So not to start the new year out on a bummer of a question, but I was explaining stock market risk to my sister. I told her that stock market risk, if you hold index funds, will not “lose” you money because you own a huge basket of stocks. Your balance may drop in a bear market for a few months or years but not your shares. Your investments will recover and grow further in the years to come, even if a few companies didn’t survive the correction. I then told her that to truly lose your index funds, our country (US) would have to be attacked and both the financial sector and government would have to be severely disrupted or destroyed. But at that point we’d have much bigger and more immediate problems than what is going to happen to our 401ks.
But that got me thinking, let’s say she and I survive and the US wins the war (rescued by the Canadians probably) what would happen!? If Vanguard is destroyed but many of those publicly traded companies survive, is there another way to restore at least part of my 401k?
WOLVERINES!!!
Stock market existed before war.
Stock market will exist after war.
If the stock market doesn’t exist, you will have more pressing things to worry about than your piddly index shares. Like zombies and aliens.
* https://www.investopedia.com/solving-the-war-puzzle-4780889
I, too, can make up unrealistic scenarios.
Are you planning your future on such far fetched fantasies or more along realistic scenarios is the real question.
As far as I understand it, vanguard itself being destroyed wouldn’t have an effect on your funds; they don’t own them, and each fund is almost like it’s own company. It’s got it’s own insurance, managers, etc. For you to lose the assets in your 401k, it truly would take a scenario that wiped out companies and money as we know them anyhow. Either there would still be government bodies and they could get your SEC protected assets to another 401k or IRA…or the government wouldn’t exist anymore.
If Vanguard goes under but the companies underlying the stocks are still there, that’s what SIPC insurance is for. Assuming the US government is still around.
https://personal.vanguard.com/pdf/s411.pdf?2210156648
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