It pays to fund Mutual Funds

[joeyforpresident]

Guys, I don't know who is behind the LSF, but to maximize the long-term goals of the fund, I would highly recommend -- if it's not already in there now -- that you guys open an investment account with say, 10-12% interest a year. Compound interest works wonders, and the best way to insure that the scholarships are provided is to put it in mutual funds, allowing the market forces to work its magic.

Now, if the fund is already in a mutual fund, then forget I said anything. The key to remember is growing wealth so you can fund your cause(s).

[Michael Fisher]

Thanks, Joey!  I can't believe we hadn't thought of it before, but luckily Brian Sullivan came along and asked us to do one of these during the first few months of the LSF's existence.  We called it the Endowment Fund and put him in charge of it. 

Thanks for the advice!  You would not believe how many charitable organizations haven't thought of an endowment fund!   

[joeyforpresident]

Endowments I'm studying about as well, but I'm not  sure if the interest rates are as high as just a regular mutual fund.

Were you being sarcastic?

Anyway, endowments are used, yes, for a ton of nonprofit organizations' funds of all sorts. With the mutual funds, at least you can fully utilize the market, at interest rates that are set by the market, not by some bank or board of directors.

Endowments these days are also very rare.

[Kat Kanning]

I don't think he was being sarcastic.

[Michael Fisher]

Sarcasm is the second cousin of anger.  I'm very rarely sarcastic these days. 

[Kat Kanning]

Oh, a fellow insomniac

[Michael Fisher]

Oh, a fellow insomniac

No kidding!  And I have work tomorrow morning!!!   

[AlanM]

Oh, a fellow insomniac

No, just can't sleep. 

[Dreepa]

It still early for me... just got back from a day trip to Santa Cruz.. cramming CA sites in before we leave.

[joeyforpresident]

The cool thing about an endowment is that in case of death, it will pay a face amount, i.e., the death benefit.

It operates like life insurance.

But, this is just Joey the Financial Planner speaking, I'd dump all the funds from an endowment (which is probably more expensive anyway) into a mutual fund, say maybe a Roth IRA. You can write checks to the fund when they are needed, but the money goes in tax free, and comes out tax free (this is only on a Roth).

But, if you can afford the endowment, go ahead and keep it...but be careful, these life insurance death benefits can be very tricky, at least in the contracts that are handed out.

I'm learning to pick apart individual policies, and while I haven't been shown an endowment, I can still tell you what provisions to avoid, etc.

[Kat Kanning]

Thanks Joey.  I trust what Brian Sullivan is doing.  He's got his own financial advisor business.

[Russell Kanning]

The cool thing about an endowment is that in case of death, it will pay a face amount, i.e., the death benefit.

It operates like life insurance.

r u talking about an annuity?

[PattyE]

But, this is just Joey the Financial Planner speaking, I'd dump all the funds from an endowment (which is probably more expensive anyway) into a mutual fund, say maybe a Roth IRA. You can write checks to the fund when they are needed, but the money goes in tax free, and comes out tax free (this is only on a Roth).

Joey, you are correct about the money that comes out of a Roth IRA.? It is tax free, providing it has been five years since your Roth has been established and you are 59 1/2 or older.? Otherwise, your withdrawals will be subject to taxes and penalties.?

But the money that goes in is not tax free.? It goes in after taxes.

And, when you have a minute... I 'd like that list of investment accounts that earn 10 to 12% interest per year, please?

[AlanM]

Correct me if I am wrong, but as I understand it, an Endowment Fund for a charity such as the LSF is merely an amount that is set aside that cannot be spent. Only the interest earned from it can be spent.
So what does this have to do with IRAs?

[Dreepa]

I think that Alan has it right.
Also Russell mention annuities.. maybe that is what he means. ???