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Your Charitable Investment and Market Volatility

Recent volatility in the stock market has some Community Foundation fund advisors thinking about the investment allocation for their fund. We would like to take this opportunity to discuss the Community Foundation’s investment policy, answer a few questions, and offer you some tips for wise fund allocation.  

While it is tempting to allow current economic concerns or the state of the markets to dominate our thought process, history suggests that conditions will improve without warning and well before the flood of bad news has subsided.

Diversification and asset allocation are key elements to the investment strategy of all Community Foundation funds. Research has shown that asset allocation is the primary determinant of long-term investment results. Community Foundation funds are invested in a variety of stocks, bonds, and mutual funds to stabilize the effect of market volatility. An investment performance review of CFOV funds under management showed a return of 8.4% for 2007.

Community Foundation fund advisors with long-term charitable goals should not focus on short-term performance. Returns are cyclical and the key risk is failure to earn sufficient return for the investment risk being undertaken. This usually results from investing in extremes; too conservatively or aggressively. For long-term success, it is wise to stick to a consistent and disciplined asset allocation strategy designed to fit your time horizon and philanthropic goals and to regularly rebalance assets back to the target asset allocation.

The Community Foundation for the Ohio Valley has a conservative spending policy of 5% of the fair market value of the fund based on a 12 rolling quarter average. This policy is meant to level out the peaks and valleys of the market and achieve a fair average to continue to maintain fund balances. Staying within the guidelines of the 5% spending policy will allow fund advisors to achieve their charitable goals while still maintaining strong funds.

The bottom line is that Community Foundation funds are meant to be ‘A Fund For All Time.’ With that mindset, the investment professionals we work with are working hard to ensure that a permanent endowment for the Ohio Valley is maintained through expert market analysis.

If your group would be interested in hearing more about how your funds are invested, please contact Susie Nelson to arrange for a meeting with your fund’s investment professional.