What’s Insured and What’s Not
In their search for higher returns, many cus-tomers of banks and credit unions are look-ing beyond traditional
savings accounts to investment products such as mutual funds and annuities. Mutual funds and annuities have
their advantages, but it’s important to understand how they work and what risks are involved.
Deposits vs. Investments
Any money you have in savings and checking accounts or in certificates of deposit (CDs) is known as a
deposit. Your financial institution is committed to returning all of your deposits (plus interest) whenever you
ask. You can even take money out of a CD before it matures, however, you will have to pay a penalty for early
Your institution is also required to carry government insurance on your deposits up to $100,000. The insurer is
usually the Federal Deposit Insurance Corporation (FDIC). Contact your financial institution if you have
specific questions about your insured deposits.
Financial institutions can also provide investment products like mutual funds and annuities to their customers.
Your bank or credit union may sell you this type of product, but it is not obligated to pay you back for any
losses you may have if the investment is not successful.
Equally important, the U.S. government does not insure you against investment losses, even if you purchased
the product at a bank or credit union.
Investing in a Mutual Fund
When you invest in a mutual fund, your money is put together with the money of other investors and is used
to purchase a variety of securities such as stocks, bonds, and other financial instruments.
Mutual funds are run by investment professionals who decide which investments to buy or sell for the fund.
Their decisions are guided by the fund’s investment goals.
For example, some mutual funds are designed for people who want to have easy access to their money and
invest only for a short time. These funds invest primarily in government securities or very short-term bank