Vanguard Charitable, a donor-advised fund sponsor, released a white paper on Tuesday written to show charitably minded individuals and families how they can best achieve their giving goals using DAFs.
Vanguard based its recommendations on an examination of the investing behaviors of some 6,000 account holders who have maintained DAFs for five or more years.
According to the paper, donors should start by writing a mission statement about what they want to accomplish with their giving, keeping in mind that different goals will have different timeframes and may require different strategies.
They should have a clear idea of which charities they wish to support with how many grants they want to recommend and when, and include steps to reach these goals.
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In addition, the paper says, it is important for donors to create and maintain a balanced charitable portfolio, diversifying investment options in order to minimize losses and maximize gains over time. By considering their risk tolerance and desired time horizon, they will be equipped to select funds best suited to help reach their charitable goals.
DAF account holders should invest in options with minimal fees, allowing more dollars to be invested rather than paying investment fees. The effects of minimizing costs can have a significant effect on a donor’s portfolio, and the positive effects of low costs are compounded over time, according to the paper.