Ways to Allocate a Donor-Advised Fund Account
Two factors tend to have the most influence on how you apportion, or allocate, a traditional investment portfolio among various asset classes: how soon you'll need the money and how much volatility you can stomach along the way.
However, while the investment principles are the same, the considerations are different when you're investing a donor-advised fund (DAF) account—a charitable vehicle that allows you to claim an immediate tax deduction for the total amount contributed and recommend grants to qualified nonprofits over time.
Because DAF assets are irrevocably committed to charity and no longer part of your estate, they can be invested based on your unique charitable timeline, potentially shifting your approach to risk exposure in order to preserve or even grow the funds.
Aligning allocation with intent
Settling on a DAF allocation starts with considering what you'd like to achieve with the funds.
If your goal is immediate impact—by supporting your favorite charities on a set granting schedule, for example, or keeping funds ready for urgent needs like disaster relief—then principal preservation is crucial.
In that case, consider a conservative allocation, such as investments in:
- Cash or money market funds, offering high liquidity and a lower risk of short-term losses.
- Fixed income investments, such as a diversified bond portfolio that can support giving in the short term and help manage downside risk.
On the other hand, if your objective is to leave behind a long-term charitable legacy, a growth strategy can help ensure that inflation doesn't erode giving power and can even sustain planned grants beyond your lifetime. That generally means a portfolio tilted toward stocks, which historically have outperformed other major asset classes and outpaced inflation over the long term.1
If you're looking to make an impact in both the short and long terms, you might recommend a balanced portfolio that's stable enough to support ongoing grants without sacrificing your longer-term legacy goals.
Selecting your investments
Unlike brokerage accounts, in which you can invest in a wide range of securities, most DAF sponsors—including DAFgiving360®—offer investment pools designed to align with your giving goals. According to their holdings, these pools can be organized into categories such as conservative, balanced, and growth, or equities, fixed income, and money market funds.
Another consideration is whether the investments should align with your values. For instance, some donors want their contributions and any gains to "walk the walk" of the causes they support. Many DAF platforms offer socially responsible investment options to help meet this investment goal.
Donors to accounts with large balances or who have more complex needs might consider recommending an investment advisor to professionally manage the account, particularly if:
- The timing of donations is uncertain: For example, if you want to fund ongoing research of a medical condition but also want the option to accelerate your support if there's a scientific breakthrough, an advisor can help adjust the holdings in the account on short notice without disrupting its long-term allocation and without tax consequences.
- You want more investment options: If standard investment pools don't meet your requirements, an advisor can craft a portfolio tailored to your preferences using a wider array of investments.
If you're unsure of the best approach for your philanthropic funds, a financial consultant or wealth advisor can help you think through your giving goals and how they fit into your larger financial and estate plans.
1Morningstar, Inc., with data from 01/01/1970 to 12/31/2025.
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This material is intended for general informational and educational purposes only. This should not be considered an individualized recommendation or personalized investment advice. The securities, investment products, and investment strategies mentioned are not suitable for everyone. Each investor needs to review an investment strategy for their own particular situation before making any investment or trading decisions.
All expressions of opinion are subject to change without notice in reaction to shifting market conditions.
For illustrative purposes only. Individual situations will vary. Not intended to be reflective of results you can expect to achieve.
This information is not a specific recommendation, individualized tax, legal, or investment advice. Tax laws are subject to change, either prospectively or retroactively. Where specific advice is necessary or appropriate, individuals should contact their own professional tax and investment advisors or other professionals (CPA, Financial Planner, Investment Manager, Estate Attorney) to help answer questions about specific situations or needs prior to taking any action based upon this information.
DAFgiving360® is the name used for the combined programs and services of Donor Advised Charitable Giving, Inc., an independent nonprofit organization which has entered into service agreements with certain subsidiaries of The Charles Schwab Corporation. DAFgiving360 is a tax-exempt public charity as described in Sections 501(c)(3), 509(a)(1), and 170(b)(1)(A)(vi) of the Internal Revenue Code.
Contributions made to DAFgiving360 are considered an irrevocable gift and are not refundable. Once contributed, DAFgiving360 has exclusive legal control over the contributed assets.
A donor's ability to claim itemized deductions is subject to a variety of limitations depending on the donor's specific tax situation.
Market fluctuations may cause the value of investment fund shares held in a donor-advised fund (DAF) account to be worth more or less than the value of the original contribution to the funds.