Holding shares in a street name is when investments are held in the name of a broker, not yours.
Some investors hold paper stock certificates bearing their name. These are proof they own shares in a corporation. Other investors are invested in a dividend reinvestment program (DRIP) and their shares are noted by the company’s registrar in an electronic journal. This journal entry is known as a “book entry.” In both cases, the company can quickly and easily access the total number of shares you own or contact you directly.
- Holding stock and other investments in a street name means that rather than the asset being held in your name, it is held in the name of the brokerage firm.
- If you own all of your investments under your brokerage's name, consider asking your broker to invest some assets in your name.
- You can also use a direct registration system to register stocks in your own name.
Most Popular Holding Form
The most popular holding form for most investors is through a brokerage account or asset management account. When you buy shares of Coca-Cola (KO) or General Electric (GE) through your broker, they don't sit in a vault with your name on them. Instead, the broker registers them in its name.
So Coke won’t know that you own the shares. It sees only that Charles Schwab or Fidelity—or any other broker—owns X number of shares. The stockbrokers, in turn, keep records to track who owns what within their accounts.
Risks of Holding All Your Stocks in Street Name
Holding stock in a street name is an accepted practice. It's better, though, not to keep a huge portion of your net worth in a brokerage account using this method. That's even more the case if your account value exceeds the SIPC insurance limits.
You can avail yourself of the direct registration system if inclined. At the very least, if you are concerned about this, refuse to open a margin account and ask your broker to register your securities in your name. It's been said that it might cost a little extra, but it can be worth the peace of mind when and if the world falls apart.
The stocks are in your name.