What Asset Allocation Should I Have For My Schwab Donor Advised Fund?

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Schwab’s Donor Advised Fund, called Schwab Charitable, allows you to invest the assets in the fund while you are waiting to designate grants to charities.

The subsequent amount of appreciation or depreciation after you have transferred assets into the account does not affect your tax deduction. But it will affect how much money is available to the charities you support.

Here is a suggested asset allocation for Schwab’s Donor Advised Account where you want the money to remain invested and it does not matter if the account value bounces around and you are willing to replenish the account if the balance falls below your gifting goal for the year.

 Option #1: Invest for growth

If there is any time between your transfer into the account and designating grants out of the account, you could simply keep the account invested in a growth portfolio that hopes for market rates of return:

  • 40% Schwab Total Stock Market Index (SWTSX)
  • 20% Schwab Small Cap Index (SWSSX)
  • 40% Schwab International Index (SWISX)

Since the account is fully invested, disbursements to fulfill grants are prorated across the funds with no transaction costs unless the donor designates otherwise.

 Option #2: Invest for stability

Since a donor advised fund is going to be gifted, the entire amount could simply be invested in a bond fund when the client is willing to take a small risk that there will be sufficient funds to fulfill their specific gifting goals for the year:

  • 100% Principal Short-Term Income Inst (PSHIX)

Option #3: Keep the money in cash

Or it could simply remain in cash when the client wants to be certain there are sufficient funds to fulfill their specific gifting goals for the year:

  • 100% Schwab US Treasury Money FundT (SWUXX)

My practice is to use Option #1 and keep the money invested for appreciation. I believe that all non-profit organizations should have investment accounts and my contributions will average slightly higher if I keep the money invested.

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David John Marotta is the Founder and President of Marotta Wealth Management. He played for the State Department chess team at age 11, graduated from Stanford, taught Computer and Information Science, and still loves math and strategy games. Favorite number: e (2.7182818...)