Dear Dr. Don,
If you have a large amount of money — in the millions — where do you put it? The FDIC covers $250,000 only and the U.S. banks are not so stable over and above the $250,000.
— John Juxtapose
For people who have millions to invest and want the security of insurance from the Federal Insurance Deposit Corp., or FDIC, without having to work with multiple banking relationships, the Certificate of Deposit Account Registry Service, or CDARS, can arrange for up to $50 million in insured deposits. My sense is that you pay a price for this convenience in the form of lower yields, but I don’t know that as fact.
You could also consider investing in U.S. government securities. The market value of these securities will fluctuate with interest rate changes, but they have a full faith and credit pledge by the U.S. government that they will mature at face value.
Having a collateralized security portfolio protecting your investment position is another alternative. Your deposits are backed by a portfolio of collateral held by the financial institution to protect the security of your position. This is commonplace for deposit securitization of public funds. The agreement would speak to the suitability of collateral backing the deposits.
To ask a question of Dr. Don, go to the “Ask the Experts” page, and select one of these topics: “Financing a home,” “Saving & Investing” or “Money.” Read more Dr. Don columns for additional personal finance advice.