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Old 16.06.2017, 10:36
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How safe is your E-Trading account?

The modern IT systems are so complex, that an error in code or a security breach are quite possible. My current retirement plan is to put maybe even 90% into one or two ETFs. But I have worries of putting my savings into something so untangible. For all I know, the only proof that I have purchased some securities, is when I login to my E-Trading and it's still there. I do not get any paper confirmation.

What if someone steals my password and makes some malicious leveraged deals? My savings could evaporate within minutes. They are not locked or protected in any way. What if there is a "glitch" in the system, and I have no proof that I had more securities than my broker claims?

I guess that is one big advantage of real estate investors. They have a deed, verified by a notary, and a physical property. I only have some numbers in a system. It makes me feel uncomfortable.

What is your experience and your tips to raising the security level? We often discuss trading costs, saying that IB is cheap, Swiss brokers are expensive, but in the end this is just the fraction of the whole portfolio. Is it safer to keep your custody account with a bank?
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Old 16.06.2017, 10:39
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Re: How safe is your E-Trading account?

Basic Security
1. How secure is your password? Fully randomised, over 20 characters?
2. Do you use 2 factor authentication?

Investment Security
1. Why put all your cash in one basket/ETF?
2. Have you taken professional advice?
3. Do you understand the risk levels?
4. Can you afford to lose this money?
etc
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Old 16.06.2017, 11:48
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Re: How safe is your E-Trading account?

You have to break down the risk into parts, not try to look at the whole.

* Platform (i.e. password, security risks)

* Issuer / structural risks with the instruments

* Market / investment risk

All of them can be mitigated through diversification
* use more than one platform
* more than one issuer of ETFs
* more than one sector for investment

All of them can be mitigated through understanding the provider

* reputable platform vs dirt cheapest; keep an eye on security / financial audit reports for the provider; check the agreement on segregation of funds, banking license or whatever

* be aware of credit risk - i.e. with an ETF, you don't own any underlying, if the issuer goes bust you may lose your money; less of an issue with funds, unless they're leveraged in which case they can rapidly and fatally screw up

* portfolio diversification is fairly obvious...

And your own responsibility
* Protect your password, 2FA token etc
* Have an actual plan for your investments over a reasonable horizon...
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Old 16.06.2017, 11:50
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Re: How safe is your E-Trading account?

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Basic Security
1. How secure is your password? Fully randomised, over 20 characters?
2. Do you use 2 factor authentication?

Investment Security
1. Why put all your cash in one basket/ETF?
2. Have you taken professional advice?
3. Do you understand the risk levels?
4. Can you afford to lose this money?
etc
1. It is long and fully random. But it doesn't matter, since when it is stolen, it's stolen. Be it by keylogger or some different hack. A single password is not enough to keep you safe nowadays.

2. I have activated two-factor authentication. But the stupid thing is, after you provide the password, you can change the app ID used for authentication, thus bypassing the second check.

1. Why not? An All-World market cap weighted ETF is diversified enough. You have oil companies there, real estate companies. Plus my parents have ALL their savings in real estate, so I treat this base as covered.

2. No. Who would I trust to ask?

3. I understand that the share value denominated in a currency can drop significantly and take years to recover. But I'm not interested in current value, but more like in 20-30 years.

4. These are my retirement savings. Once I invested, I do not plan to sell for many years.
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Old 16.06.2017, 12:54
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Re: How safe is your E-Trading account?

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1. use more than one platform
2. more than one issuer of ETFs
3. more than one sector for investment
4. reputable platform vs dirt cheapest
5. portfolio diversification is fairly obvious...
1. If you use different platforms and different issuers, then soon you have a huge fragmentation of your portfolio. the thing is, I want to keep it safe AND simple.

2. My ETF is issued by Vanguard. From what I've heard, they are non profit with a proven track record. The ETF has full replication. Fatmanfilms has most of his savings in Fundsmith, a small fund. I guess that strategy is riskier?

3. A broad ETF, like S&P 500, invests in all sectors

4. So for a 15'000 CHF purchase of european securities, IB takes 0.1% (15 CHF), Corner Trader 0.12% + 0.15% stamp duty = 0.27%, PostFinance 0.48%. The question is, is PostFinance better at keeping security high?

5. It is obvious, but then, is it? If you buy only stocks, you have highest return and highest volatility. does it help if you put a portion in bonds, a portion in real estate, a portion in resources? You get an illusion of diversification. The companies, which stocks you hold, emit these bonds, build this real estate, mine and use these resources, so investing in them, you have stake in other asset types.
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Old 16.06.2017, 14:20
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Re: How safe is your E-Trading account?

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1. It is long and fully random. But it doesn't matter, since when it is stolen, it's stolen. Be it by keylogger or some different hack. A single password is not enough to keep you safe nowadays.

2. I have activated two-factor authentication. But the stupid thing is, after you provide the password, you can change the app ID used for authentication, thus bypassing the second check.

1. Why not? An All-World market cap weighted ETF is diversified enough. You have oil companies there, real estate companies. Plus my parents have ALL their savings in real estate, so I treat this base as covered.

2. No. Who would I trust to ask?

3. I understand that the share value denominated in a currency can drop significantly and take years to recover. But I'm not interested in current value, but more like in 20-30 years.

4. These are my retirement savings. Once I invested, I do not plan to sell for many years.
EFT's are much riskier than a fund holding the same investments.

http://www.telegraph.co.uk/finance/p...I-thought.html

Nothing to stop you holding assets in your own name, certificates are often available but expect high charges.
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2. My ETF is issued by Vanguard. From what I've heard, they are non profit with a proven track record. The ETF has full replication. Fatmanfilms has most of his savings in Fundsmith, a small fund. I guess that strategy is riskier?
Fundsmith is lower risk than either the FTSE 100 or S&P 500. Diversification spreads risk, not necessarily reduces it.
I also hold 29/30 of the investments in my own name. When I know the 30th company I will invest in it.
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Old 16.06.2017, 14:51
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Re: How safe is your E-Trading account?

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spreads risk, not necessarily reduces it..
Can you explain that - I don't get it.
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Old 16.06.2017, 14:53
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Re: How safe is your E-Trading account?

Does key logging work if you copy and paste passwords??
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Old 16.06.2017, 14:54
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Re: How safe is your E-Trading account?

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Does key logging work if you copy and paste passwords??
it can do, yes.
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Old 16.06.2017, 14:59
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Re: How safe is your E-Trading account?

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Can you explain that - I don't get it.
Buying lower quality assets will increase your risk & reduce your return.
Terry Smith believes there are only 60 companies in the world that are suitable for a 10 billion GBP fund to invest in. Buying any additional companies & the quality of your investments are diminished.

You also have to remember that most funds holding 250 plus investments will have 90% identical investments to most other similar funds so buying 2 funds has not actually helped you to diversify.

If you remember the Financial Crisis Banks were buying securitised mortgages, they were spreading their risks, yet had no understanding of what they were actually buying.
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Old 16.06.2017, 15:21
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Re: How safe is your E-Trading account?

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Does key logging work if you copy and paste passwords??
Pasting into the password field is typically blocked for security reasons
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Old 16.06.2017, 18:13
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Re: How safe is your E-Trading account?

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Pasting into the password field is typically blocked for security reasons
All my bank and financial investment logins accept pasting. I could never key in long and complicated passwords...
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Old 16.06.2017, 20:53
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Re: How safe is your E-Trading account?

Interesting. Last thing I know is, pasting is blocked because if you walk away somebody else could use it too once you're away from the machine.

Perhaps practice has changed because it would keep people from using long keywords.
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Old 16.06.2017, 21:05
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Re: How safe is your E-Trading account?

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EFT's are much riskier than a fund holding the same investments.
That was a nice read. Still, I think Vanguard has a good reputation and it's ETFs are physically replicated. As to other dangers mentioned in the article, I guess it would be safer to own an index fund. Maybe I will look into the possibility of buying Vanguard's funds. If you buy directly by Vanguard, then you could also bypass the broker.

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Fundsmith is lower risk than either the FTSE 100 or S&P 500. Diversification spreads risk, not necessarily reduces it.
I also hold 29/30 of the investments in my own name. When I know the 30th company I will invest in it.
I would like you to elaborate on this. Fundsmith is an actively managed fund. You don't know what they do behind the scenes, you just have to trust them. The strategy with owning the whole market is that you believe that the world is developing in the long term and you're satisfied with that rate of growth, you're not trying to outsmart anybody.

What does it mean that you hold 29 investments "in your own name"? I thought that your plan was to go all in, like 90% into Fundsmith?

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Does key logging work if you copy and paste passwords??
Think about it: if someone installed an app that reads input from your PC, then they could read the clipboard, or even control your PC. They could access your password manager.
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Old 16.06.2017, 21:17
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Re: How safe is your E-Trading account?

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29 investments "in your own name"? I thought that your plan was to go all in, like 90% into Fundsmith?
Whilst I have about 60% in Fundsmith between UK/Euro funds , I have a further 25% in the individual holdings, of course my weighting is different & to date I have under performed the fund. Selling my USD stock to buy £/€ & being out of the market a week at least could cost a lot more than my under performance.
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I would like you to elaborate on this. Fundsmith is an actively managed fund. You don't know what they do behind the scenes, you just have to trust them. The strategy with owning the whole market is that you believe that the world is developing in the long term and you're satisfied with that rate of growth, you're not trying to outsmart anybody.

.
They are a very inactive fund doing virtually nothing behind the scenes other than investing inflows of £100 million a month. Of course the management fee is nearly £9 million a month The accounts are audited so you would see other trading if it existed.

Oh & by the way it's outperformed both the S&P 500 & The Nasdaq 100 since you started it was merely tracking those index's & you were very unimpressed by its performance. Anyway +99.09% in GBP in 3 years + 83.92 in Euros in 3 years works for me. 5 years is £ +180.18% & € +152.66%

Last edited by fatmanfilms; 16.06.2017 at 21:34.
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Old 17.06.2017, 07:38
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Re: How safe is your E-Trading account?

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All my bank and financial investment logins accept pasting. I could never key in long and complicated passwords...
Look up "lastpass" password manager. It'll run on Windows Android and Apple. You can have very strong passwords autopopulate for you so you don't have to remember or type them.

H.
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Old 17.06.2017, 08:00
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Re: How safe is your E-Trading account?

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Look up "lastpass" password manager. It'll run on Windows Android and Apple. You can have very strong passwords autopopulate for you so you don't have to remember or type them.

H.
yeah. they had a few security problems recently.
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Old 17.06.2017, 09:38
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Re: How safe is your E-Trading account?

Yes, password managers, like lastpass or keepass, can have fatal flaws, but they are still better than using a weak password. What other way is there?When you have 20-30 accounts then for most people it's not possible to remember complex passwords to all of them. If you write down your passwords physically, then you can only login when you have your password list with you.

I would like to refocus to the main purpose of this thread:
1. how does it look from the legal side when I have purchased securities in online trading and did not receive any printed "certified" document. Are the brokers / custodians legally obliged to keep this information backed up? What is the procedure if the broker goes bankrupt, their website is no longer accessible etc? What proof do you have that you do own these 1000 apple shares?

2. how can you protect yourself against a malicious hacker, who logs into your account, sells your shares, makes maximum leverage forex deals until you're broke?
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Old 17.06.2017, 10:01
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Re: How safe is your E-Trading account?

Maybe use a service that guarantees your assets: https://www.tdameritrade.com/securit...guarantee.page

Aside from that use your browser in private mode (i.e. incognito in Chrome) and log in to your computer as a normal user (not as Administrator).
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Old 17.06.2017, 10:03
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Re: How safe is your E-Trading account?

Broker accounts usually only linked to 12 bank account.

So even if hacked they can only send money to your bank account.

Being hacked on your bank account is a bigger issue than your broker.
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