Co-op general managers and finance managers: Are you at a co-op with a substantial excess cash balance¹ seeking opportunities to align your investment decisions with current market conditions? With interest rates substantially higher now than several years ago, managers may choose to explore avenues that offer higher returns without taking on undue risk. Below, we describe some options for you to research further and discuss with your board.

1. Certificates of Deposit (CDs): Certificates of deposit are a popular choice for risk-averse investors looking for steady returns. By investing in CDs, you can earn higher interest rates compared to traditional savings accounts while still maintaining the safety and security provided by FDIC/NCUA insurance.² Note that early withdrawals from CDs before the maturity date may incur a penalty. Also, if interest rates rise, your investment would be locked in at a lower interest rate.
    
2. Certificate of Deposit Account Registry (CDAR) Accounts: CDAR accounts offer the convenience of consolidating your CD investments with multiple banks and credit unions, eliminating the need to be an account holder at each financial institution. An important benefit of the CDAR account is that amounts above the normal FDIC/NCUA limits remain insured. CDAR accounts do this by dividing your total investment into amounts below insured limits and allocating to multiple banks, allowing for the full balance to remain insured.
    
3. SimpliCD: Primary Financial Company is a financial services company jointly owned by ten corporate credit unions that has created a service called SimpliCD (pronounced “Simplicity”), which allows for investments in multiple CDs from a single account, similar to a CDAR account. While CDs from traditional banks are also offered through the service, SimpliCD focuses on credit unions. Balances held in SimpliCD remain insured as your funds are invested through purchases of multiple CDs from participating financial institutions. SimpliCD’s platform allows you to select CDs with maturity terms and at banks of your choosing. 
    
4. U.S. Treasuries: U.S. Treasuries are considered one of the most secure investments available. Backed by the full faith and credit of the United States government, Treasury bills, notes and bonds offer a reliable investment vehicle with low default risk. Treasury securities are issued in various maturities, allowing you to choose an investment term that aligns with your business needs. TreasuryDirect.gov allows companies to purchase securities at auction directly from the U.S. government at no cost. Some well-known brokerage companies offer low-/no-cost brokerage accounts that facilitate the purchases and sale of these securities. As with all bonds, if interest rates rise, the value of the security will fall, although 100% of face value is returned if held to maturity.
    
5. Money Market Accounts: Another option to consider for earning a higher rate of return on your cash balances while maintaining low risk is money market accounts that invest in highly liquid, short-term instruments such as U.S. Treasuries and municipal bonds. Money market accounts are typically offered by banks and credit unions and provide a higher interest rate than regular savings accounts. By selecting a money market account that focuses on investing in U.S. Treasuries, you can benefit from the stability and security of Treasury investments while earning a competitive return on your cash. Further, a money market account provides the same level of FDIC/ NCUA insurance as traditional bank accounts with more liquidity, allowing you to access your funds when needed. However, there may be restrictions on the number of transactions allowed per month.
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Consider Benefits, Risks and Costs

When exploring options and making investment decisions, it is prudent to remember that while they offer benefits, all investments come with some level of risk. Even investments such as CDs and Treasuries can lose value due to inflation or, in the case of CDs, may have penalties for early withdrawal. It is essential to weigh all risks, benefits, and costs:

• Benefit: By diversifying your cash balances and investing in higher-yielding options, you can expect a return that outperforms the minimal returns offered by traditional bank accounts.
• Risk: Investing in equities involves a higher risk of loss. However, CDs, CDAR accounts, or U.S. Treasuries are lower-risk options focusing on capital preservation but might not keep pace with inflation over the long term.
• Cost: The expenses associated with investment management should be considered. Partnering with reputable institutions can provide access to knowledgeable portfolio managers and services while minimizing costs. With a well-structured portfolio, you can achieve a net return that exceeds the returns from traditional bank accounts.

While the investment options discussed here are relatively low risk compared to other options, financial situations, risk tolerance and investment goals can vary between co-ops. Therefore, it is crucial to conduct a thorough analysis of your financial circumstances and goals before making investment decisions. A financial advisor understands your unique needs and can provide personalized guidance based on your current financial situation and future objectives.

These investment options should not be considered in isolation but as part of a comprehensive investment strategy that balances risk and return. Market conditions and interest rates vary over time, so an investment strategy that works today may need to be adjusted in the future to continue meeting your goals. Your investment strategy should also be revisited as your financial situation, goals and market conditions change.