Hey Tynan, love your blog posts usually but this seems really irresponsible!
1. There's no such thing as "no risk". What happens if your real estate friend ends up losing all the money because the market suddenly turns bad? (not saying your friend doesn't know what he's doing, but all investments have risks)
2. There's a difference between a banking and a brokerage account. For example, in UK, money deposited in a bank is generally protected by the FSCS, which means you get (a lot of) your money back if the bank goes under. Brokerage accounts don't always have the same protections.
3. If Interactive Brokers go under, you no longer have a margin account. You only have to look as far back as 2007/2008 for examples of this kind of thing happening! Even if you can get your money back, it'll be months later... It's important to always keep some emergency cash around.
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Daan
I see. I understand what you're saying but I think we might be talking about different categories of risk here. Have you read any of NN Taleb's books? He explains these things better than I could.
I think you might enjoy Fooled by Randomness or The Black Swan (the latter is most relevant here). I'd recommend only reading the first 2/3 as he tends to waffle on at the end!
1. Sure, I agree that nothing is actually no risk, but this is close enough that I can call it that comfortably. I have zero doubt that he would make things right no matter what, based on past experience and knowing him well.
2. I have negative money there, so I'm not worried about it. Even if I had positive money, there is SIPC coverage of both securities and cash.
3. I would never get into a situation with a single point of failure. IBKR could die and I'd be fine. I don't mind the extra step of having to liquidate something in the extremely unlikely event that IBKR disappears.