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Are Term Shares Worth It?

October 30, 2024 • General News

If you're reading this, there's something you'd want most to avoid: regret.


That's why we're here to face it head-on. 


Every person's financial situation is unique. The term share is "worth it" if you're a candidate for its advantages. As your financial advisor, we briefly introduce term shares and insights into whether term shares are worth it based on your current financial situation.

 

A Brief Summary on Term Shares

A term share at Canopy Credit Union is more than just a savings option; it's a secure path to growing your finances. Offering a high Annual Percentage Yield (APY), Canopy’s term shares are available with terms ranging from six months to three years. They are perfectly suited for savings that you want to grow and don’t need to touch for a while! 


Term shares offer a stable, short-term investment that prioritizes growth with less risk than traditional stocks or bonds. When you buy term shares, you invest in a secure option with a fixed rate. They safeguard you against inflation and protect your hard-earned money in unpredictable times. At Canopy CU, the member owns the account where term shares are invested. The account does include an ATM or debit card.  


Our term shares work by investing in financially stable assets, minimizing risk with dividend growth over time. They are similar to a CD of a ban but with competitive flexibility and low minimums. Unlike high-stakes stocks or risky company assets, these shares allow you to confidently hold your position while earning steady returns over time.


Unlike more volatile options such as the stock market, these shares are low-risk. A minimum to open a term share is $500, with your dividends computed daily and paid out monthly without worrying about stock price fluctuations.

 

Are Term Shares Worth It: The Short Answer

At Canopy Credit Union, we understand that choosing the right investment is crucial. Read our simple guide to help you determine if share certificates are the right choice for your financial landscape.


Are you aiming for a short-term financial goal?

  • If Yes: for short-term goals with a similar timeline of  6 months to 3 years, term shares are a great option to offer high returns among savings accounts. They can be used to save up for an automobile down payment, vacation fund, tax payments, mortgage expenses, and payment for business loans. 
  • If No: You might want to explore long-term investments for your wealth management solutions. This may involve growth in capital gains, aligning more closely with your retirement planning goals.

 

Are the interest rates of credit unions and banks expected to drop this year?

  • If Yes: The fixed rates of term shares shield against the effects of low economic growth or stagnation, ensuring your money continues to grow without concerns over holding in a volatile sector.
  • If No: Consider leveraging the potentially higher interest rates other investment accounts offer based on advisor insights.

 

Are you prepared not to touch your money in the near future?

  • If Yes: Term shares are a top choice, offering secure and predictable investment outcomes without comparing constantly shifting stock prices.
  • If No: You might find more flexibility in money market accounts or high-yield checking or savings accounts, which allow easier access to your money without compromising the management of your financial resources.

 

If your responses lean towards 'yes,' Canopy’s term shares could be a highly beneficial component of your financial strategy. 

 

 

Are Term Shares Worth It: The Long Answer

A term share is valuable for those targeting short-term financial goals through a secure, low-risk investment. Because it offers the highest returns among similar savings options, it provides a solid balance between earnings and security, particularly for those seeking a passive cash flow.


While the returns on term shares may not match those from more aggressive investment strategies, they offer the significant advantage of lower risk, thanks to their fixed rates. It's crucial to remember the fundamental trade-off in investing: higher potential returns usually come with higher risks, and conversely, lower returns typically involve less risk of losing your investment.


Embracing calculated risks means making well-informed decisions. Here are some reasons term share investments might be the smart, safe choice you're looking for, along with advice from our team to help you make the best decision.

 

Short-term Maximal Earnings Through Stocks

At Canopy Credit Union, our term shares are an excellent option for substantial, low-risk returns over a short period. With stable rates, these accounts can maximize your short-term earnings. 

 

Accessible Investment with a Lower Minimum Deposit

While money market accounts (MMAs) allow you to access your balance while it is being invested, they demand a higher minimum deposit. For example, MMAs typically have a minimum deposit of $5,000. Meanwhile, term shares have a comparably lower minimum deposit of $500 in Canopy CU. This advantage makes them more accessible for first-time investors and investors looking to diversify their portfolios. While we offer both accounts in our financial services, we aim to help you find the right investments for your financial goals.

 

Protected from Economic Uncertainty

Investing in term shares can offer a stable refuge during economic uncertainty. With fixed rates, term shares are unaffected by the fluctuating economy, providing a predictable return on your investments. This fixed-rate structure makes term shares appealing to those seeking financial stability in turbulent times without needing to track government policy changes impacting banks or stock price trends.

 

Protected from Bank Failures

Unlike volatile stock or bond investments, investments in term shares and similar products at credit unions and banks come with an added layer of security—they are insured. Specifically, the National Credit Union Administration (NCUA) protects credit union term shares, which provides insurance coverage up to $250,000 for each account. This substantial coverage means that even if credit unions or banks were to fail due to economic recessions, your investments in share certificates would be safeguarded.

 

Increase Cash Flow with the Ladder Strategy

The ladder strategy is a savvy investment approach that uses share certificates. 


By diversifying your investments with term share stocks, and utilizing staggered short-term and long-term maturity dates, you can optimize the benefits of each. Long-term term shares generally offer higher returns due to their extended maturity. Simultaneously, short-term term shares maintain liquidity, allowing you access to funds without as long of a wait.


This strategy cleverly balances the need for higher earnings with the necessity for accessible cash, making it a strategic choice for prudent savers looking to maximize their financial growth.

 

Stocks Through Term Share Account: Make Your Money Work for You

Term shares maximize your investment returns while keeping risks low with fixed rates. There is no one best investment option, but attaining term shares can help diversify your portfolio, increase risk tolerance, and achieve financial goals. 


Term shares make your money work for you without interruption by withdrawals. They are a good choice as a low-risk, short-term investment for money you may need in a few months or years. 


Ready to discover competitive APY to enrich your portfolio? Time is of the essence. See our term share rates today.

 

 

 

 

 

 

 

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