A Practical Guide for Saving-to-Give

Everything you need to know to get started

March 31, 2022

Disclaimer: I am not a financial advisor or investment professional. Consult a professional before making any large financial decisions. None of this is investment advice, and is provided purely for informational purposes. This post was all done in my personal time, has no relation to my work at Open Philanthropy, and does not represent the views of anyone but myself.


Donating a portion of your income to highly effective charities is a great way to do good in the world. This is especially true for those living in wealthy countries. There are great organizations to help you do this, including Givewell, The Effective Altruism Funds, Animal Charity Evaluators, and Giving What We Can. If you’re looking to use your money to make a positive impact, those four organizations are about as good as you can get.

An alternative (but complementary) approach is saving-to-give. Saving-to-give is the practice of saving and investing one’s money with the intent to donate it later. There are several reasons why one may want to do this, including preferential tax treatment or believing that better opportunities to do good will arise in the future. The Effective Altruism Forum user SjirH did a great write up of this topic here, and Phil Trammel appeared on a great episode of the 80,000 Hours Podcast to discuss the topic. I’m not going to take a direct stance on whether it’s the best strategy for everyone seeking to do good.

Rather, I’m going to assume that you’re convinced by some of the arguments in favor of saving-to-give, and you’re looking to figure out how to get started. I will walk you through the different options available to you, explain what I think makes the most sense, and how to go about setting it up. Unfortunately, I’m writing exclusively for a US audience here, as it’s where I live and where I’ve done the necessary research for myself. I think many of the points will carry over to other countries, but the specifics may vary. I am also assuming that you’re not extremely wealthy (say, with assets more than $5MM); if you are, you probably have better options available to you than what I’m recommending here.

Finally, nearly all of my notes here are a result of reading Gordon Irlam’s website. This whole blog post is essentially a summary of Irlam’s work, along with a few minor changes and practical tips. If you want more details on anything, his work is an invaluable resource.

Summary of advice for US donors

Please read the disclaimer above, and contact a tax or investment professional before making large financial decisions.

The following is what I personally do. I find it quite easy and hassle free, and feel comfortable using the margin provided by M1. If rates continue to rise, I’ll likely consider getting rid of the margin. I explain a variety of different alternative options to this method in the rest of the post.

  1. Open a brokerage account with M1 Finance (that link is my referral link; if you join, we each get $50, which I will put in my saving-to-give account). Sign up for the free year of M1 Plus (which gives you access to the low margin rates).
  2. Set up a pie with the following allocation (or simply copy my pie with this link):
  • 70% AVUV (small-cap value)
  • 15% VTI (Total US stock market)
  • 15% VXUS (Total ex-US stock market)
  1. (Optional, more risky, requires more effort:) Use M1’s Borrow feature to take out the maximum loan possible on your holdings. Transfer this to your save-to-give account. Repeat this process until you have reached the maximum margin limit, around a 67% debt-to-equity level.
  2. Set up a monthly recurring transfer from your bank account to your new M1 save-to-give account.
  3. At any point in the future, you can then transfer stocks from this account to a charity of your choice, or sell stocks for cash to give to an organization that is not a charity. Ideally, you should save until you can donate more than the standard deduction, and then donate in one big chunk.

Note that this is a risky allocation, especially with margin. There is a solid possibility that my portfolio drops by 70+% at one point or another. You should make sure you understand the risks of using margin before following this strategy: you could end up losing everything, or even owing money to your lender.

Goals and asset allocation

Our goal is to put money somewhere where it will grow as much as possible in expectation, taxes and fees considered. Note that this is a very different goal than retirement, where you’re typically trying to reach a minimum asset amount and avoiding worst-case outcomes. In retirement planning, you’re risk-averse: your marginal utility decreases as your portfolio grows. This means that your portfolio will change as you get older, becoming less volatile and growing less quickly as you get closer to retirement.

In saving-to-give, you should be much more risk-neutral. Every dollar that you gain will be (roughly) equally useful in doing good, and so you’re (roughly) equally happy about going from $50,000 to $100,000 as you are going from $1,000,000 to $1,050,000. This may not always be true, especially for larger donors. For example, one can imagine a risk-loving donor that unlocks different opportunities as their pool of assets grows, like gaining the ability to run their own granting program, or matching a large amount of donations.

Gordon Irlam has done some great analysis of this goal, and I’ll simply quote his recommendations for asset allocation:

Effective altruists should be less concerned with downside risk measures than personal investors.

Provided you can become comfortable with volatility, effective altruist portfolios should be at least 100% stocks, and theoretically as high as 300% although the options for achieving this theoretical level of leverage appear limited. Small cap value stocks can be relied on to offer slightly more expected return than the broader market, and as such are appropriate for an effective altruism portfolio. In the past they have substantially outperformed, but whether this anomaly will continue isn’t known. International diversification is a good thing, but far from essential for an effective altruism portfolio.

Because of the environment we are now in, which is likely to persist, stock returns are expected to be substantially lower than they have been in the past. Expected future stock returns involve considerable unavoidable uncertainty and much risk. Even over a 50 year period, there is a distinct possibility of obtaining a negative real return.

Personal investing is very different from effective altruism investing due to its greater downside risk aversion. Most of the recommendations made here are inapplicable to personal investing.

Based on Irlam’s analysis, we want to hold small-cap value (SCV) stocks, the total US stock market, and the total international stock market in some combination. (Small-cap value companies are small companies that have low valuations (low price ratios and high dividend yields) and slow growth.) As SCV is expected to have the highest return over time, our portfolio should probably be largely composed of SCV. As noted above, my suggested portfolio is something like

  • 70% SCV
  • 15% US stock market
  • 15% World ex-US stock market,

but you could easily adjust these based on your own beliefs and preferences.

Specific funds

What are the best funds to get exposure to these specific asset types? We’ll be looking for ETFs, as they’re generally more tax-efficient and easier to buy than mutual funds. For the US and ex-US portfolios, it’s pretty easy to find cheap ETFs that track these indices. Vanguard is a staple ETF provider, and the respective tickers for US and ex-US markets are VTI and VXUS.

SCV is a little trickier, as there aren’t many funds that cheaply give access to this asset class. Irlam runs through a few different options provided by Vanguard, and VIOV ends up being his recommendation. Recently, however, there’s been a new development in the space that I think is superior. The company Avantis was started to create ETFs for targeted sectors, and one of their ETFs is a US SCV ETF, with ticker AVUV.

This ETF is actively managed, which is quite different than VIOV, which instead passively tracks an index. Usually the downside to these funds is that they have much higher fees. However, AVUV’s fee is only 0.25%, compared to 0.15% on VIOV. This 10 basis point difference equates to an extra 1 dollar for every 1000 dollars invested.

What do you get for that fee? For starters, since inception, AVUV has out-performed VIOV:

Of course, it’s a very short time period, as AVUV has only been around since October 2019. Still, it’s at least somewhat encouraging.

More importantly, AVUV seems to be doing a better job at specifically gaining exposure to the small-cap-value space, while screening out companies that may not belong. For example, VIOV’s largest holding is currently Gamestop (GME), representing 1.11% of the fund. This is because of Gamestop’s “meme stock” status, which has recently catapulted its valuation far beyond what traditional economic analysis would warrant. Meanwhile, AVUV does not hold any GME. This, to me, is a big advantage of the active management principle, and is worth paying the extra 10 basis points for. You may disagree. You can read more about different SCV funds here.


Leverage is the practice of borrowing money and then using it to invest. Leverage increases your potential upside while also increasing your potential downside. As a simple example, imagine you were to buy a $500,000 house with 100% cash. Then, imagine the price of the house doubles. You could sell it and double your initial investment, for a return of 100%. Likewise, if the house price falls in half, and then you sell, you’d have a return of -50%.

Now imagine that instead of using 100% cash, you borrow $250,000 from the bank and use $250,000 cash (ignore the interest rate for now.) We can call this a leverage ratio (debt-to-value) of 50%. If the house price doubles, and you sell it and then pay off your loan, you’re left with $750,000, for a return of 150%. Or, if the house price falls in half, and then you sell and pay off your loan, you’re left with $0, for a return of -100%. So, the more you lever up, the more you can increase your returns and losses.

As Irlam notes, the ideal effective altruism portfolio incorporates a high amount of leverage, up to 300% stocks and -200% cash (borrowing $200 for every $100 of stocks you own). But, it is practically difficult for the average investor to a achieve this amount of leverage. Further, doing so can dramatically change your investment results for the worse, and therefore may not be appealing to everyone. This can’t be understated: using margin can lead to dramatic declines in your portfolio’s value. As Irlam writes: “…there is a non-zero chance of -10% annual returns for 50 years, which would reduce a portfolio to below 1% of its original value. Leverage shouldn’t be attempted if you are not comfortable with this.” That said, if you are interested in going down this route, there are options available to you.

Leveraged ETFs

One way would be to invest in leveraged ETFs. These are funds that do all the borrowing for you, and seek to replicate a multiple of a given index. For example, the ETF UPRO seeks to replicate 300% of the movement in the daily S&P 500 Index. So if the S&P is up by 2% on the day, UPRO will go up 6%, and the same is true of declines. These ETFs have pretty high fees, and also lag their true benchmarks because of their borrowing costs. Again, Irlam has done some great analysis here:

Based on the previous two sections mathematically speaking a 3X leveraged ETF, such as UPRO, currently has a small advantage over 1X or 2X for effective altruism purposes, but it may be wise to use a 2X leveraged ETF, such as SSO, owing to the significantly reduced downside of doing so. Investing in the 2X ETF would probably make it slightly easier to sleep at night. That said, both options are only just superior, or significantly inferior to investing in small cap value, depending on whether there are persistent small and value performance anomalies.

Irlam’s takeaway is that it’s maybe worth it, but small-cap value is probably a better bet.


Options are stock derivatives that allow you to bet on the specific price of an index in the future. They provide the right, but not the obligation, to buy a security at a predetermined price by a predetermined date. So, if I thought a stock would be worth more in the future, I would buy an option for that stock at a higher price than the current value. If the stock price goes up, my option becomes more valuable.

To see how these provide leverage, consider an option with a strike price (the price at which I can buy the underlying security) of $95, for a security that’s currently trading at $100. This option should be worth up to $5, because you could buy the option for $5, then buy the security for $95, then sell the security for $100 and just barely break even. (In reality, there’s a variety of factors that influence the price of options, and indeed an entire academic literature is dedicated to option pricing. But this is a fine approximation.) Now, imagine that the price of the underlying security increases to $105. Your option, by our simple model, is now worth $10. So the stock price increased by 5%, but your option doubled in price from $5 to $10. This is how options can provide leverage.

Irlam evaluates whether options are a good method of obtaining leverage, and writes:

Purchasing 3-month deep in-the-money call options and rolling them over four times a year offers a significant expected performance improvement over investing in 100% stocks. However, the complexity of this approach, including the possible need to rebalance in the event of a very large downturn, and that it appears inferior to simply investing in small cap value means I wouldn’t recommend it.

I wholeheartedly agree. Maintaining a portfolio of call options is a huge hassle for the average person, and the hassle isn’t worth it.


Margin is a way for you to directly achieve leverage through a lender. It’s very analogous to the house example above, except the underlying asset is your stock holdings rather than a house. The issue with margin is that you have to typically pay a lot for it, around 7% from a typical broker. However, there’s two examples in the US that let you borrow against your stocks for much cheaper: M1 Finance and Interactive Brokers. I’ll go over these options below in more detail.

In order for this method to be worth it, the interest you pay on your loan must be less than the amount your securities are appreciating on average. Right now, interest rates happen to be low, so the margin rate is also low (2.25% right now for M1 Finance, as I’m writing this in March 2022.) It seems like a safe bet that small-cap value stocks and the total US stock market will, on average, return more than 2.25% per year in the future. However, this becomes much less favorable if the interest rate gets up to 4 or 5%, and at that point one should re-consider whether the hassle of margin is worth it.

Further, using margin is an active strategy: you have to continuously monitor the leverage rate, and sell if it becomes too high or buy if it becomes too low. This may require more time and effort than you’re willing to expend. Using margin also requires dealing with “margin calls,” which is when the value of your securities falls below a certain threshold (for big ETFs in M1, it’s around 25% of your total equity value). In these cases your lender requires you to either put up more margin (add more money), or liquidate your depreciated assets.

The lenders that are cheaply available to us (M1 and Interactive Brokers) won’t let you get anywhere close to the 300% stocks that’s mathematically optimal according to Irlam. The max you can get for M1 is around 167% stocks, and I believe the maximum for IBKR is only 125%. This is probably for the best psychologically, as playing around with 200% margin is extremely risky business.


In the US, you must pay taxes on your capital gains. If you sell an asset within a year of buying it, then it’s taxed as regular income. If you hold on to it for more than a year, then it’s taxed at the long-term-rate, which varies between 0, 15%, and 20% based on your income. However, this tax can be avoided by donating your assets directly, as explained below.

Donations to charities are tax-deductible, meaning you are not taxed on any of your income that you donate to charity. However, to take advantage of this you must itemize your taxes and forego the standard deduction (currently $12,950 for single filers and $25,900 for married filing jointly.) This means that unless you donate more than the standard deduction in a single year, you get no special advantages for donating. One implication of this result is that you should consider saving to donate until you’re able to donate more than the standard deduction. If you’re a single-filer are able to donate $5,000, for example, you could consider saving that money for five years, taking the standard deduction each year, and then in the fifth year donating $25,000 and deducting all of that from your income in that year. Of course, you may have other reasons to itemize your deductions, in which case it doesn’t matter when you deduct.

Fortunately for those of us that are saving-to-give, you can often donate your stocks directly to nonprofits, and then deduct the total value of those assets. So, if you bought a stock for $1,000 in 2015, and it then appreciated to $5,000 in 2022, and you donated that stock to Givewell, you do not have to pay any capital gains tax and you can deduct $5,000 from your income in 2022.

Not every charity accepts direct stock donations, but many do. Further, some organizations like every.org let you donate stocks to them, and then they donate to other organizations for you. Thus, I think it will almost always be possible to avoid capital gains taxes in this manner. The one exception, of course, is giving money to organizations that are not nonprofits, like a politician or private individual doing research. In these cases, you will be forced to pay a tax on your capital gains.

The other timing aspect to consider with taxes is your personal marginal tax rate. All else equal, you should donate money (or contribute to a traditional retirement account) in years when your marginal tax rate is higher than other years, to save the most on income taxes. This is sometimes very hard to predict, but some careers have periods of very high earnings followed by low earnings, or vice versa. Or, you could have very strong beliefs about what future tax brackets will look like, and use that to inform your decision making.

Where to save

With our asset allocation and tax considerations in mind, we can consider different places for us to hold our funds.

A traditional (non-Roth) IRA or 401(k)

IRAs let you deduct contributions from your income tax, and then their withdrawals are taxed as regular income once you’re in retirement. Further, they provide a shelter from capital gains taxes. They provide access to a wide array of investment options. Once you are over 70.5 years old, you can donate up to $100k per year tax-free from your IRA. Once you pass away, you can donate the assets remaining in your IRA to charity, or pass the IRA itself along to someone else.

One downside of this approach is that there is a maximum contribution limit per year for these accounts: currently, $6k for IRAs. In addition, it is not possible to donate assets from a 401(k) account, which is unfortunate because 401(k)s have higher contribution limits (currently $19.5k), and often have employer-sponsored matching benefits. However, you currently are able to roll over a 401(k) into an IRA, which you can then donate assets from.

This could be a decent option if you’re already saving enough for retirement, have “room left over” in your contribution limits, and think that you would be likely to donate money to organizations besides nonprofits (because you will avoid paying capital gains taxes on these).

A donor-advised fund

You can think of a DAF like an IRA, except you get a tax deduction for putting money into them in addition to your tax savings on the assets’ growth. You put money in when you please, and then when you wish to distribute the money, you tell your provider where to donate the amount you choose. This ensures that you can put money into them when it’s most advantageous for you, i.e. at times when your marginal tax rate would be highest. They come with a significant fee, typically around 0.5%, on top whatever fees are on the funds that you invest in. They have no minimum distribution requirements or maximum donations per year. (They do have a minimum starting asset requirement). The only restriction on giving is that the money must be donated to an eligible 501(c)(3) organization (or foreign charities that meet the equivalent requirements for a 501(c)(3)).

There are a few downsides with DAFs. One is that they offer a relatively limited range of investment options, without the variety one can find in typical retirement accounts or mutual fund accounts. In particular, I have not seen a DAF that lets you invest in a small-cap value fund. That said, all provide access to major asset classes (international equity, domestic equity, domestic fixed-income), and some provide a few extras for those seeking exposure to different types of assets.

Another potential downside of choosing a DAF is that once you put money in, you cannot withdraw it without donating it to a charitable organization. While the intent is obviously to save money to donate later, it’s conceivable that the optimal donation at a certain time may not be a charitable organization, but instead an individual person (e.g. a prodigious researcher that needs cash quickly) or a private company (e.g. a startup trying to manufacture a new vaccine). Yet, the irrevocability of funds in a DAF may also be an upside, as it could prevent you from taking out cash, thus preventing value drift.

A standard brokerage account

A brokerage account provides none of the special tax advantages of an IRA or DAF. This means that when you sell stocks from them, you must pay a capital gains tax. As noted above, this is easily mitigated when donating to a nonprofit.

Further, some brokerages give you access to leverage. Most have terrible interest rates, but as noted above, there are two with usable interest rates: M1 and Interactive Brokers. I’ll compare them below.

A private foundation

A private foundation is an organization that gets its funds from a single source family or donor, and typically gives money to other charitable organizations. The foundation must pay taxes on its investment income (currently 1.39%), and must pay out 5% of their assets every year. For these two reasons, a foundation seems like a poor method for an individual to save their money for the long-term. 1.39% is a high tax, and required donations of 5% really hamper one’s ability to save for the long term.

Choosing a brokerage

If you end up going with a brokerage account, which I think makes the most sense, you have a few different options, summarized in the table below.

Brokerage Automation Extra Fees Margin rate
M1 Finance Heavily automated; allows automatic rebalancing and transfers; fractional shares $100 outgoing transfer fee; $125 annual fee to access cheap margin rates (first year is free) 2.25%
Interactive Brokers None 0 2.83%
Other brokers (e.g. Fidelity) None 0 ~7% (varies based on holdings)

There are, of course, many other options for a brokerage, but these are the ones that make the most sense to me. M1 and Interactive Brokers (IBKR) are unique in that they allow relatively cheap borrowing; I put Fidelity here because it’s very well-liked among people that use it, but it’s probably comparable to most other big brokers in the US It’s also worth noting that the margin fees quoted will change as interest rates change, and as I’m writing this in March 2022, it looks like rates will be going up.

The big advantage to M1 Finance is its “pie” feature which lets you automatically handle rebalancing. For example, if you wanted to have your portfolio of 70% SCV and 30% US stocks, then whenever you transfer money into the account, it automatically splits up your money to meet your desired allocation targets. It accounts for how your indexes are doing at the moment of transfer, meaning every time you add funds you’re rebalancing to exactly where you want to be. It also lets you buy fractional shares this way. You can see how it works on M1’s website.

I personally love this service, and I use it for my save-to-give portfolio. The biggest drawback is the $100 outgoing transfer fee, which would apply to any donation of stocks to charities. I actually didn’t know about this when initially setting up my M1 account. I personally think that this will not be too bad for me, as I don’t anticipate making many small donations out of this account. Further, I can see myself instead simply selling stocks to transfer cash to causes that aren’t 501(c)(3) organizations.

That said, I think choosing a simple brokerage like Fidelity and foregoing margin altogether makes a lot of sense, too. It also would be easy if you already had an account (like an IRA) at such a brokerage.


Hopefully this post has helped explain some of the core ideas behind saving-to-give, and how to go about implementing it yourself. If you think I got something terribly wrong, let me know via my contact form. Or, see other discussion of this post on The EA Forum. To get an email about once a month summarizing my blog posts for the month, subscribe here.

Posted on:
March 31, 2022
21 minute read, 4432 words
finance effective-altruism
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