Mutual Funds: A Solid Credit Union Investment Choice

A mutual fund uses pooled money from individual investors to buy multiple stocks, bonds or other securities through a professional investment manager.


By My Credit Union


A mutual 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.

By pooling 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.

The 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:

  • Professional Investment Management – this could relieve some of the time pressure on your CFO
  • Liquidity – generally same-day or next-day liquidity, depending on the time your redemption order is placed
  • Choose a Fund that’s 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
  • Convenient Reinvestment Options – investors can either reinvest dividends or receive dividend checks

While 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.

Total 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 fund’s Net Asset Value (NAV). NAV changes daily and is determined by dividing the total value of the Portfolio’s securities by the number of shares outstanding.

Are Credit Unions eligible to invest in Mutual Funds?

Yes, Credit 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 funds.

Not FDIC-Insured May Lose Value No Bank Guarantee


This sponsored content article is provided to the credit union community for shared insights and knowledge from a recognized solutions provider in the industry. Please note that the views and opinions offered here do not reflect those of Callahan & Associates, and Callahan does not endorse vendors or the solutions they offer.

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Oct. 16, 2000



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