Revisiting the NC State Employees Credit Union Bridge Account

Some may recall my initial excitement about learning about and opening my bridge account at the NC State Employees Credit Union back in April 2008 (If you need a refresher on the basics, check back at that post). I checked back in during June of that year, and it just wasn’t going my way. In fact, the S&P 500 finished down for the first 4 quarters I was in the account so I moved most of my money out and largely forgot about it. However, today a friend who read my story actually went to a NC State Employees Credit Union and opened a bridge account. This along with how far money market interest rates have declined piqued my interest about the viablility of the account again.

I decided the first thing I needed to do was get a little historical perspective on the S&P 500 to see if my results were typical. Luckily, I found a link to the information I needed on NC State Employees Credit Union website in the bridge account disclosure form. Using the information I found there, I was able to download the closing level of the S&P 500 in Excel for every trading day beginning in January 2005. I then deleted out all of the days except for the ones right before and right after each quarter. The next step was calculating the quarterly returns and then determining what the S&P 500 return would translate into for the bridge account (had it been available for this amount of time).

NC SECU Bridge Account Historical S&P 500 Data

DateS&P Index ValueS&P ReturnYour ReturnBridge AccountMoney MarketS&P 500
31-Mar-20051180.59-1.82%0.00% $1,000.00
30-Jun-20051191.331.55%1.55% $1,015.45
30-Sep-20051228.812.80%2.80% $1,043.86
30-Dec-20051248.291.73%1.73% $1,061.91 $1,030.45
31-Mar-20061294.832.01%2.01% $1,083.26
30-Jun-20061270.2-2.17%0.00% $1,083.26
29-Sep-20061335.854.17%3.00% $1,115.76
29-Dec-20061418.36.13%3.00% $1,149.23 $1,061.83
30-Mar-20071420.860.30%0.00% $1,149.23
29-Jun-20071503.355.24%3.00% $1,183.70
28-Sep-20071526.750.48%0.48% $1,189.38
31-Dec-20071468.36-5.36%0.00% $1,189.38 $1,094.17
31-Mar-20081322.7-9.41%0.00% $1,189.38
30-Jun-20081280-7.05%0.00% $1,189.38
30-Sep-20081166.36-10.16%0.00% $1,189.38
31-Dec-2008903.25-28.54%0.00% $1,189.38 $1,127.49
31-Mar-2009797.87-16.79%0.00% $1,189.38
30-Jun-2009919.3211.77%3.00% $1,225.06
30-Sep-20091057.0812.65%3.00% $1,261.81
31-Dec-20091115.17.65%3.00% $1,299.67 $1,161.83 $927.64

If you take a look at the three columns on the right, you can see I decided to take a hypothetical $1,000 invested in each of three accounts. (1)NC State Employees Credit Union bridge account, (2) a standard money market earning a 3% return (delicious by today’s standards) compounded daily, (3) and a no fee no expense no dividend version of the S&P 500. As you can see the bridge account outperformed the money market fund easily. The money market fund would have need a return in excess of 4.15% to beat the bridge account. And, although somewhat artificial, the bridge account destroyed the investment in the S&P 500. I have little doubt that had I run the data using the return on SPY or any other ETF or mutual fund tracking the S&P, the bridge account would have still outperformed.

My takeway is that although the upside is limited, you simply can’t beat the downside protection you get with the NC State Employees Credit Union bridge account. In this interest rate environment, where my primary money market has an APR of only 1.25% per year, it certainly seems like it’s worth the risk of no return in exchange for the chance to get up to a 3% return quarterly. I know I talked about gaming this account in previous posts, but to be honest the $3,000 maximum investment in the account makes it not really worth my while. With all this in mind, I will be moving $3,000 from my emergency fund over to the brdige account as a long-term investment. Again there’s no downside risk, and there’s no limit to the number of transactions you can make so I can always transfer the money back immediately if some even occurs that requires it.

I’d love to know your thoughts!

Read the update on the NC SECU Bridge Account and see the actual returns.

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