Prior to Uncle Al’s death, and after discussion with his attorney and accountant, we made the decision to invest the Trust’s funds with Vanguard Investment Services. After discussing the short term and long term goals of the trust, Vanguard recommended a growth and income portfolio, that would be managed by the Trust Division of Vanguard Investments.
We provided the Trust Document which outlined that the Trust would provide assistance to family members for college educations. As there are many family members, there would generally be some students requesting funds every year, so cash would be need to be available for distribution each year. While the cash needs would vary yearly, we agreed on general goal of $30,000 to $40,000 per year. With initial funding of $600,000, and to satisfy this cash requirement, the fund would need to grow by about 5% to 7% to break even. As our desire would be to have the fund grow over time, we the total returns, after taxes, would need to be at least a few percent more.
Based on these goals, Vanguard recommended that 70% of the assets be invested in a mix of Vanguard domestic and international stock funds, and 30% of the assets be invested in a mix of Vanguard tax free bond funds. This investment philosophy has not changed in the 20 plus years since the trust was started. The link provides the current plan prepared by Vanguard Vanguard – Financial Plan – 2016