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Consolidate Your Assets

The old Adage “Don’t put all your eggs into one basket” is a wise course to follow.  But in the case of multiple investment accounts, it pays to consolidate.

There are many reasons why someone might not want to hold their stocks, bonds or mutual funds in one account.  They may not feel comfortable entrusting their assets to one provider, or worry about the insurance coverage provided by the custodian for a single account.  Also, many people “compartmentalize” their investments, for example holding inherited assets in one account, investments reserved to pay for college tuition in another, etc.

Consolidating accounts has several advantages.  Most large financial services providers offer Asset Management Accounts, a full-service account offering a money market fund, check writing, automatic dividend reinvestment, bill-paying and other amenities.  If you have more than one such account, you are paying multiple account fees for services you are not using in both accounts.  You may write checks out of one account, and have automatic deposits into another.  Also, current account insurance covers account values up to $500,000, and many companies provide additional insurance up to as high as $25 million.

For each account you receive monthly or quarterly statements, year-end tax reporting statements and other information from the provider.  If you move, you must notify each company, possibly delaying the timely receipt of information at your new address.  Consolidating accounts also lessens your record-keeping burden and makes your tax preparation easier.

Of course tax-deferred accounts cannot be combined with taxable accounts, so the ability to consolidate is limited.  But for these reasons and more, consolidating accounts makes a lot of sense.

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