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Conference 7.286::dcu

Title:DCU
Notice:1996 BoD Election results in 1004
Moderator:CPEEDY::BRADLEY
Created:Sat Feb 07 1987
Last Modified:Fri Jun 06 1997
Last Successful Update:Fri Jun 06 1997
Number of topics:1041
Total number of notes:18759

1039.0. "Money Market IRA - Why Bother?" by UNXA::ZASLAW (Steve Zaslaw) Mon Mar 17 1997 19:22

I got an envelope stuffer, along with a recent DCU monthly statement, promoting
a money market IRA yielding between 4.25 - 5.25% APR. 

I don't know all that much about finance and investing, but are there are lot
of potential investors in such a vehicle who would be well served by such a
conservative investment? If one were that conservative, or at a point in life
very near retirement where perhaps it would be justifiable for some component
of your tax-deferring portfolio, would one be better off in higher yielding
fixed income vehicles that are equally safe, say treasuries or CDs? IRAs are
long term investments, so why invest in a short term, relatively low yield
vehicle?

Hey, I love DCU and use it as my primary banking institution. But the best DCU
rate, for accounts of $50,000 or over, is 5.25% APR. The best rate for a 1 year
FDIC insured CD in the US is 6.17% APR (from the Bank Rate Monitor). I'm sure
the minimum is no greater than $10,000 for that. Wouldn't the DCU money market
IRA be a bad investment?
T.RTitleUserPersonal
Name		DateLines
1039.1could be useful short-term, though,SUBSYS::SUNDARESANTue Mar 18 1997 21:4017
    I agree that its not a particularly attractive product
    for the long-term. But it could be a convenient place
    to park liquid IRA funds while looking for, or waiting for,
    better investment options (and perhaps more credible 
    valuations in the stock market ;-) 
    
    I have also noticed that DCU's short rates have been
    trending down, and I'm not pleased about that. But 
    it's not fair to compare our money market rate
    with a 1-year CD rate. Our 1-year rate is now 5.75% APY
    for 25K or higher (5.70% for $500 or higher), a bit closer 
    to the 6.17% rate you quoted. I also don't know how 
    much trouble it is to get that rate - none of the 
    local banks in central Mass (not even the credit unions) 
    are offering anything close, from what I've seen.
    
    - Ganesh.
1039.2DREGS::BLICKSTEINThe moment is a masterpieceFri Mar 21 1997 16:2010
    Have you got the latest Benefits newsletter?
    
    I was amazed at how large a percentage of folk's money was in the Stable
    fund.   
    
    Although your question was posed using the words "well served", it's
    clear that there are folks who will invest in that kind of instrument
    even if it doesn't make a whole lot of sense.
    
    	db
1039.3Well servedSLOAN::HOMFri Mar 21 1997 16:2712
The members are well served when the DCU offer products
which meet the member's need.   As .2 said, some members
are more comfortable with a low but predictable return.

What works for one member may not work for another.  For example,
some members love debit cards because of it withdraws money from
the member's account. That way, they can't spend what they don't
have.    Others abhor the idea of missing out on the float.
DCU offers both a debit and a credit each.  To each his/her own.

Gim
1039.4Suggestion: Less Marketing, More Education for MembersUNXA::ZASLAWSteve ZaslawFri Mar 21 1997 23:4021
>The members are well served when the DCU offer products
>which meet the member's need.   As .2 said, some members
>are more comfortable with a low but predictable return.

>What works for one member may not work for another.  

True.

However, I think it's time that DCU stopped acting like a profit-making
business aggressively marketing its products. It is appropriate, and desirable,
for DCU to offer the widest variety of services and to increase its deposit base
and loan portfolio. Hell, I got a big dividend a few weeks ago. Thanks!

But I would like to see an end to boosterism and marketing hype in DCU
communications and the substitution of educational material. I think it would
be a good idea if the DCU in its glossy enclosures stated the downside or
caveats that the potential customer should consider, giving a balanced
appraisal of the pros and cons of any given service or investment vehicle.

Unheard of, perhaps. But it would better serve the members than the typical
marketing pitches we get now.
1039.5skylab.zko.dec.com::FISHERGravity: Not just a good idea. It's the law!Mon Mar 24 1997 15:1110
>But I would like to see an end to boosterism and marketing hype in DCU
>communications and the substitution of educational material. I think it would
>be a good idea if the DCU in its glossy enclosures stated the downside or
>caveats that the potential customer should consider, giving a balanced
>appraisal of the pros and cons of any given service or investment vehicle.

Now *that* is an excellent idea, imho.  I would love to see my credit union
being more informative with less hype.

Burns
1039.6SLOAN::HOMMon Mar 24 1997 17:1219
I will make sure the CEO sees the last two comments. 

I quote from a letter I wrote to the DCU sometime ago. It focuses
more on the loan side. 
     
   "It is natural for a financial institution to encourage members to use
    the credit union for loans (and deposits).  But we should encourage
    prudent borrowing rather than loans that stretches a member's ability
    to pay.  Is there any marketing value in periodically highlighting the
    need to borrow but to borrow prudently? (Financial publications show
    that consumer debt payment is an increasing percentage of income.) There
    may be significant good will generated from such a program.  It is a
    rare financial institution that encourages prudent borrowing.
   
Gim