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As a nonprofit, your attention is likely focused on doing everything you can to serve your beneficiaries’ needs. Unfortunately, that often means that finances fall to the wayside, putting your altruistic efforts in jeopardy. Approximately 38% of nonprofit organizations are at risk of shutting their doors due to pandemic-related financial strain.
As a result, it is crucial not only that you invest your operating and capital reserve funds, but also that you stay abreast of current investment and fundraising trends.
That’s why we’ve compiled a list of current statistics relevant to nonprofit investing to help guide you through the process. We’ve divided these statistics into five core themes:
- Inflation
- Savings Accounts and Money Markets
- Nonprofit Investment Accounts
- Passively Managed Funds
- Accepting Alternative Donations
Whether you’re investing your nonprofit’s funds for the first time or looking for new strategies for growing your existing investments, it’s beneficial to survey the broader field of nonprofit investing. Use these investment statistics as a way to evaluate your own situation and make better, more thoughtful, data-driven decisions. Let’s dive in!
Trend 1: In 2022, inflation grew above 9%. For comparison’s sake, the inflation rate in 2019, prior to the COVID-19 pandemic, was 1.8%.
For nonprofits operating on a shoestring budget, such a dramatic increase in inflation can quickly cut into your daily operations and programming. Moreover, it also means that any long-term investments that are returning less than the current inflation rate are actively losing impact value.
What does this mean for your nonprofit’s investments?
While there’s little you can do to change the inflation rate, you can take proactive steps to make sure your nonprofit isn’t losing money by adjusting your investments. Look to invest your funds in well-balanced portfolios that offer returns above the current inflation rate.
Compare Statistic with the following: Infinite Giving’s guide to nonprofit reserve funds notes that today’s savings accounts average 0.09% returns each year. Money market funds currently average 2% to 3% annual returns.
If your money is sitting in one of these accounts, it’s not only not performing as well as it could, it’s losing to inflation. However, there are a number of additional ways, from automated investing to big banks, to grow your nonprofit’s money through a diversified portfolio of ETFs and index funds that, in many cases, can beat inflation.
What does this mean for your nonprofit’s investments?
While they may seem like a safe option, investments in today’s savings accounts and money markets are losing value. Whether you’re depending on your funds for a capital project, a rainy day fund, or everyday expenses, diversify your investments beyond these strategies.
Trend 2: According to a study from MIT’s Sloan School of Management, only 11.2% of nonprofits hold investment accounts.
On the flip side, this means that nearly 90% of nonprofits aren’t investing their funds. As a result, they’re hampering their potential growth and the impact they could have on their community.
But this doesn’t have to be the case. In 2022, it’s easier than ever to responsibly invest your nonprofit’s reserve funds.
What does this mean for your nonprofit’s investments?
Don’t let your money sit around! If your charity falls into that 90%, you have a great opportunity to start building your impact through a nonprofit investing strategy.
Trend 3: Over a 15-year study, nearly 90% of actively managed investment funds failed to beat the market.
Actively managed funds focus on a wealth manager trying to guess the market and are often associated with high annual fees.
On the other hand, passive investing focuses less on trying to time the market and more on reliable long-term diversified index fund investments. Because these aren’t being actively managed, they cost less. In fact, researchers have linked high nonprofit investment account advisory fees to lower investment returns, with a .17% decrease in net returns for every one percent increase in fees.
What does this mean for your nonprofit’s investments?
To save time and increase investment results, use an investment manager with low, transparent fees. Ideally, you should be able to keep track of your investment profile via 24/7 access to an online portal.
Trend 4: Nonprofits that accept stock donations can increase their fundraising contributions by 55% over those only accepting cash donations.
In the past, stock donations placed a significant burden on donors and staff to fill out and mail hardcopy forms back and forth. As a result, they were restricted to only the largest nonprofits with the resources available to process these donations.
However, today, modern investment technology allows nonprofits big and small to accept stock donations through entirely online processes.
In addition to stock gifts, these investment accounts allow nonprofits to easily accept alternative forms of donations, such as real estate, cryptocurrency, and endowments. Often these types of donations appeal to older donors, who hold the vast majority of wealth in the U.S. and are looking to establish a legacy of giving for their families.
What does this mean for your nonprofit’s investments?
When your nonprofit receives a stock donation, consider liquidating the donation and reinvesting the funds in a diversified portfolio that aligns with your long-term goals, values, and risk tolerance.
Investing your nonprofit’s funds is critical to securing your long-term financial health and have a greater impact on your community. However, it’s important to be thoughtful about your investment strategy. While not investing your funds can hurt your financial future, taking the wrong approach can also be harmful.
We hope that these five investment statistics help you better understand the current state of nonprofit investing and drive you to make more informed decisions about how and where you invest your nonprofit’s funds.
A version of this article was originally written for and published on Top Nonprofits.
