Financial Budget: You may not like reading this
May 23, 2015 5:12:07 GMT -5
sneakers and Bona84 like this
Post by class70 on May 23, 2015 5:12:07 GMT -5
An endowment is your savings whereas tuition and fees are income. As an analogy to personal finance, the wealthier you are the less income you need to support your lifestyle. I believe I read recently that Harvard pays over half its operating expense from the endowment. That is significant considering what they pay their professors.
Most endowments have increased smartly in this bull market, which has now been running over 6 years. If you are an investor you have probably done well also, but another bear market lurks somewhere in the future. Unlike the plight of retirees like me, investments are not university endowments' sole sustenance. Donations can cover up even a mediocre investment performance, but those donations also get scarce when money is tight.
As to why certain state universities have such large endowments, I can only guess that much of it has come from some public source. UT and Texas A&M are two of the finest universities in the land and their tuition is very low relative to private colleges, so I guess those endowments are being put to good use. However, I have never donated to any public university I've been associated with as I figured my scarce funds could be better used in the private sector by my alma mater and certain others.
Edit: Continuing the analogy to personal finance, a simple rule for retirees who want their savings to survive at least as long as they do is to withdraw no more than 4% of your portfolio per year. A well diversified and prudently invested portfolio should throw off at least this much income on average while surviving many business cycles. If we use this benchmark Bona's endowment could comfortably provide less than $2.5 million per year to the operating budget. I don't believe this is a very large percentage of the current need, so our Bonnies need our continued support in the most generous possible way.
Edit#2: I am probably mistaken about how much of its operating budget Harvard takes from the endowment. It appears to be closer to one-third from what little information I could find.
Most endowments have increased smartly in this bull market, which has now been running over 6 years. If you are an investor you have probably done well also, but another bear market lurks somewhere in the future. Unlike the plight of retirees like me, investments are not university endowments' sole sustenance. Donations can cover up even a mediocre investment performance, but those donations also get scarce when money is tight.
As to why certain state universities have such large endowments, I can only guess that much of it has come from some public source. UT and Texas A&M are two of the finest universities in the land and their tuition is very low relative to private colleges, so I guess those endowments are being put to good use. However, I have never donated to any public university I've been associated with as I figured my scarce funds could be better used in the private sector by my alma mater and certain others.
Edit: Continuing the analogy to personal finance, a simple rule for retirees who want their savings to survive at least as long as they do is to withdraw no more than 4% of your portfolio per year. A well diversified and prudently invested portfolio should throw off at least this much income on average while surviving many business cycles. If we use this benchmark Bona's endowment could comfortably provide less than $2.5 million per year to the operating budget. I don't believe this is a very large percentage of the current need, so our Bonnies need our continued support in the most generous possible way.
Edit#2: I am probably mistaken about how much of its operating budget Harvard takes from the endowment. It appears to be closer to one-third from what little information I could find.