fund uses "pooled" money from individual investors
to buy multiple stocks, bonds or other securities through
a professional investment manager. The amount you invest in
a mutual fund is kept track of in shares or units and priced
daily, similar to a stock or a bond. There are many types
of mutual funds, each with its own investment objective. The
three main types are: stock, bond, and money market funds.
money from many investors, a mutual fund has greater buying
power and can diversify its holdings. A mutual fund also offers
professional investment management from a registered investment
adviser, who generally has greater research capabilities and
investment expertise than an individual investor.
Potential Benefits of a Mutual Fund
Mutual funds are designed to help make investing easier. Credit
Unions, specifically, can look forward to the following potential
benefits, if they invest in mutual funds:
Investment Management this could relieve some of
the time pressure on your CFO
generally same-day or next-day liquidity, depending
on the time your redemption order is placed
a Fund thats in line with your goals and objectives
there are thousands of mutual funds available, but only
a few are specifically designed for credit union investors
Reinvestment Options investors can either reinvest
dividends or receive dividend checks
there are many benefits, there are also risks associated with
mutual fund investing. For example, investors should be aware
that fluctuations may occur in the return and share value
of any fund. Also, mutual funds are subject to the same special
risks as the stocks and bonds that make up the portfolio.
Return on a Mutual Fund
The total return of a mutual fiund is the complete performance
picture.There are two components that make up the total return
of a mutual fund investment. One is the dividend income received
on a monthly basis and the other is a rise or decline in the
funds Net Asset Value (NAV). NAV changes daily and is
determined by dividing the total value of the Portfolios
securities by the number of shares outstanding.
Credit Unions eligible to invest in Mutual Funds?
Unions currently have $103.7 billion in investments as of
6/30/00, $2.2 billion of which is in mutual funds.
The Trust for Credit Unions is the oldest and largest
mutual fund family designed exclusively for credit union
investors. TCU offers three diverse portfolios that
conform with NCUA guidelines and are approved for federal
and most state-chartered credit unions. To determine
if a specific credit union may invest in mutual funds,
you may consult with your state administrator and, of
course, your internal investment rules to determine
whether or not your credit union may invest in mutual
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