In practice, I think ability to take risk holds more weight than willingness to take risk for a foundation. I’ll give you a real world example. I’m on the board of a small private foundation with an indefinite life. Historically (before I was involved), willingness to take risk varied wildly from year to year depending on who sat on the board (this is why it’s important to have an investments sub-committee to keep things on track, but I digress). Currently, we’re at 50/50 stocks/bonds (the fund use to simply roll CDs). Probably a bit conservative given our ability to take risk, but, up until now, willingness has trumped ability.
ahhh questions make it so difficult, i just read the answers to the stephenson case and I agree but I remember reading one in which somebody had a 60% in employer stock and mentioned he didnt want to lose much money so he was below average he though his investments were risky. So having small caps willingness risky but employer stock I guess not. I’ll have to find that question.
60% in employer stock is risky b/c of Company Specific risk not necessaritly the stock itself. He thought that his company stock was safe becasue he knows his company…he didnt throw 60% into some company he didnt know, that woudl be risky.
i guess that would make sense but you’d be assuming he thought his company stock was safe and assuming that the other person who threw money in small cap funds thought they were risky (what if he thought they were safe) even if there was not any indication of this. This is so dumb though if there is a instance of this (when the person says and what he does risk wise) it makes more sense to counsel them and go from there for willingness.