Learn how endowments think in centuries, and what that teaches about your own money.
Lesson 1 of 4
An endowment is a pool of invested money meant to last forever. Each year the organization spends a small part of it, and the investments grow to replace what was spent.
Universities, hospitals and foundations use endowments. In Hawaiʻi the best-known example is Kamehameha Schools, one of the largest charitable trusts in the country.
Spend 4% a year or 8% a year from a real 60/40 portfolio since 2007 and see what is left.
$2.00M
Left today at 4%
$973k
Given out at 4%
$891k
Left today at 8%
$1.29M
Given out at 8%
Spending more gives more today, but a smaller endowment gives less every year after. Real endowments also have to outrun inflation, which this chart ignores, so the true cost of overspending is even larger.
$1 million invested in June 2007 in an S&P 500 fund and a total bond fund, rebalanced monthly, spending taken each January. Real total-return data.
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For learning only. Kuleana Finance explains how money works. It does not tell anyone what to buy or sell.