sure, my pleasure. I've posted here to convince people of the effectiveness of the donation system at Give For Good, so I appreciate the questions and feedback.
Re "Past performance does not guarantee future results": I think it matters a lot which stocks you look to see if this statement is true. It is correctly used for trading in individual stocks or basket of carefully picked stocks. Also correct for when you look at holding broad index funds for a short amount of time. But when you are looking at holding index funds for a long period of time, I do not think this sentence makes sense, for 2 reasons:
The evidence is really good from the past that the longer you hold index funds, the more your interest moves towards the mean (around 9% uncorrected for inflation, 7% corrected).
Perhaps more importantly with regards to your question, there is a good theoretical reason for why stock index funds have a positive interest + a better interest than saving or bonds. We explain this here. In a nutshell: this is how our (capitalist) economy works. Economic theory dictates that in capitalism, you can earn ‘rewards’ (e.g., money) for two things: labor and capital. With labor the reward is a wage. With capital (eg by investing, loaning out money, renting out land or a house etc), the reward is profit/rent/interest etc. It is logical that lending out capital (which is what investing is) over long periods of time pays off on average. Otherwise, no one would lend out money or invest anylonger and the capitalist system would no longer work. It is also logical that this nets more rewards on average than saving at a bank or bonds, because those two carry less volitality in the short term. So you get a premium for the higher short-term volatility.
Hope that convinces you !
I've heard about the Japan argument before, but the same applies there as to all other markets that have seen a downturn, however short or long: A) if you increase the number of years of the analysis, the average interest becomes positive again and moves towards the mean, B) if you increase the geographical scope of the investment, the interest over the same time period also becomes positive. So the best strategy is to invest in world-level index funds for dozens of years. Which is what we do at Give For Good.
Re the operational costs: we buffer our income from investments. So instead of taking all operational revenue each year and using that to fund our expenses, we take what amounts to around 5% interest (so on purpose a bit below the historical average). Any money that is left over, we save for years with losses.
Hi Madhav,
I work for Give For Good, a new donation platform that encourages people to donate in a new (more effective!) way. We don't select charities, but we did just add our first Indian charity. If you're interested to have a look, this is our website:
www.giveforgood.world
Best,
Rik
thanks for this! Yes, this is a common discussion in sustainable finance at the moment, whether it is better to divest from such companies or to invest in them and influence their decision making via voting.
We have opted for ESG and SRI investment funds that exclude these companies because the two groups involved in our donation system, donors and the charities, often desire this.
you are right, there are some organizations that do and Wikipedia and universities are good examples. But in our experience, many of the mainstream charities do not. This is partly for PR reasons as you indicate, because donors appreciate to see the direct action that was taken using their donated money. Another reason is that it can be illegal for charities to do so, because of legislation saying that charities can only hold money or investments as a reserve, not as a source of income.
We aim to change this, by explaining to donors why this is such a great system and how it can multiply the impact of each of your donations many times over! And we make it easy for people to support charities this way if they want: at the majority of charities, for regular-sized donations you cannot indicate currently that you want the donation to be invested, with the interest going to the charity.
apologies for the late reply! Someone had a similar question in this forum post. The answer is: many charities enthusiastically embrace Give For Good as a concept for two reasons:
Many charities currently see their stable, periodic donations trending downwards. The reason for this is that there is an ongoing switch in how people donate. It used to be very normal to transfer a fixed amount periodically to your favorite charities. However, this is changing nowadays more towards one-time gifts based on campaigns (think ice bucket challenge) and tips from influencers and blogs/vlogs/podcasts. As a result, many charities can no count less and less on a stable, annual income. This is a challenge that Give For Good helps to solve.
We were told by several of the larger charities that their research has shown that the more 'methods' of giving there are, the more the overall income is. There is some degree of cannibalization between the different donation methods, but overall the income is more. So we understood from them that this is an extra method of income for them, which they expect will increase their overall income (especially long-term, given our model). Also, they expect that because of our model, we may be able to attract donors from sectors that are normally hard to reach for them (e.g. the financial sector).
Hope that clarifies things! Let me know if you have any additional question, happy to answer them.
thanks for your reply: yes it is pretty good right!! We got lucky, to be honest. It is quite common for the annual interest to vary a lot year by year, see for example here. Give For Good was established in 2020, and the two financial years that followed were very good investments years.
Yes you are correct that this year is not so great :), so after we update the investments the next time, the average will likely be lower. We update everything early in the year after the closure of the financial year, so I expect these numbers to be updated by February/March.
Re your second point, it is actually a common misconception that all stock investments are risky. Investing in stocks definitely CAN be risky, e.g. when you pick certain stocks or invest for a short time. But there is solid evidence available that shows that if you spread your investments over a lot (really a lot!) of companies, eg 1000s of 10000s, plus if you hold those investments for a very long time, that investing is safe and generates a reliable interest. A good example is investing in 'index funds' which enable you to invest in all companies that offer stocks. This allows you to achieve the average interest of all companies combined and is what we do at Give For Good. A nice way to show this is the graph at the bottom of this page, which shows the range of interests that you would have achieved if you invested in such index funds. As you can see, if you had only done this for 1 year, the interest varied between -60% and +150% in the past 150 years. However, if you had invested for a period of 25 year, the interest varied between +2% and +12%. So for these index funds, there has never been a period of 25 years with a negative interest. The longer you invest, the more these ranges move towards the average (7%, corrected for inflation, 9,1% not corrected for inflation).
This is precisely the system we make use of at Give For Good and it is the same system that many other public-benefit organizations make use of, for example pension funds. Our big advantage at Give For Good is the same advantage that they (the pension funds) have: our investment horizon is very long, in our case we intend it to be infinite, so we want our donations to keep generating income for charities in perpetuity. This makes the investment system we adhere too safe and reliable in terms of the interest you can expect it to generate.
Re your final question, the financial statement: correct, we are fully run by volunteers at the moment. The few costs that there are currently each year (mainly some IT costs for hosting and software) we cover using no-interest loans that only have to be paid back if Give For Good is ever financially healthy enough to pay them back. For the medium-term, we do have a revenue model with which we hope to be able to hire staff in the future: asking a % of the interest we achieve on the donations. This is on purpose a % of the interest, and not of the donations themselves, so we only get operational funding when we actually generate profits for the charities. The % is currently set at 5%. Our long-term plan is for people's donations to our own non-profit, Give For Good, to be enough to generate an income to support our operational expenses. This would allow us to decrease the 5% that we ask on the generated profits to 0%, so that 100% of the profit from the invested donations goes to the charities.
Regarding your question about scaling, we can scale almost infinitely with our current IT-system and volunteer efforts: it was set up on purpose to be manageable at a low cost, so that we have time to get our medium- and long-term revenue models going. Extra operational income in the future would be spent mostly on onboarding new charities and on convincing donors that this way of donating to charity is long-term the smart and effective way to donate!
thanks for having such a detailed look at our website, much appreciated!
To answer your statement, see my reply to Tom, most charities that I know of have legal limits on how much money they are allowed to invest legally, it is intended for backup/reserve reasons. I don't know many that invest as a source of income (although they should!!).
thank you for your question and interest. There is a point in time when the profit from the investments becomes more than the original donation. When calculating this point, it is important to take inflation into account (because money becomes worth less over time). It differs at which period in history you look for when this occurs, because the profits from stock investments differ per period (but are on average 9.1% per year in the past 150 years). In the example that is shown on our website, we show what would have happened if someone had established Give For Good 100 years earlier, so in 1920. If that had happened, the "point" that I speak above when the inflation-corrected profit from the investments had overtaken the value of the initial donation occurred after 9 years.
With regards to your question/statement that non-profits are allowed to invest: this is a bit more complicated. In most countries that I know of, non-profits are only allowed to invest money as a 'reserve'. And there are limits to how much they may keep as a reserve. It is often not allowed to invest money as a primary source of income. If charities would be allowed to do this, we would certainly try to convince them of our model, because we think it generates much more benefit long-term than spending the donations immediately.
Things are a little different for philanthropic funding foundations. They very often apply our model - investing their funds - and then give the profits each year to charities or they select projects themselves (e.g. grants for students). Their model is the same as ours and they apply it for the same reasons as we do (see my reply above to Lukas).
thank you for your reply. To answer your questions: yes, all the charities on our website were 'onboarded', meaning they all specifically approved being listed there. Many actually enthusiastically embrace the idea! The reasons for this are twofold:
Many charities currently see their stable, periodic donations trending downwards. The reason for this is that there is an ongoing switch in how people donate. It used to be very normal to transfer a fixed amount periodically to your favorite charities. However, this is changing nowadays more towards one-time gifts based on campaigns (think ice bucket challenge) and tips from influencers and blogs/vlogs/podcasts. As a result, many charities can no count less and less on a stable, annual income. This is a challenge that Give For Good helps to solve.
We were told by several of the larger charities that their research has shown that the more 'methods' of giving there are, the more the overall income is. There is some degree of cannibalization between the different donation methods, but overall the income is more. So we understood from them that this is an extra method of income for them, which they expect will increase their overall income (especially long-term, given our model). Also, they expect that because of our model, we may be able to attract donors from sectors that are normally hard to reach for them (e.g. the financial sector).
Re your second question, most of our donors today enter via our general website and are not looking for one specific charity to support via our platform using our methods (which also happens). So yes, our platform generates 'extra' attention for the charities that we list that would otherwise not have occurred.
Finally, to answer your question about why our scheme and not direct donations, this is quite extensively discussed on our website, but in a nutshell there are two major benefits:
Over time the money that goes to the charities is much more. For example, if Give For Good had been established 100 years earlier, in 1920, by the year 2020 each donation from that year would have generated 28 times as much income for the charities as compared to a one-time donation! See this figure on our website. This has been calculated using real stock market data, it is not an estimate, and is already corrected for inflation, so constitutes 'real value'. And most of all: after those 100 years it still continues to generate interest for the charity!
Give For Good is also beneficial because it can turn one-time donations into a stable, annually returning source of income for charities, that they can count on. For reasons described above, and for reasons like strategic planning, this is important to charities.
Thanks again for your questions, I hope that clarifies things!
Thanks for this post! I'm donating to multiple charities via the platform I help run: Give For Good. Give For Good is a charity donation platform that turns every donation into a miniature investment fund for the charity that you choose. There are dozens of charities on the website on you can invest for any other registered charity by emailing them at [email protected]
hi,
sure, my pleasure. I've posted here to convince people of the effectiveness of the donation system at Give For Good, so I appreciate the questions and feedback.
Re "Past performance does not guarantee future results": I think it matters a lot which stocks you look to see if this statement is true. It is correctly used for trading in individual stocks or basket of carefully picked stocks. Also correct for when you look at holding broad index funds for a short amount of time. But when you are looking at holding index funds for a long period of time, I do not think this sentence makes sense, for 2 reasons:
Hope that convinces you !
I've heard about the Japan argument before, but the same applies there as to all other markets that have seen a downturn, however short or long: A) if you increase the number of years of the analysis, the average interest becomes positive again and moves towards the mean, B) if you increase the geographical scope of the investment, the interest over the same time period also becomes positive. So the best strategy is to invest in world-level index funds for dozens of years. Which is what we do at Give For Good.
Re the operational costs: we buffer our income from investments. So instead of taking all operational revenue each year and using that to fund our expenses, we take what amounts to around 5% interest (so on purpose a bit below the historical average). Any money that is left over, we save for years with losses.
Merry X-mas!
Hi Madhav, I work for Give For Good, a new donation platform that encourages people to donate in a new (more effective!) way. We don't select charities, but we did just add our first Indian charity. If you're interested to have a look, this is our website: www.giveforgood.world Best, Rik
thanks for this! Yes, this is a common discussion in sustainable finance at the moment, whether it is better to divest from such companies or to invest in them and influence their decision making via voting.
We have opted for ESG and SRI investment funds that exclude these companies because the two groups involved in our donation system, donors and the charities, often desire this.
best regards,
Rik
Dear Relevantfiction,
you are right, there are some organizations that do and Wikipedia and universities are good examples. But in our experience, many of the mainstream charities do not. This is partly for PR reasons as you indicate, because donors appreciate to see the direct action that was taken using their donated money. Another reason is that it can be illegal for charities to do so, because of legislation saying that charities can only hold money or investments as a reserve, not as a source of income.
We aim to change this, by explaining to donors why this is such a great system and how it can multiply the impact of each of your donations many times over! And we make it easy for people to support charities this way if they want: at the majority of charities, for regular-sized donations you cannot indicate currently that you want the donation to be invested, with the interest going to the charity.
best regards and a merry Christmas,
Rik
Dear EdoArad,
apologies for the late reply! Someone had a similar question in this forum post. The answer is: many charities enthusiastically embrace Give For Good as a concept for two reasons:
Hope that clarifies things! Let me know if you have any additional question, happy to answer them.
Rik
Dear m(E)t(A),
thanks for your reply: yes it is pretty good right!! We got lucky, to be honest. It is quite common for the annual interest to vary a lot year by year, see for example here. Give For Good was established in 2020, and the two financial years that followed were very good investments years.
Yes you are correct that this year is not so great :), so after we update the investments the next time, the average will likely be lower. We update everything early in the year after the closure of the financial year, so I expect these numbers to be updated by February/March.
Re your second point, it is actually a common misconception that all stock investments are risky. Investing in stocks definitely CAN be risky, e.g. when you pick certain stocks or invest for a short time. But there is solid evidence available that shows that if you spread your investments over a lot (really a lot!) of companies, eg 1000s of 10000s, plus if you hold those investments for a very long time, that investing is safe and generates a reliable interest. A good example is investing in 'index funds' which enable you to invest in all companies that offer stocks. This allows you to achieve the average interest of all companies combined and is what we do at Give For Good. A nice way to show this is the graph at the bottom of this page, which shows the range of interests that you would have achieved if you invested in such index funds. As you can see, if you had only done this for 1 year, the interest varied between -60% and +150% in the past 150 years. However, if you had invested for a period of 25 year, the interest varied between +2% and +12%. So for these index funds, there has never been a period of 25 years with a negative interest. The longer you invest, the more these ranges move towards the average (7%, corrected for inflation, 9,1% not corrected for inflation).
This is precisely the system we make use of at Give For Good and it is the same system that many other public-benefit organizations make use of, for example pension funds. Our big advantage at Give For Good is the same advantage that they (the pension funds) have: our investment horizon is very long, in our case we intend it to be infinite, so we want our donations to keep generating income for charities in perpetuity. This makes the investment system we adhere too safe and reliable in terms of the interest you can expect it to generate.
Re your final question, the financial statement: correct, we are fully run by volunteers at the moment. The few costs that there are currently each year (mainly some IT costs for hosting and software) we cover using no-interest loans that only have to be paid back if Give For Good is ever financially healthy enough to pay them back. For the medium-term, we do have a revenue model with which we hope to be able to hire staff in the future: asking a % of the interest we achieve on the donations. This is on purpose a % of the interest, and not of the donations themselves, so we only get operational funding when we actually generate profits for the charities. The % is currently set at 5%. Our long-term plan is for people's donations to our own non-profit, Give For Good, to be enough to generate an income to support our operational expenses. This would allow us to decrease the 5% that we ask on the generated profits to 0%, so that 100% of the profit from the invested donations goes to the charities.
Regarding your question about scaling, we can scale almost infinitely with our current IT-system and volunteer efforts: it was set up on purpose to be manageable at a low cost, so that we have time to get our medium- and long-term revenue models going. Extra operational income in the future would be spent mostly on onboarding new charities and on convincing donors that this way of donating to charity is long-term the smart and effective way to donate!
best regards, and a Merry X-mas,
Rik
Dear Lukas,
thanks for having such a detailed look at our website, much appreciated!
To answer your statement, see my reply to Tom, most charities that I know of have legal limits on how much money they are allowed to invest legally, it is intended for backup/reserve reasons. I don't know many that invest as a source of income (although they should!!).
best,
Rik
Dear Tom,
thank you for your question and interest. There is a point in time when the profit from the investments becomes more than the original donation. When calculating this point, it is important to take inflation into account (because money becomes worth less over time). It differs at which period in history you look for when this occurs, because the profits from stock investments differ per period (but are on average 9.1% per year in the past 150 years). In the example that is shown on our website, we show what would have happened if someone had established Give For Good 100 years earlier, so in 1920. If that had happened, the "point" that I speak above when the inflation-corrected profit from the investments had overtaken the value of the initial donation occurred after 9 years.
With regards to your question/statement that non-profits are allowed to invest: this is a bit more complicated. In most countries that I know of, non-profits are only allowed to invest money as a 'reserve'. And there are limits to how much they may keep as a reserve. It is often not allowed to invest money as a primary source of income. If charities would be allowed to do this, we would certainly try to convince them of our model, because we think it generates much more benefit long-term than spending the donations immediately.
Things are a little different for philanthropic funding foundations. They very often apply our model - investing their funds - and then give the profits each year to charities or they select projects themselves (e.g. grants for students). Their model is the same as ours and they apply it for the same reasons as we do (see my reply above to Lukas).
Hope that clarifies things!
best regards,
Rik
Dear Lukas,
thank you for your reply. To answer your questions: yes, all the charities on our website were 'onboarded', meaning they all specifically approved being listed there. Many actually enthusiastically embrace the idea! The reasons for this are twofold:
Re your second question, most of our donors today enter via our general website and are not looking for one specific charity to support via our platform using our methods (which also happens). So yes, our platform generates 'extra' attention for the charities that we list that would otherwise not have occurred.
Finally, to answer your question about why our scheme and not direct donations, this is quite extensively discussed on our website, but in a nutshell there are two major benefits:
Thanks again for your questions, I hope that clarifies things!
Thanks for this post! I'm donating to multiple charities via the platform I help run: Give For Good. Give For Good is a charity donation platform that turns every donation into a miniature investment fund for the charity that you choose. There are dozens of charities on the website on you can invest for any other registered charity by emailing them at [email protected]