This looks really useful, many thanks for the writeup. I’d note that I’ve been using Vanguard for regular investments and found website annoying and the customer support quite bad; there would be long periods where they wouldn’t offer any because things were “too crowded”. I think most people underestimate the value of customer support, in part because it is most valuable in the tail end situations.
Some quick questions: - Are there any simple ways of making investments in these accounts that offer 2x leverage or more? Are there things here that you’d recommend? - Do you have an intuition around when one should make a Donor-Advised Fund? If there are no minimums, should you set one up once you hit, say, $5K in donations that won’t be spent a given tax year? - How easy is it for others to invest in one’s Donor-Advised Fund? Like, would it be really easy to set up your own version of EA Funds?
“Do you have an intuition around when one should make a Donor-Advised Fund?”
The reason I, personally, opened a DAF was to make it dead simple to donate appreciated stock.
If you’re not familiar: you can give a lot more to charity, at the same cost to you, if you gift stock that’s gone up in price instead of cash. For example, say you bought stock for $1k and has appreciated to $10k. (Lucky you!) If you sold it to donate it to charity, you first have to pay capital gains tax on the $9k, which is 35% or about $3k. So the charity only gets $7k. If instead, you gift the stock directly: you don’t pay taxes, and neither does the charity. Basically, the US Govt matches your donation. Great deal, right?
The catch is: actually gifting stock is really annoying! When I was donating TSLA shares to GiveWell I had to literally fax a piece of paper telling them which shares to take out of my account. A DAF is much simpler; I just click some buttons from my Schwab investment account and the stock lands and gets sold in my Schwab Charitable DAF. There are other great reasons to open a DAF too—but making this tax optimization really easy is why I went for it.
DAFs do make it much easier to donate appreciated stock, and this is good advice. However, if you want to make a donation of appreciated assests and you aren’t able to set up a DAF, EA Funds accepts donations of stock (in the US) and cryptocurrency (US, UK, and NL) for donations of more than $1000 (no promises that you won’t have to send a fax to your broker if you want to donate stock, but in general that hasn’t been the case for most of our donors who are donating from Vanguard etc).
Thanks for sharing your experience with Vanguard! That aligns with anecdotes I’ve heard about Vanguard’s brokerage service.
Are there any simple ways of making investments in these accounts that offer 2x leverage or more? Are there things here that you’d recommend?
I just published something about DAF investing strategies: https://mdickens.me/2021/04/06/investing_strategies_DAF/ In this section, I talk about leveraged ETFs. I believe the only way to invest with leverage in a DAF is through a leveraged ETF or mutual fund, although I’ve heard conflicting things about what the actual legal requirements are. In general, I don’t think leveraged ETFs are good investments.
Do you have an intuition around when one should make a Donor-Advised Fund?
If you want to use leverage, probably never. (Or just use it to convert stock into cash for donations, as akrolsmir described.) Otherwise, you want to have at least $10,000 or so, otherwise the minimum fee will eat too large a % of your assets each year. (Schwab and Fidelity both have a $100 minimum fee.)
How easy is it for others to invest in one’s Donor-Advised Fund?
It’s definitely possible. I personally don’t have my own DAF, I use my parents’ DAF. I’m a full authorized user on the account, which means I had to connect my Fidelity account to the DAF. If you don’t care about managing anything and just want to donate to the DAF, I would think that should be pretty easy, but I haven’t tried it. I think it should be as simple as writing a check to Fidelity Charitable with a note that the money is for that particular DAF.
This looks really useful, many thanks for the writeup. I’d note that I’ve been using Vanguard for regular investments and found website annoying and the customer support quite bad; there would be long periods where they wouldn’t offer any because things were “too crowded”. I think most people underestimate the value of customer support, in part because it is most valuable in the tail end situations.
Some quick questions:
- Are there any simple ways of making investments in these accounts that offer 2x leverage or more? Are there things here that you’d recommend?
- Do you have an intuition around when one should make a Donor-Advised Fund? If there are no minimums, should you set one up once you hit, say, $5K in donations that won’t be spent a given tax year?
- How easy is it for others to invest in one’s Donor-Advised Fund? Like, would it be really easy to set up your own version of EA Funds?
“Do you have an intuition around when one should make a Donor-Advised Fund?”
The reason I, personally, opened a DAF was to make it dead simple to donate appreciated stock.
If you’re not familiar: you can give a lot more to charity, at the same cost to you, if you gift stock that’s gone up in price instead of cash. For example, say you bought stock for $1k and has appreciated to $10k. (Lucky you!) If you sold it to donate it to charity, you first have to pay capital gains tax on the $9k, which is 35% or about $3k. So the charity only gets $7k. If instead, you gift the stock directly: you don’t pay taxes, and neither does the charity. Basically, the US Govt matches your donation. Great deal, right?
The catch is: actually gifting stock is really annoying! When I was donating TSLA shares to GiveWell I had to literally fax a piece of paper telling them which shares to take out of my account. A DAF is much simpler; I just click some buttons from my Schwab investment account and the stock lands and gets sold in my Schwab Charitable DAF. There are other great reasons to open a DAF too—but making this tax optimization really easy is why I went for it.
DAFs do make it much easier to donate appreciated stock, and this is good advice. However, if you want to make a donation of appreciated assests and you aren’t able to set up a DAF, EA Funds accepts donations of stock (in the US) and cryptocurrency (US, UK, and NL) for donations of more than $1000 (no promises that you won’t have to send a fax to your broker if you want to donate stock, but in general that hasn’t been the case for most of our donors who are donating from Vanguard etc).
Thanks for sharing your experience with Vanguard! That aligns with anecdotes I’ve heard about Vanguard’s brokerage service.
I just published something about DAF investing strategies: https://mdickens.me/2021/04/06/investing_strategies_DAF/ In this section, I talk about leveraged ETFs. I believe the only way to invest with leverage in a DAF is through a leveraged ETF or mutual fund, although I’ve heard conflicting things about what the actual legal requirements are. In general, I don’t think leveraged ETFs are good investments.
If you want to use leverage, probably never. (Or just use it to convert stock into cash for donations, as akrolsmir described.) Otherwise, you want to have at least $10,000 or so, otherwise the minimum fee will eat too large a % of your assets each year. (Schwab and Fidelity both have a $100 minimum fee.)
It’s definitely possible. I personally don’t have my own DAF, I use my parents’ DAF. I’m a full authorized user on the account, which means I had to connect my Fidelity account to the DAF. If you don’t care about managing anything and just want to donate to the DAF, I would think that should be pretty easy, but I haven’t tried it. I think it should be as simple as writing a check to Fidelity Charitable with a note that the money is for that particular DAF.