Market Investments | Cedar Point FCU (Lexington Park, MD)

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Stocks & Bonds

Assessing the risks and potential rewards that can come with investing in stocks and bonds is much easier with experienced guidance. Cedar Point Financial Services can help you in determining which options match your investor profile, goals, timeline and acceptable risk.


Stocks are equity investments. When you purchase a share of stock, you become a partial owner of that company—a stockholder or shareholder. Stock ownership allows you to share in any profits and growth in the company.

Generally, investors purchase stock for growth and income. Stocks offer the potential to increase in value and outpace inflation. While the stock market tends rise in value, the prices of individual stocks rise and fall daily. Some stocks also pay dividends providing regular income to help fund a retirement or pay for more investing to grow your portfolio. There are two main types of stocks:

  • Common stock is the most commonly traded type of stock and entitles owners to vote at shareholder meetings and receive dividends. When you read or hear about stocks being up or down, it always refers to common stock.
  • Preferred stock usually doesn't come with voting rights. However, preferred stock stockholders receive dividend payments before common stockholders and preferred stockholders have priority over common stockholders if the company goes bankrupt and its assets are liquidated.

Though stocks have historically performed well over the long term, there's no guarantee that stocks will produce higher returns or any returns on your investment. Understanding the factors contributing to the risk will assist you in making sound investment decisions. Here are some factors to be aware of:

  • Actions of investors: If a large number of investors believe that the nation is entering a recession, their actions can affect the direction of the stock market.
  • Business conditions: A new patent, an increase in profits, a pending merger or litigation could affect investor interest and stock prices.
  • Economic conditions: Employment, inflation, inventory and consumer spending influence the potential profit of a company and its stock price.
  • Government actions: Decisions on interest rates, taxes, trade policy, antitrust litigation and the budget impact stock prices.
  • Global economy: Changes in foreign exchange rates, tariffs or diplomatic relations can cause stocks to go up or down.


Bonds are debt securities similar to an I.O.U. When you buy a bond, your purchase is in essence loaning money to a bond issuer. In return for your investment you receive regular interest payments, usually based on a fixed annual rate, until the stated maturity date. Bonds are affected by interest rates, meaning the price of bonds can increase or decrease based on current interest rates. At maturity, you are paid the bond's full-face amount.

Investors purchase bonds for income, safety and diversification. Bonds usually pay interest semiannually, providing a predictable income stream. If bonds are held to maturity, bondholders get back the entire principal. Even though bonds aren't risk-free, they tend to be less volatile than stocks and can offer portfolio stability when the stock market is struggling. It is also possible to lose amounts if a company were to go bankrupt.  High yield bonds can be riskier than most stock so it’s important to talk to a qualified financial professional to assess all risks. 


If you've maxed out your Individual Retirement Account (IRA) and employer-sponsored plan contribution, then an annuity may be a good option to help round out your portfolio. It is important to insure the financial strength of a company when looking at an annuity.

What is an Annuity?

An annuity is an insurance contract designed to provide retirement income. Annuities have two phases:

  • Accumulation: During this phase money is added to the annuity, either as one lump sum (otherwise known as a single premium annuity) or in periodic payments.
  • Distribution: During this phase distributions are received from the annuity either as lump sum or as a guaranteed income stream for your lifetime or a set period of time.

Annuity Options

There are typically two options with annuity investments:

  • Immediate Annuities: Distributions begin immediately upon investing. With an immediate annuity, you can choose to receive payments for a certain period of time or for the rest of your life. They typically offer a fixed payment and a variable payment amount based on market performance. Immediate annuities are best suited for someone near retirement who hasn’t saved enough and needs a steady supplement to their other income sources.
  • Deferred Annuities: With a deferred annuity, you deposit your money with the intention of letting it grow tax deferred until the date set in your contract. They typically allow you to choose between fixed or variable payouts. Deferred annuities are best suited for someone who doesn’t have an immediate need for the money or the income stream.

Annuity Investment Types

  • Fixed: Fixed annuities offer a guaranteed rate of return. The insurance company invests your premium in its general account. Whatever payout option you select, the interest gains and payment amounts are guaranteed by the insurance company, which assumes the risk of investing the general account.
  • Variable: Variable annuities let you choose the investment, and your payout will depend on the performance of the underlying securities in the separate accounts in which your premium is invested. Unlike fixed annuities, the value of your account is not guaranteed—you assume the risk involved in investing your premiums in exchange for potentially higher returns.
  • Indexed: The insurance company credits you with a return that is based on changes to an index, such as the S&P 500.

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Mutual Funds

Diversification is a fundamental principle of investing means not putting all your eggs in one basket.

The Basics

Putting together a portfolio of individual stocks and bonds can be daunting and knowing what and when to buy can be difficult. Mutual funds allow you to invest in several different securities at once, often at a lower cost than if you had purchased the stocks and bonds on your own. By investing in the fund, you own shares of the fund which, in turn, owns shares of individual securities.

The most common types of mutual funds are:

  • Stock funds: Invest in common stocks, generally with capital appreciation as the primary objective.
  • Bond funds: Invest in corporate, government and municipal bonds, and can provide investors with interest income in the form of regularly scheduled dividends.
  • Money market funds: Invest in certain high-quality, short term investment, and typically provide preservation of capital, liquidity and current income are typically the objectives.
  • Balanced funds: Invest in a combination of stocks and bonds, and strive to provide both growth and regular income.

While mutual funds may lose money and do not guarantee a profit, mutual funds may offer a more stable investment option when compared to individual stocks. The price of shares can change daily, and when you sell, you'll receive the value of your shares at that point in time, which may be more or less than what you paid.

Investment Benefits

A few investment benefits of mutual fund investments:

  • Diversification: Most mutual funds own dozens or even hundreds of securities. The managers often spread the fund's assets over more than one type of investment, exposing you to less potential risk than buying individual securities.
  • Professional money management: When you buy shares in an actively managed mutual fund, part of what you pay for is the fund manager's expertise. The manager analyzes hundreds of securities and makes decisions on what and when to buy and sell.
  • Small investment amounts: Depending on fund rules, you can open an account and make subsequent contributions with a very small initial investment. Most funds also allow you to set up automatic investments through a transfer of funds from your credit union or bank account.
  • Liquidity: You can convert your mutual fund investment into cash by making a request to the fund company in writing, over the phone or on the Internet on any business day.

Choosing a Fund

Choosing a mutual fund requires careful consideration involving a number of factors, such as your investment objectives, risk tolerance and time horizon. We encourage you to work with a Cedar Point Financial Services representative to select and invest.

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