No to Charity Trusts, Now What?

By Oregon Department of Transportation (Considering options) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

Sleep per Day: (Target) 7h30m / day (Actual) 7h17m  / day (48 day average)

It’s done, I’m very unlikely to start / run a charity trust.

A friend of mine who studies law elaborated a comment of hers a few months back on not starting a charity trust but instead donating directly as an individual.

The risks of being a trustee outweighs any benefits that starting / running a charity trust will bring, which are similar reasons to why my other friend abandoned the idea of starting a charity trust and letting me run it.

So what does this leave me in terms of options?

One option would be to run my own personal portfolio and just compound the crap out of it.

  • The benefit of doing so is because I’m my own boss I won’t get fired, which allows for most of my portfolio be in investment strategies that are extremely tax efficient (companies that don’t pay dividends) and generate the highest returns albeit at the cost of high volatility.
  • The disadvantage of doing so is that this strategy will make me very very rich, which endangers my safety (a lot of people hate the rich) and also cause friendships to become odd (by interviewing and reading about this topic, my observation is that a lot of  friendships don’t survive the wealth divide).

Another option would be to run my own personal portfolio as well, but then just donate everything beyond the money that I need to live comfortably.

  • The benefits of doing so are listed in an article by GiveWell called “Give Now or Give Later?“, but the gist of the article is basically that the the good that you enable through donating now may compound even faster than the good you can enable by delaying donations to compound the donation sum for the future.
  • The disadvantage of doing so would be that I won’t get the opportunity to manage large sums of money. I really want to know where my limit is in terms of investing skills, and staying “small” will make the game of investing become more stale as it would be a game that I would continue to beat without having to try (difficulty to generate returns scales with asset base size) .

The last option I can see right now is to manage other people’s money besides my own portfolio, but the fees they pay for my services are donated to the non profits of my choice (namely charities that have extremely high bang for buck and non profits that maintains an open web and enable effective, scalable and repeatable knowledge accumulation).

  • The benefits of doing so would be that I get to manage much larger sums of money from the get go, the amount of donations that are generated due to my investing is not tied to my personal wealth (refer to previous comment about relationship between wealth and safety), the amount of donations that is directly related to my own activities is much more bigger than running my own personal portfolio and I get to walk this journey of investing with like-minded individuals / institutions that want to use compounding to drive positive change
  • The disadvantage of doing so would be disagreements on where the donations need to go, the inability to employ unconventional investment strategies (refer to previous comment on tax efficient high volatility investment strategies) if the individual / institution can’t stand volatility, possibility of early withdrawals that would prematurely kill the potential returns of certain investment strategies, and the possibility of relationships being ruined due to such disagreements

I’ll be sticking to option one for now (run personal portfolio and compound the crap out of it) since my current biggest priority financially is to create a big enough asset base that can allow me to achieve financial freedom, since philanthropy should not come at the expense of your lifestyle.

That being said, I would be open to option three (manage other people’s money and get paid by donations to non profits of my choice) since it allows me to start generating donations to causes I’m passionate about without interfering with my aggressive compounding of my personal portfolio to achieve financial freedom.

I do have to be very careful with whom I pick to partner with and the alignment of expectations.

[Disclaimer]

Not advice. No offer. Do not rely. May lose value. Risky. Conflicts hidden/obscured. (Borrowed from Terrence Yang‘s Disclaimer on Quora)

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