PLANO, Texas — The recent record surges with the Dow Jones Industrial Average may have little impact on how members will invest for the long term.
That's according to Brian Turner, manager of advisory services at Southwest Corporate Federal Credit Union. The Dow recently closed above 13,000 points for the first time in the index's history. The record increase came at the end of a seven week rally that saw the Dow gaining more than 1,000 points.
"The question will be whether or not members perceive greater return by putting their principal at risk in the equity markets rather than what they can earn safely in a credit union money market, regular share or term certificate account," Turner said.
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The average rate paid on CU MMAs has risen from 1.3% to 3.1%, translating to an annualized total return of approximately 3.5% to 4.0%, Turner said. During the same period of time which saw record highs being reached in the stock market, CU MMAs have only dropped from 18% to 17% of total shares and actually have seen a steady rise since last August.
"This postulates that credit union funding and its associated impact on cost of funds is more susceptible to members' perception of future interest rates rather than opportunities associated with the stock market," Turner said.
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