May one invest his Maaser funds and give the dividends a charity?

1. Question:

I am wondering if it is permitted for me to place my Maasar contributions in a stock portfolio that provides dividends, and give the dividends to charity while having the original money gain value over the years in stock.

Answer:

It is permitted to enter the Maaser money into a bank account and have it collect interest, until it is needed to be distributed to paupers. One may not invest it in any nonliquid assets [i.e. real estate, collectibles, and equipment] due to the inability to quickly access the funds for distribution. Likewise, one may not invest it in even liquid assets [i.e. stocks] if they risk depreciation. Now, while some Poskim are lenient to permit investing the money in liquid assets even if they risk depreciation, such as stocks, the Rebbe’s position was not to do so, as have ruled other Poskim.

Explanation:

It is a clear ruling in the Rama that monies which are designated to be distributed to paupers may not be invested, with exception to if one uses the funds to purchase other liquid assets that can be quickly and easily turned into cash. The reason for this is because the money must be readily available to give to the paupers upon their arrival to receive charity. [Alternatively, the reason for this is in order so one does not risk losing the money in a bad investment.] However, charity money which is not designated for distribution to paupers, and is meant to remain static and have its profit go to charity, is permitted to be invested and so is the custom.

Thus according to all opinions, it is permitted, and perhaps even obligatory, to enter the charity money into a bank account and have it collect interest, until it is needed to be distributed to paupers, as in such a case the cash is pretty much guaranteed, and considered to be within the best area for safe keeping. However, due to the first reason mentioned above, one may not invest it in any nonliquid assets due to the inability to quickly access the funds for distribution. Likewise, according to the second reason mentioned above, one may not invest it in even liquid assets if they risk depreciation, such as stocks. However, some Poskim permit investing the charity fund money in nonliquid assets if one obligates himself to distribute the money to paupers from his own pocket, if he cannot cash in his assets right away when necessary for distribution. Likewise, some Poskim rule that the main reason against investing is the first reason mentioned above, and hence one may invest the money in liquid assets even if they risk depreciation, such as stocks, and it is not necessary for one to accept liability for any potential losses of the money.

Practically, the Rebbe’s opinion was that one is not to make investments with charity funds, especially if it is an investment into nonliquid assets or an investment into liquid assets which carry a risk of depreciation, such as stocks. The Rebbe negated such investments even if one is certain that he will make a profit and rather recommended for the funds to be placed into a bank account and collect interest until it comes time to use it for its purpose. Hence, we see the Rebbe took into account both reasons.

Sources: See Rama Y.D. 259:1 [1^st reason]; Beis Yosef end of 259; Sefer Haterumos 46, 4:8; Hagahos Maimanis Malveh Veloveh 4; Teshuvos Maimanis Mishpatim 14; Bava Metzia 70a; Kesubos 106b; Yerushalmi Shekalim 2:4 [mentions 2^nd reason]; Teshuvas Haran 44; Shelah Megillah 28; Biur Hagr”a ibid; Maharit 1:144; Shaar Hamelech Malveh 5:14; Kesav Sofer Y.D. 110; Aryeh Devei Ilaiy Y.D. 12; Shaareiy Tzedek 8:42; Pesakim Uteshuvos 259:5; Poskim who permit investing in even nonliquid assets if agree to lend from pocket when needed: Taz 259:2; Radbaz 3:412; Shelah Megillah 28; Pesakim Uteshuvos 259:5; Poskim who permit investing in liquid assets even if there is risk of losing the money: All Poskim and Rishonim who only record 1^st reason above; Arba Tureiy Even 6; Kesav Sofer Y.D. 110; Shevet Halevi 8:213; Pesakim Uteshuvos 259:5 footnotes 29 and 34; Poskim who forbid investing in liquid assets if there is risk of losing the money: All Poskim who mention 2^nd reason above; Tzitz Eliezer 14:76 Rebbes opinion: Heichal Menachem 1:64; Shulchan Menachem 5:113