Bank customers have enjoyed the security and protection provided by the Federal Deposit Insurance Corporation (FDIC) knowing their savings deposits are backed by the full faith and credit of the U.S. government for up to $250,000 per account. However, those in search of higher returns who were willing to risk their money in the securities markets — for much of Wall Street's history — had virtually no protection of any kind, even from losses due to broker/dealer bankruptcy. Are Investment Losses Insured?

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 depreciation 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.

For example, consider 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.