What does holding shares in street name mean and what makes it special? Whether you're reading old newspaper articles or watching your favorite high-class drama, you'll occasionally hear this phrase. Rightfully so, this is a commonly asked question, but one that can be easily explained.
Some investors hold physical stock certificates—pieces of paper with their name on them—that represent their ownership 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 an individual's name, it is held in the name of the brokerage firm.
- If you own all of your investments under your brokerage's name, you may want to consider asking your broker to make some investments 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, however, is through a brokerage account or asset management account. When you buy shares of Coca-Cola (K) or General Electric (GE) through your broker, they aren’t physically sitting in a vault with your name on them. Instead, the broker has them registered in its name.
That is, Coke won’t know that you own the shares, it only sees that Charles Schwab or Fidelity—or any other broker—owns X number of shares. The stockbrokers, in turn, track who owns what internally by adjusting their own accounting records.
Risks of Holding All Your Stocks in Street Name
Holding stock in a street name is an accepted practice, but you shouldn't keep a huge portion of your net worth in a brokerage account using this method, especially if your account value exceeds the SIPC insurance limits.
You can avail yourself of the direct registration system were you so 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 often that it might cost a little extra, but it can be worth the peace of mind when and if the world falls apart.