HOA Investments

Started by DennisG7 • 14 replies • 143 views

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DennisG7 (Georgia)
Posts: 155

Posted:

We have been investing in CD's for the past 3-4 years. Until recently most have earned us about 5%+. I'm looking for any other options that I can present to my BOD at our next BOD meeting in April. Can you provide me with any other options that are guranteed to be safe from loss? Right now we have about $40k invested and we are looking at investing about $20-30K this year. Any Ideas?
Thanks
DennisG7

ElleN (Idaho)
Posts: 1,289

Posted:

Quote:

Posted By DennisG7 on 03/16/2026 10:21 AM
We have been investing in CD's for the past 3-4 years. Until recently most have earned us about 5%+. I'm looking for any other options that I can present to my BOD at our next BOD meeting in April. Can you provide me with any other options that are guranteed to be safe from loss? Right now we have about $40k invested and we are looking at investing about $20-30K this year. Any Ideas?

Interest rates on CDs have come down. I would just buy more CDs at the lower rate. Right now an indvidual can buy a 3-month CD with an APY of 3.8%. I expect a HOA may not be able to get a CD with as good a yield.

DeanJ
Posts: 1,786

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Quote:

On a guaranteed option, 4% is about the best you are going to do today and the term will be less than 12 months.

JonG3 (Florida)
Posts: 13

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Depends on the timeframe, why not look at municipal bonds?

AnneB7 (Minnesota)
Posts: 9

Posted:

We are in the same boat- Investing of CDs is generally the safest that you can do in order to fulfill your fiduciary duty. Some would say invest in a money market- while that CAN be a good investment, if your board has high turn over, or if whoever takes over after you doesn't understand how the stock market works- your community can lose a lot. Many people see the down and get scared and don't react well, and they sell at a loss instead of waiting for the bounce back. Also, I've seen situations where they do not invest with stocks that have dividends- that is easy money in my book, but you could still lose principle, but gain more in dividends over the years, but there is no easy way to track that- someone would have to purposefully make a point to track that in order to show the fiduciary duty.

Right now, the projection is that rates will go down- so we have decided to take our 3.8 and get the longest hold that we can. And, we are currently working on laddering our CDs for the most flexibility that we could get.

ElleN (Idaho)
Posts: 1,289

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Quote:

Posted By AnneB7 on 03/17/2026 9:18 AM
We are in the same boat- Investing of CDs is generally the safest that you can do in order to fulfill your fiduciary duty. Some would say invest in a money market- while that CAN be a good investment, if your board has high turn over, or if whoever takes over after you doesn't understand how the stock market works- your community can lose a lot.

I would not compare money market funds to the stock market as a whole. Exactly once in history (in 2008) did money market funds decline.

I agree short-term and/or laddered CDs are the best bet.

On the third hand I believe "investing reserves" is a topic that many directors will not understand, particularly given that many (most?) directors do not even understand reserve funding.

AnneB7 (Minnesota)
Posts: 9

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Posted By ElleN on 03/17/2026 9:52 AM

I guess maybe I used the term incorrectly?? I meant to signify the difference between accounts that can access stocks- I meant money market funds as in the accounts that are NOT retirement accounts, but with which you can invest into the stock market just like one could with an IRA (Roth, Traditional, Ect.) I agree, there can be some "funds" that are managed by professional Advisors, that you can buy into that have good returns, and good growth, but I also wouldn't trust myself, much less someone that comes after me to do the job, to not make a mess of things.

ElleN (Idaho)
Posts: 1,289

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Quote:

Posted By AnneB7 on 03/17/2026 10:21 AM
I agree, there can be some "funds" that are managed by professional Advisors, that you can buy into that have good returns, and good growth, but I also wouldn't trust myself, much less someone that comes after me to do the job, to not make a mess of things.

I hear you.

I object to any HOA or COA having a brokerage account in the first place. As far as I am concerned all HOAs/COAs should have strictly bank accounts, hopefully with high interest rates or at least good CD offerings.

Brokerage customer service can be appalling, besides.

Let's see who here, if anyone, chimes in that their HOA has an account with say, Fidelity or Schwab. Granted I do not know if either Fidelity or Schwab allow a relatively small potatoes corporate account with the funds the typical COA has. And I do mean a few million dollars in reserves is small potatoes compared to for-profit corporate accounts that Fidelity et al. may have.

BryonW (Massachusetts)
Posts: 55

Posted:

+1 to Annb7 and ElleN -

I would only invest association funds in products that are FDIC insured. That means savings accounts and CDs.

Anything riskier than that is, IMO, not appropriate for association funds.

NameW1 (Texas)
Posts: 32

Posted:

DennisG7 the truth is your association and all similar organizations are losing their shirts over this idiotic societal obsession with FDIC insured CD's. FDIC insured CD's = guaranteed loss due to interest rates much lower than the rate of growth of the supply of US dollars.

If your CD earns 5% and the supply of US dollars increases 10-40% per year is your association getting richer or poorer?

Unfortunately it's probably illegal to invest HOA funds properly.

MarkM19 (Texas)
Posts: 1,452

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As a HOA president with over 1.5 million dollars in CDs for the association, it is not my job to find a better way to invest. It is making sure the funds are getting invested the safest way with the highest return available. The reason why we have limited options is because if laws were laxed some HOAs would be investing in Prok Bellies and the like.

I always make sure along with my treasurer that our CDs are laddered which means that they expire or renew almost every month or so in the event the funds need to be used for repairs. We also keep about 20% of our reserves in cash a reserve checking account for immediate needs. If you need to cash a CD early you lose the interest it was maturing since the start date.

LoriM15 (Florida)
Posts: 1,009

Posted:

A caution on laddered CDs. We have a governance issue I am trying to fix. Our treasurer has access to the brokerage account where our reserve money is kept in CDs. They invest or reinvest or cash out the CDs based on his word alone. He's a very trustworthy guy, but not always a great decision maker. A few years ago when interest rates were very low, the broker advised him to ladder CDs up to 10 years out. He put all of the money in the CD ladder with interest rates ranging from less than 1 - 2%. Then interest rates went up and some of our CDs are still not matured and will pay less than 2%. It was a stupid decision based on bad advice. I am trying to get the bylaws changed so an investment committee is required so it would prevent one person from tying up our funds like this.

MarkM19 (Texas)
Posts: 1,452

Posted:

Lori,
Good point and that is why we always discuss renewing CDs at our meetings. We only invest in annual CDs and 6 months CDs while we created the ladder to fill in months they renew.

It should be at a minimum the treasurer and president on all those broker calls who then report back to the board for final approval.

ElleN (Idaho)
Posts: 1,289

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Quote:

Posted By LoriM15 on 03/19/2026 12:36 PM
A few years ago when interest rates were very low, the broker advised him to ladder CDs up to 10 years out.

Was this broker in any way HOA qualified? Did this broker even look at the reserve study? The latter would be a good start but nowhere near sufficient for giving advice on how long a ladder should be created.

DeanJ
Posts: 1,786

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Posted By JonG3 on 03/16/2026 9:50 PM
Depends on the timeframe, why not look at municipal bonds?

Why not? Unlike CDs, when interest rates increase the value of the bond decreases.

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