National Credit Union Administration (NCUA)

The National Credit Union Administration (NCUA) is the independent federal agency that charters, supervises, and insures federal Credit Unions in the United States. Think of it as the guardian angel for your money held at a credit union. Much like its more famous cousin, the Federal Deposit Insurance Corporation (FDIC), which protects bank deposits, the NCUA's primary role is to maintain public confidence in the credit union system. It does this through its insurance arm, the National Credit Union Share Insurance Fund (NCUSIF). This fund, backed by the full faith and credit of the U.S. government, insures member deposits (called “shares” in credit union lingo) up to at least $250,000 per individual depositor, per insured credit union, for each account ownership category. This means that if your federally insured credit union were to fail, the NCUA would step in and ensure you get your money back, up to the insurance limit. This protection is a critical safety net, making credit unions a secure place for members to save and manage their cash.

The NCUA's protection is automatic whenever you open an account at a federally insured credit union. You don't need to apply for it, and the credit union pays for it. The goal is to protect your savings from the possibility of the institution failing.

It's crucial to know exactly what is and isn't protected. The NCUSIF insurance covers the money you have on deposit, but not investment products, which carry inherent market risk.

• What's Covered:
• Your deposits in various account types are generally combined and insured up to the $250,000 limit.
  • Regular share accounts (savings accounts)
  • Share Draft Accounts (checking accounts)
  • Money Market Accounts
  • Share Certificates (the credit union equivalent of a Certificate of Deposit or CD)
• What's Not Covered:
• These products are investments, not deposits, and are not guaranteed by the U.S. government.
  • Stocks, bonds, and mutual funds
  • Annuities and other insurance products
  • Municipal securities
  • The contents of a safe deposit box

It's possible to have more than $250,000 of insurance at a single credit union if you structure your accounts across different ownership categories (e.g., single accounts, joint accounts, retirement accounts).

For savers, the NCUA and the FDIC are two sides of the same coin. They provide functionally identical protection, just for different types of institutions.

1. NCUA: Insures deposits at federally insured credit unions.
2. FDIC: Insures deposits at federally insured banks.

From a safety perspective, your money is just as secure in an NCUA-insured credit union as it is in an FDIC-insured bank. Both are backed by the full faith and credit of the U.S. government, and both insure your deposits up to $250,000. The decision to use a bank or a credit union should be based on factors like interest rates, loan terms, fees, and customer service—not on the security of the deposit insurance.

For a value investor, managing risk is paramount. While we often focus on the risk of overpaying for an asset, the risk of losing our foundational capital—our cash—is just as important.

Legendary investor Benjamin Graham taught that the cornerstone of sound investing is the Margin of Safety—ensuring you have a buffer against error, bad luck, or the wild swings of the market. While this concept is usually applied to buying stocks for less than their intrinsic value, it's equally vital for the cash portion of your portfolio. Holding cash is an active investment decision. It's your “dry powder,” ready to be deployed when opportunities arise. The NCUA (or the FDIC for bank deposits) provides the ultimate margin of safety for this cash. It guarantees the return of your Principal, eliminating the risk of institutional failure. A value investor never speculates with their foundational capital. By keeping your cash reserves in an NCUA-insured account, you ensure that your war chest is completely safe, allowing you to focus on finding wonderful businesses at fair prices without worrying about the safety of your savings. It's the boring but essential first step in playing defense, which is the key to winning the long-term investment game.