QMy wife and I are retired and rely on our investments to supplement our pensions.

All of our investments are in Vanguard, spread across four funds. In light of the recent bank failures, are we at risk by relying on just one mutual fund company, or should we diversify among two or more companies?


AIt's a question all of us savers should deal with considering the financial industry malfeasance and failures of the past several years.

The collapse of Lehman Brothers, the Bernie Madoff and other Ponzi schemes and the missing customer money at MF Global come to mind. Concerns over the financial repercussions of the eurozone crisis continue to dominate the headlines.

To cut to the chase, there are layers of protection for mutual fund investors. The most important protection, when it comes to mutual fund investments, is the fact that you own the securities and your account is segregated from the mutual fund company.

By law, mutual fund assets are held in a trust account at a custodian bank. So, even if Vanguard, Fidelity, T. Rowe Price or some other major mutual fund company or one of their mutual funds got into trouble, you're still the owner of the securities. The failure of the firm wouldn't affect the trust account.

Of course, as we have all learned the hard way, ownership doesn't prevent the value of your portfolios from spiraling lower. It protects you from fraud and theft.

For many of us, it's easier to manage our retirement portfolio if the money is at one institution that offers good service, low fees and sound investment choices. That's my main answer.

However, I do favor diversification with our overall relationship with financial services companies. My experience is that most of us are reasonably diversified, with our retirement money and other long-term savings with a major mutual fund company; our checking and savings accounts with a credit union or bank, and our insurance policies with a blue-chip insurance company, and so on.

The bottom line: I think you're OK.

Chris Farrell is economics editor for "Marketplace Money." Send your questions to cfarrell@mpr.org.