While the 2013 cost of living rate went up about 1.5 percent, the rate on money
market funds and certificates of deposit have maintained rates between 0
and 1.0 percent per year. Arguably, while condominium associations appropriately
fund their reserve for capital improvements, the value of the reserve is decreasing versus inflation. Condominium associations have traditionally deposited reserve funds in money market funds and certificates of deposits as their only means of investment for decades. It is believed that this method is the most conservative manner to maintain the reserve capital. Except for longer-term CDs, this approach is guaranteed to lose value if inflation is taken into consideration. Other alternatives are available that are conservative in nature and offer higher returns to the associations.