Cohousing-L Mailing List: Re: Investing Cohousing Funds

[Mac Thomson (macthomson]

I’m the leader of our Finance team. If I let the community’s reserve funds sit 
in a bank account and earn virtually no return, I would feel that I had failed 
in my duties by leaving so much money on the table. Since 2002 our net 
investment earnings have totaled about $95K.

Yes, loss aversion is a huge thing for people, but opportunity cost is another 
type of loss to be avoided.

We invest 25% in cash (including MMF), 50% in bonds, and 25% in stocks and real 
estate. All of our bonds, stocks, and real estate investments are in Vanguard 
index funds.

-- 
Mac Thomson

Heartwood Cohousing
Southwest Colorado
http://www.heartwoodcohousing.com


"All that we are is the result of what we have thought.  The mind is 
everything.  What we think we become."
        - Buddha
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> On Dec 11, 2021, at 11:00 AM, Kaye B <kayebpdx [at] gmail.com> wrote:
> 
> Regarding the question about investment strategies for community association 
> funds, my perspective is slightly different than that of the three folks who 
> responded. Here goes . . .
> 
> First, it's important to check your governing docs, as they may specify which 
> investment vehicles are acceptable and which are not.
> 
> It's equally important to know what your state has to say. State laws vary, 
> but some states limit community associations to direct investment in issues 
> of the federal government and/or FDIC insured bank accounts or CDs. In these 
> states, associations are not permitted to invest in municipalities, mutual 
> funds or indirect investments (like limited partnerships and real estate 
> investment trusts), and non-FDIC insured money market accounts can't be used 
> either.
> 
> Beyond that, I think it's important to remember that your association's board 
> members are fiduciaries with respect to the association's funds, and they can 
> arguably be held liable if there is a loss of principal due to a downturn in 
> an investment. Someone mentioned a $35,000 Parnassus fund investment that 
> grew to $67,000. Nice, but what if it had gone the other way? For example, 
> suppose that at the beginning of 2008, $35,000 had been invested in the 
> Parnassus Core Equity Fund (just picking one, since I don't know which fund 
> was actually used). At the end of 2008, that $35,000 would have fallen 23% to 
> $27,000. And then another 11% drop in the first quarter of 2009 would have 
> put the total at $24,000. Would members have been okay with that? It's their 
> money, after all. Would they have been willing to leave their money in the 
> fund to see if it would recover? And what if something unexpected happened 
> and it became necessary to immediately tap the portion of reserves that was 
> meant for the longer term?
> 
> I have no problem investing my own money in funds like those in the Parnassus 
> group; those are great funds. However, when you're responsible for the 
> long-term maintenance of your association and for other people's money, I 
> think it's a bad idea to put any of your reserves at risk, no matter what the 
> potential rewards.
> 
> Kaye Blesener,
> Treasurer, Columbia Ecovillage
> Portland, OR
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