Input Requested on Non-Profit Scholarship Endowment Investments

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JaneyLH
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Joined: Wed Oct 16, 2013 7:16 pm

Input Requested on Non-Profit Scholarship Endowment Investments

Post by JaneyLH » Tue Jan 23, 2018 3:00 pm

I realize this isn't exactly a personal investment, but it's personal to me as I am on the board of a non-profit organization that has amassed an endowment of nearly a half million dollars that funds scholarships for graduating high school seniors in a depressed area. One student is selected each year to receive a 4-year scholarship, so we have a $16,000 obligation each year. Very little is being added to the endowment so portfolio performance is key to maintaining the scholarship funding.

I am not on the committee that administers the endowment, but with my eyes opened and the tremendous resulting personal benefit I have received from this forum I know the value this group can provide. I’m not familiar with the investments and I’d appreciate any feedback I can get from more knowledgeable individuals.

These are the investments, as of 11/22/17:

Franklin Income Fund FKINX: 52%, .6 expense ratio, holdings approx.. $257K
American Mutual Fund Class A AMRMX: 22%, .6 expense ratio, holdings approx. $110K
American Balanced Fund Class A ABALX: 15%, .6 expense ratio, holdings approx.. $73K
Federated Government Reserves GRAXX: 10%, ? expense ratio, holdings approx.. $49K

I know there were tremendous loads :oops: on the American and Franklin funds, no use crying over spilled milk… One bright spot is that the financial advisor at Wells Fargo does not charge any fee for managing the portfolio due to the influence of one of our board members who is a customer.

Thank you in advance for any insights or advice you can provide.

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FiveK
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Re: Input Requested on Non-Profit Scholarship Endowment Investments

Post by FiveK » Tue Jan 23, 2018 3:31 pm

JaneyLH wrote:
Tue Jan 23, 2018 3:00 pm
...an endowment of nearly a half million dollars
...we have a $16,000 obligation each year.
That's a 3.2% withdrawal ratio, which should (if historical results are generally predictive) be easily supportable. Also, given a higher inflation rate of college tuition vs. "normal" inflation, there is a risk that the scholarship will lose real value over time.

One of the Vanguard LifeStrategy Funds, in particular the Moderate Growth fund, could be a one-and-done answer for your organization.

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JaneyLH
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Re: Input Requested on Non-Profit Scholarship Endowment Investments

Post by JaneyLH » Tue Jan 23, 2018 8:45 pm

Thank you FiveK. Most of our students are enrolling in lower cost universities... I just found out that my nephew's Syracuse University tuition is $72,000 this year. His first year was $46,000. That's crazy!

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