That depends on the goals and risk tolerance of the individual. Generally, the longer the holding time, the higher the chance stocks and bonds outperform cash and cash equivalents. Therefore, investing with stocks and bonds is typically recommended for savings that aren’t needed in less than several years (like retirement savings).
If the EA community invests all intended donations in a mix of investments that are high-EV and uncorrelated, many years there would be more money available to donate than if everyone had been more risk adverse. That sounds really beneficial.
One potential issue is there aren’t that many highly liquid asset classes out there. If most EAs put their intended donations in stocks, there may be undesirable effects from having donations significantly decrease in recessions from negative returns on intended donations combined with a decrease in donations due to job loss/lowered income.
On an individual level, another potential issue is that the variation in donation value could be more harmful than the higher EV. For example, at an extreme, doubling donations every 6 years and losing all the money every 4 years could lead to missed donation opportunities during those 4 years. The additional opportunities made possible with the doubled donations may not be impactful enough to overcome the effect of the missed donations.
These concerns are just speculative. If nonprofits retain sufficient capital reserves to mitigate the effects of donation variability and if EAs adjust to funding shortfalls caused by other EAs not having enough cash on hand, then all EAs should be investing intended donations in high-EV options.
That depends on the goals and risk tolerance of the individual. Generally, the longer the holding time, the higher the chance stocks and bonds outperform cash and cash equivalents. Therefore, investing with stocks and bonds is typically recommended for savings that aren’t needed in less than several years (like retirement savings).
ideally you shouldnt be risk-averse with your donations though
If the EA community invests all intended donations in a mix of investments that are high-EV and uncorrelated, many years there would be more money available to donate than if everyone had been more risk adverse. That sounds really beneficial.
One potential issue is there aren’t that many highly liquid asset classes out there. If most EAs put their intended donations in stocks, there may be undesirable effects from having donations significantly decrease in recessions from negative returns on intended donations combined with a decrease in donations due to job loss/lowered income.
On an individual level, another potential issue is that the variation in donation value could be more harmful than the higher EV. For example, at an extreme, doubling donations every 6 years and losing all the money every 4 years could lead to missed donation opportunities during those 4 years. The additional opportunities made possible with the doubled donations may not be impactful enough to overcome the effect of the missed donations.
These concerns are just speculative. If nonprofits retain sufficient capital reserves to mitigate the effects of donation variability and if EAs adjust to funding shortfalls caused by other EAs not having enough cash on hand, then all EAs should be investing intended donations in high-EV options.