When you decide to open a donor advised fund to help streamline your charitable giving, you have some choices to make. Most donor advised funds have a minimum contribution to open the account. Since a donor advised fund is maintained through a broker who can hold stocks and bonds as well as cash, you will have the option of keeping your contributions in cash or investing them in securities in your donor advised account.

There are several strategies for using a donor advised fund, and your strategy will help determine your asset allocation.

How often do you want to contribute to your fund? A great advantage of donor advised funds is that it allows you to contribute appreciated securities, taking those securities out of a taxable account and thus avoiding the capital gains tax, and then replenishing your investment account with cash to rebalance your portfolio.

With this method, you might contribute a year or two’s (or five) worth of charitable giving at once, meaning you have some time before giving away the balance to specific charities you support.

If you have more time between when you give to your fund and when you give to charity or if you plan to always have something in your fund, you can invest more aggressively in your donor advised fund. If you don’t mind your account value fluctuating between when you give and when the money goes out to support worthy causes, you might also want to invest more aggressively.

For the Schwab donor advised fund, here is an all-stock asset allocation:

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

Maybe you don’t like the thought of that much volatility in your donor advised fund or the money will sit in the account for less time before you give it away to your favorite charity. You might pick a mix of stocks and bonds. Here is a 60%-40% asset allocation:

20% Principal Short-Term Income (PSHIX)
20% Dreyfus Bond Market Index (DBIRX)
30% Schwab Total Stock Market Index (SWTSX)
30% Schwab International Index (SWISX)

If you have a fairly short amount of time for money to sit in the account or you just want the account to keep up with inflation with a steady value, you might want to keep your fund invested completely in bonds:

100% Principal Short-Term Income (PSHIX)

Many people just use their donor advised funds as pass-through accounts where money goes in and goes out in fairly short order. If you don’t want even the slight volatility of bonds and want to keep your account in cash, this is an option:

100% Schwab US Treasury Money Market Fund (SWUXX)

The upside of investing in securities in your donor advised fund is that your account value may grow over time, which means more money to support causes you care about.

The downside is obvious: the market can swing down as well as go up, and your account value could be lower than your contribution when you are giving to a charity.

Whichever asset allocation you choose, you are ultimately investing in order to give that money away and if you change your mind about how to invest your account or your time frame changes, you can always update your account with a new asset allocation.

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