Investment FAQs


Q: What’s investing?

A: Investing is the purchase of a financial product or other item of value with an expectation of favorable future returns. In general terms, it’s using money in the hope of making more money. Investing involves putting money into some form of "security"––an investment instrument of debt or equity. Stocks, bonds, mutual funds, and brokered certificates of deposit are all types of securities.

Q: What‘s the stock market? 1

A: The stock market is a financial market where company stock is bought and sold at an agreed-upon price. When you buy a stock, you become an owner of the company and are entitled to a share of its profits. Investors buy stock because they believe the value of their shares will increase in the future. If the company’s profits go up, share value may go up if the stock sells at a higher price and you can sell at a gain. If the company’s profits don’t go up, you probably would either hold the security in hopes it’ll rise or have to sell at a loss if you want someone to buy the stock from you. In your retirement plan, you may invest in mutual funds that own stocks.

Stock investing involves risk, including loss of principal.

Q: What’s a bond? 2

A: A bond is simply a debt security in which an investor agrees to loan money to a company or government entity in exchange for a predetermined interest rate. If a business wants to expand, one of its options is to borrow money from individual investors. The company issues bonds at various interest rates and sells them to the public. Investors purchase them with the understanding that the company will pay back their original principal plus any interest that is due by a set date [the “maturity date”]. A bondholder is mailed a check from the company at set intervals [for example, every month] until the “loan” is paid off.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in prince.

Q: What’s a mutual fund? 3

A: Mutual funds are another way to invest in the market. A mutual fund is a professionally managed type of collective investment program that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities. The mutual fund will have a fund manager that trades the pooled money on a regular basis.

Investing in mutual funds includes risk, including possible loss of principal.

Q: What’s a CD? 4

A: A CD (certificate of deposit) is a time deposit, a financial product commonly offered to consumers by financial institutions. CDs are similar to savings accounts in that they are insured and thus carry less risk than equities (CDs are insured by the NCUA for credit unions and the FDIC for banks). They are different from savings accounts in that the CD has a specific, fixed term, and usually, a fixed interest rate. It’s intended that the CD be held until maturity, at which time the money may be withdrawn together with the accrued interest. In exchange for keeping the money on deposit for the agreed-upon term, institutions usually grant higher interest rates than they do on accounts from which money may be withdrawn on demand. Fixed rates are common, but some financial institutions offer CDs with various forms of variable rates, like our own 36-month Step-Up CD option.

CDs are NCUA Insured to specific limits and offer a fixed rate of return if held to maturity.

Q: What does it mean to have a diversified portfolio?

A: Diversification is the practice of spreading your investments – and thereby your risks – across a number of different types of investments, such as stocks, bonds, and cash. While there is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio, it may help limit the size of any losses. Diversification does not protect against market risk. If one type of investment performs poorly, other areas of your portfolio may help offset your losses if the sector of the market they’re invested in is less affected or performs positively.

Q: What’s compound interest?

A: Compound interest pays you interest on your principal; then, when it’s time to pay interest again, you’re paid interest on your principal and the previous interest that you earned. In other words, the interest that you’re paid adds to and becomes part of the principal that accrues interest during the next period. You have a continuously growing principal amount without having to make another deposit. But if you do choose to make regular deposits to go along with your automatically growing principal, over time the results can accelerate the growth of funds in your accounts. The power of compound interest is so attractive, Albert Einstein called it “The eighth wonder of the world”!

Q: What’s an annuity? 5

A: An annuity is a contract between you and an insurance company, under which you make a lump-sum payment or series of payments. In return, the insurer agrees to make periodic payments to you beginning immediately or at some future date. It’s typically a part of a retirement plan used to ensure a fixed/stable income when the recipient stops working. A pension is a common form of annuity. Annuities come in a variety of forms, including: fixed, variable, deferred, and immediate. Attractive features include tax deferral on investment earnings, a death benefit, a selection of investment options and lifetime income.

Fixed and Variable annuities are suitable for long-term investing, such as retirement investing. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply. Variable annuities are subject to market risk any may lose value.

Q: What’s an IRA?

A: An IRA (Individual Retirement Account) is an investment tool created by the U.S. government to offer you ways to self-supplement retirement income. Depending on the type of IRA, it provides a tax-deferred or tax-free way of saving for retirement. Traditional and Roth are the most common varieties of IRAs.

  1. Traditional —You get a tax deduction for contributions, which reduces your taxable income. Any earnings and contributions are tax-deferred until withdrawal. When you withdraw the money, the IRA distribution is included in your taxable income, just like any of your ordinary income. You must begin withdrawing from this IRA in the year you turn age 70½. There is a penalty for withdrawing money before age 59½ if certain criteria are not met.
  2. Roth —Unlike a Traditional IRA, you don’t get a deduction for contributions, but distributions are completely tax-free as long as you meet certain requirements, including being 59½ or older and having held the IRA for five years. Otherwise, restrictions, penalties and taxes may apply. If limitations and restrictions are not met it may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

* Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker/dealer (member FINRA / SIPC). Insurance products are offered through LPL or its licensed affiliates. Vantage Credit Union and Vantage Investment Services Group are not registered as a broker/dealer or investment advisor. Registered representatives of LPL offer products and services using Vantage Investment Services Group, and may also be employees of Vantage Credit Union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of Vantage Credit Union or Vantage Investment Services Group. Securities and insurance offered through LPL or its affiliates are:

Not Insured by NCUA or Any Other Government Agency Not Credit Union Guaranteed Not Credit Union Deposits or Obligations May Lose Value

The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with residents of the following states: AR, AZ, CA, CO, FL, GA, IA, IL, MO, MT, NV, OH, OK, SC, TN, TX, WV.

Vantage Credit Union (“Financial Institution”) provides referrals to financial professionals of LPL Financial LLC (“LPL”) pursuant to an agreement that allows LPL to pay the Financial Institution for these referrals. This creates an incentive for the Financial Institution to make these referrals, resulting in a conflict of interest. The Financial Institution is not a current client of LPL for advisory services. Please visit for more detailed information.

1 Investing in securities involves risk, including possible loss of principal. No strategy can assure success or guarantee against loss in declining markets.

2 Selling bonds prior to maturity may make the actual yield differ from their advertised yield and may involve a loss or gain. Bond values will decline as interest rates rise and are subject to availability and change in price.

3 Investors should consider the investment objectives, risks, charges and expenses of the investment company carefully before investing. The prospectus contains this and other information about the investment company. You can obtain a prospectus from your financial representative. Read carefully before investing.

4 Certificates of Deposit offered through these financial institutions offer a fixed rate of return if held to maturity, whereas the return and principal value of an investment in equities fluctuates with changes in market conditions.

5 Variable and fixed annuities are long-term, tax-deferred investment vehicles designed for retirement purposes; but the variable annuity contains both an investment and insurance component. Variable annuities are sold only by prospectus. Guarantees are based on claims paying ability of the issuer. Withdrawals made prior to age 59½ are subject to 10% IRS penalty tax, and surrender charges may apply. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. The investment returns and principal value of the available sub-account portfolios will fluctuate so that the value of an investor’s unit, when redeemed, may be worth more or less than their original value.