In a recent episode, Adam Nash, CEO and co-founder of Daffy, a not-for-profit community built around a modern platform for giving, answered the question, "Why should you invest in a diversified portfolio of index funds?"
Adam, who has taught “Personal Finance for Engineers” at Stanford since 2017 and has held high-ranking positions at Wealthfront and Dropbox, highlighted three key reasons to invest in index funds.
Firstly, index funds have very low fees. It's not expensive to own a little bit of everything, weighted like the market. Low fees are a significant advantage as they are one of the main reasons investors trail the market. By paying low fees when you own an index fund, you can get ahead of most other people.
Secondly, index funds are very tax-efficient. In our tax system, you owe taxes only when you sell a security. Actively managed funds sell securities all the time and trigger taxable distributions, while index funds mostly just hold the same stocks year in and year out.
Lastly, index funds tend to outperform most active traders and active fund managers. So, you can get better returns with lower fees and lower taxes if you own a diversified portfolio of index funds.
Daffy, the Donor Advised Fund for You™, is a great option for a DAF. With Daffy, you can easily donate to almost every US public charity, track tax-deductible contributions, and access donation receipts all in one place. Daffy waives all membership fees for members with less than $100 in their fund, so you can get started today for free!
Daffy also offers exposure to index funds from Vanguard and BlackRock, with average costs of just 0.045% for our Standard portfolios. For those members looking for exposure to crypto, Daffy has partnered with Bitwise Investments and Coinbase to provide access to both publicly traded index funds as well as direct ownership of Bitcoin and Ethereum.
With Daffy, you can easily contribute and donate money anytime, anywhere. So why not simplify your giving with Daffy today?
Please note that the information contained on this page is for educational purposes only and should not be considered tax advice. Any calculations are intended to be illustrative and do not reflect all of the potential complexities of individual tax returns. To assess your specific tax situation, please consult with a tax professional.