk. This would include an annuity invested in stocks.
