A:

No. Whenever you invest in a stock, bond or mutual fund, there is no insurance against the possible loss of your initial investment. Even if you are investing in collectibles, the insurance that you can purchase protects only against unexpected occurrences such as fire or theft, not depreciations in value.

The element of risk is inherent to investing, which is why investments are not (and cannot be) insured. For all types of investments, the return - whether in the form of interest, dividends or capital gains - is a reflection of the type of risk you are taking on. The higher the risk, the higher the potential return. Conversely, a reduction in risk means a reduction in potential return. Take for example the investment products that guarantee your principal. Your money is guaranteed because you'll receive a relatively low rate of return. Remember, there is no such thing as a free lunch!

There is deposit insurance, but it is not protection against investment loss. In the United States, certain types of bank deposits and certificates of deposit are insured under the Federal Deposit Insurance Corporation. In Canada, they're insured under the Canadian Deposit Insurance Corporation. Deposit insurance will protect certain types of deposits - up to a maximum amount - in the case of your bank or investment firm defaults. But this type of insurance is meant to promote confidence in the banking system, not to ensure your investment has a positive return. That depends more on your investment knowledge, research and strategy.

To read how to create a balanced portfolio, see A Guide To Portfolio Construction, How Risky Is Your Portfolio? and Broadening The Borders Of Your Portfolio.

RELATED FAQS
  1. How do I borrow money from my life insurance?

    Hello, I would like to find out the steps I need to take towards borrowing money off my life insurance. ... Read Answer >>
  2. What is the average return on total revenue for the insurance sector?

    Learn about the three main segments of the insurance industry, and find out what the average return on revenues is for the ... Read Answer >>
  3. Why is the insurance sector considered a low-risk investment?

    Find out why an investor would consider the insurance sector, why that sector is relatively risk-averse and read about some ... Read Answer >>
  4. Which insurance policies do I really need?

    Your needs for insurance depend on your situation and can't be generalized for everyone, but there are a lot of options available. ... Read Answer >>
  5. Can your insurance company cancel your policy without notice?

    Learn about your rights as an insured when it comes to your insurance policy being canceled, including how to access your ... Read Answer >>
  6. Why are mutual funds not FDIC-insured?

    Discover why mutual funds are not insured by the FDIC, and learn what protection is offered for these and other similar financial ... Read Answer >>
Related Articles
  1. Personal Finance

    What Happens If Your Insurance Company Goes Bankrupt?

    When insurance companies go bankrupt or face financial difficulty, it's bad news for policy holders.
  2. Personal Finance

    Exploring Advanced Insurance Contract Fundamentals

    Understanding your contract can help you protect our family's financial security.
  3. Personal Finance

    Understanding Your Insurance Contract

    Learn how to read one of the most important documents you own.
  4. Personal Finance

    How Much Life Insurance Should You Carry?

    Learn how much - if any - insurance you really need.
  5. Investing

    Insurance 101 For Renters

    If it's time for you to leave the nest, find out how to protect your new home from disaster.
  6. Personal Finance

    Do You Need Casualty Insurance?

    Find out how different types of coverages can protect you and which policy is right for you.
  7. Markets

    Insurance Companies Vs. Banks: Separate And Not Equal

    Insurance companies and banks are both financial intermediaries. However, they don't always face the same risks and are regulated by different authorities.
  8. Personal Finance

    Bundle Your Insurance For Big Savings

    Bundling your insurance can save you money and time. Read on to see how get the most out of multiline insurance discounts.
  9. ETFs & Mutual Funds

    Mutual Funds Are Not FDIC Insured: Here Is Why

    Find out why mutual funds are not insured by the FDIC, including why the FDIC was created and how to minimize your risk with educated mutual fund investments.
  10. Personal Finance

    Explaining Insurance

    Insurance is a form of contract between an individual and an insurance company that spreads risk in exchange for premium payments.
RELATED TERMS
  1. Bank Insurance

    A guarantee by the Federal Deposit Insurance Corporation (FDIC) ...
  2. Insurance Industry ETF

    A sector-following fund that invests primarily in insurance companies, ...
  3. Personal Lines Insurance

    Property and casualty insurance products for individuals that ...
  4. Risk-Based Deposit Insurance

    Deposit insurance with premiums that reflect how prudently banks ...
  5. Accounts Receivable Insurance

    A form of credit insurance offered by commercial insurers to ...
  6. Finite Risk Insurance

    An insurance contract in which the insured provides a pool of ...
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center