Return On Investment .... "ROI"

Talked a little bit about the effect of inflation on savings last week; and how low rates lead to a "losing hand" for savers in this economy.  Low savings rates are one thing, but failed to mention the trend among a few institutions toward actually charging consumers a fee for saving. You actually have to pay a financial institution a fee to keep your money!

Paying a fee, rather than earning an interest rate, leads to what is known as a "negative return on investment"!  In other words, at the end of each year you end up with less and less on deposit! A charge (a reduction in principal) has been applied to your balance - over and above the "inflation loss" you also incurred.  Pretty mean game for the prudent, the frugal, the financially responsible!

As a credit union, you invest member deposits in loans, securities, branches, and other assets to attempt to "do good" and to earn a positive ROI for your savings members.  Ever considered which of your CU investments has produced the worst ROI over the last three years?  Which of your investments produced the worst value proposition?  Which of your investments actually produced the worst negative ROI for your members?

Take a guess...

"ROI-bust" Investing!!

That's right!  The one investment we all had which produced a negative ROI - and which produced the worst value proposition over the last three years -  was our NCUSIF investment.  CUs invested 1% of our member deposits with the NCUSIF in 2009 and were charged a 15% fee ( a .15% "assessment"!) on our NCUSIF deposit; in 2010 we invested  1% of our member deposits with the NCUSIF and were charged a 25.82% fee (a .2582% combined "assessment") on our NCUSIF deposit; in 2011 we invested 1% of our member deposits with the NCUSIF and were charged a 25% fee ( a .25% "assessment") on our NCUSIF deposit - more fees ("assessments") have been faithfully promised over the next seven years!

Aggregate 3 year loss on our 1% investment:  (65.82%)

Average annual loss on our 1% investment:     (21.94%)

Expected unrealized losses in future years:   (Sky's The Limit!)

Pretty mean game for the prudent, the frugal, the financially responsible....

If "their" strategy gets anymore "robust".... we're all goin'  "bust"!