Practical Investment Considerations for Nonprofit Foundations and Endowment

Full disclaimer: this article is not all encompassing. You could write a long book on foundation and endowment investment management. This is a collection of thoughts and opinions about what I think foundation and endowment boards should consider. If you’ve ever met me, you know I’m both opinionated and long-winded. So, if you serve on a board or work for a nonprofit foundation/endowment, don’t hesitate to send me an email and take me to task for why I’m wrong. 

Dustin Sobolik - Investment OfficerPractical Investment Considerations for Nonprofit Foundations and Endowment
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Should You Pay Off Your Mortgage or Invest?

By Dustin Sobolik, CFP® – Investment Officer

One question I’m often asked by clients is what to do with excess savings. Should they invest it or pay extra on their mortgage? I’m going to frame this article with a simple question and a simple answer, followed by a much more complicated answer. Let’s boil this down to a few core considerations:

Dustin Sobolik - Investment OfficerShould You Pay Off Your Mortgage or Invest?
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Comparing Compensation

If you’re considering a job change, salary is one important factor. But it’s also vital to look past the salary and study the total benefits package. Benefits offered by employers can vary greatly so take a look at the full picture. Here is a shortlist of the most common types of compensation.


Wages are the most straightforward portion of your compensation package (unless you work in sales, but those pay structures are beyond the scope of this article). The primary consideration beyond the actual dollar figure is whether you live in an area with a higher cost of living and/or higher taxes. It’s no secret to many of our clients that living in Minnesota versus North Dakota will jump your tax rate significantly, even if you’re on the lower end of the income spectrum. 


Dustin Sobolik - Investment OfficerComparing Compensation
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Planning for Physicians: Managing Contributions Between a 401(k), 457(b)

As many of our readers likely know, the Federal government provides strong incentives for saving for retirement and other financial goals. You can break these down into three broad categories: tax deductibility (on contributions), tax-free distributions (i.e. withdrawals), and tax deferral (on growth). Many physicians can increase their tax deductions and benefit from tax deferral by contributing to both a 401(k) plan and a 457(b) plan.

401(k) and 457(b) plans are both employer-sponsored retirement plans. The main difference is 457(b) plans can only be sponsored by certain entities, namely state and local governments, along with nonprofits such as hospitals, charities, and unions.

Dustin Sobolik - Investment OfficerPlanning for Physicians: Managing Contributions Between a 401(k), 457(b)
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What’s the Deal With Interest Rates?

As I write this, I just got a mortgage for 2.75%, my student loans are about to get refinanced at 1.5%, and my auto loan is 0%. And as a consumer, you might think ultra-low interest rates are the greatest thing since sliced bread. That might be true for consumers, but for investors looking for low-risk and a decent return, not so much. A couple of things to start you off:

  • The Federal Reserve controls interest rates. Congress and the executive branch do not. That separation is a good thing.
  • The yield on a bond is how much income you’re being paid. If a $100 bond has 3% yield, you get $3 per year.
Dustin Sobolik - Investment OfficerWhat’s the Deal With Interest Rates?
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What Are Tax Exempt Bonds?

A properly diversified portfolio should contain a healthy array of different types of investments. One of these investments may be tax-exempt bonds.

What are tax-exempt bonds?
Tax-exempt bonds are municipal bonds. In finance slang, they are commonly referred to as “munis” or “muni bonds”. Municipal bonds are issued by states, counties, municipalities, hospitals, schools, airports, and so on. When you buy these bonds, you are effectively lending money to these government or nonprofit entities. Typical uses for these funds includes construction and maintenance of infrastructure like buildings, bridges, roads, water, sewer, power, etc.

Dustin Sobolik - Investment OfficerWhat Are Tax Exempt Bonds?
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Investment Year in Review for 2019

The year 2019 was a solid one for investors. A year after one of the worst fourth quarters since the Great Recession, stocks rebounded to close 2019 with several major indexes reaching record highs. 

During the year, investors faced a yield curve inversion for the first time since 2007, a slowing economy, and a constant barrage of positive and negative information on the trade war with China. Nevertheless, investors stayed the course for most of the year, pushing stocks to their best year since 2013.

Each of the benchmark indexes listed here closed 2019 in fine fashion, led by the tech stocks of the Nasdaq, which gained more than 35.0%. The large caps of the Dow (22.34%) and the S&P 500 (28.88%) also fared well by year’s end. The small caps of the Russell 2000 began the year on a tear, ending February up almost 17.0%. However, the small-cap benchmark index pulled back some in March, but remained a steady gainer for much of the rest of the year, closing 2019 about 24.0% ahead of where it started. 

Dustin Sobolik - Investment OfficerInvestment Year in Review for 2019
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Heartland Trust Company Brings Responsible Investing to Our Clients

This is a topic that has been flying under the radar for a bit too long. What does “responsible investing” mean and why would someone allocate their assets towards it?

In industry talk, we refer to this as environmental, social, and governance (ESG) investing. Responsible portfolios are centered on these three criteria. Until recently, the problem with many of the funds in this space was that one fund’s ESG criteria could differ from another’s. It was awfully hard to distinguish if funds were simply using it as a marketing moniker or if they actually meant what they said.

We didn’t want to put our client’s hard-earned assets into funds that didn’t represent their values. Finally, a coherent set of principles started to gain traction a few years ago.

Dustin Sobolik - Investment OfficerHeartland Trust Company Brings Responsible Investing to Our Clients
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4 Ways to Avoid Common Investor Biases

It may stun some folks, but successful investing often relies more on managing emotions than on managing the market. I’m emphasizing this even after analyzing fund and macroeconomic data for the last three hours. Our biases and emotions play a strong role in our investment decision-making, often to our detriment.

Let’s start with recency bias, also known as, “markets are falling and they will continue to fall because they just fell.” It also happens to be my girlfriend’s bias toward my cooking. Just because I burned spaghetti 10 times in the past doesn’t mean I will burn spaghetti 10 times in the future. (Okay, I might.) However, it does apply to investing and the markets. This is also called zoom theory. It’s the tendency to overweigh recent experiences when forming a view of the future. It’s why folks think they can tolerate risk when returns are strong, only to sell when asset prices fall. They zoom in. Let’s zoom in on the most recent sell off for an example:

Dustin Sobolik - Investment Officer4 Ways to Avoid Common Investor Biases
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Don’t Let Emotions Swing with the Markets

It’s no secret that investing is an emotional process. Markets swing and news organizations take full advantage to pump their ratings and incite fear, oftentimes without fully understanding the economy or how markets work.

Even veteran investors can act impulsively and lose perspective when markets correct or become volatile.

All of this said, volatility is normal.

That’s why it’s essential for all of us to consider the big picture during periods of market stress. If you’re contemplating a change to your portfolio, there are two important questions you should ask: 1) have my goals changed, and 2) has my time horizon changed?

Dustin Sobolik - Investment OfficerDon’t Let Emotions Swing with the Markets
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