IndiView Chart of the Week: Investing Reserves

Earlier this month, I attended an online webinar from Propel Nonprofits on the topic of operating reserves. For those unfamiliar, Propel offers strategic consulting and accounting/finance services for nonprofit organizations.

Much of their presentation focused on why reserves matter and how to build them. That framework is essential: operating reserves provide flexibility and long-term sustainability, while also serving as a “rainy day fund” — whether that’s a leaky roof, unexpected staffing needs, or broader economic disruption. If you’d like to dig into Propel’s full discussion, I’ve included the link to their excellent webinar at the end.

Where IndiWealth Fits In: Investing Reserves

Our expertise begins once reserves are established. Too often, nonprofits assume these funds must remain in a bank account to ensure safety and accessibility. That’s partly true, but also incomplete:

Accurate:

• Reserves should be liquid and accessible.
• Reserves should be managed with an appropriate level of safety.

Incomplete:

• Reserves do not have to remain in a bank account.
• Investment accounts can be linked directly to operating accounts, with funds transferable in just a few days.
• Reserves can be invested prudently, generating returns that outpace traditional savings while staying aligned with liquidity needs.

A Time-Based Investment Strategy

This week’s chart illustrates a time-based reserve strategy. By segmenting reserves according to when they might be needed, organizations can match each “tier” with an appropriate level of risk and return potential:

• Near-Term (1-2 years): High liquidity, cash equivalents, money markets, fixed income.
• Intermediate-Term (3-7 years): A balanced approach of income and growth assets.
• Long-Term (7+ years): Diversified investments with higher return potential (and greater risk).

Why This Matters

By stratifying reserves in this way, institutions can:

• Earn meaningful returns without sacrificing liquidity.
• Align investments with their true time horizon rather than defaulting to bank-only savings.
• Strengthen financial sustainability while preserving mission focus.

Additional Considerations

• Governance: Reserve investment strategies should be codified in a written investment policy statement approved by the board and reviewed periodically.
• Transparency: Regular investment reporting and review ensures leadership knows where reserves stand and adjusts for any changes in strategy.
• Compliance: Investments must remain consistent with nonprofit fiduciary standards.

If you’d like to learn more about structuring reserve investments, visit us at indiwealthmanagement.com.

Here’s the link to Propel Nonprofits’ full webinar: Nonprofit Reserves: What, Why, When, and How Much