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Charitable Giving: A Case of Bad Market Timing

This article was written by in Charity. 9 comments.


I made a mistake, and I should have known better.

Last year, I struggled with coming up with a needy non-profit organization that I felt I should support through charitable giving. The indecision stems from the desire to contribute to an organization with a mission that reflected one of my passions and the lack of quality non-profits that fill that niche. By the end of the year, I decided to provide money to the Fidelity Charitable Gift Fund, which would allow me to distribute or grant my funds to the recipients I choose at a later date.

I invested these funds like I normally do. With the $5,000 I provided to fund my “mini-foundation” in December 2007, I invested in a broad market index fund. Considering I intended to use these funds, or at least a portion of these funds, throughout 2008, I shouldn’t have chosen to invest in the stock market. I should have left the money in a money market account within the Charitable Gift Fund. The account would have grown to about $5,200 by the end of December 2008 if left alone.

At this time, the account’s value is a little over $4,000, having lost about 20% so far this year. That’s $1,000 less that I have to donate to a worthy organization because I couldn’t find the right match — possibly a procrastination — and because I invested without considering my time horizon for these particular funds.

Now I feel as if I need to leave the money in there until the market recovers its losses from the last year, but it could be a long time before the index fund increases 25% from today. My goal before the end of the year is to finally select an organization worthy of my continued support and pay them directly from my available cash rather than from the Charitable Gift Fund. I’ll also continue to contribute to the Fund but I’ll set some funds aside for short-term charitable giving in addition to continuing to invest in the stock market index fund for longer-term growth.

Published or updated September 24, 2008. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 9 comments… read them below or add one }

avatar Todd

It sounds like you shouldn’t beat yourself up about that. Just wait until the market comes back and then you will be able to give more. Yes you forfit the tax write off for 2008 but you will get it eventually.

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avatar Kyle

Is there a balanced fund alternative? I like the idea of these mini charitable endowments, but they really are for long-term giving.

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avatar CJ

Oh well. You live and you learn. I put giving as a very high priority but I already know the few organizations that I like to give to.

As far as Todd’s suggestion, I disagree. There’s no need to wait to give the money. I’m sure some organization will appreciate the $4000 right now. Otherwise you run the risk repeating this process by trying to “make money” off of your charity fund.

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avatar Todd

CJ -
I agree any organization will love to get $4000. Will they appreciate $5000+ more? Yes.

If you have earmarked this money for charity how will you run the risk of trying to make money? (I am assuming you mean for yourself) Yes you are making money (interest) but for charity. How is that a bad thing?

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avatar CJ

I don’t mean making money for yourself. I’m more talking about getting into the mentality of “Well I’ve got $5000 for the charity but wouldn’t $10,000 be even better?”

That’s what I meant. Just go ahead and give it away. $4000 today, $5000 tomorrow, $10,000 in a decade. Just give it away already.

That’s just my thoughts. Either way, it was and still is a good gesture to set aside money for charity.

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avatar skiman723

Along this line, my company’s United Way campaign just started a couple of days ago. I have always preferred to direct my contribution to a specific charity instead of putting it in the United Way slush fund. However, this year after speaking with a friend and doing some research, I found that my local United Way (SE Pennsylvania) takes an 11.8% cut of my donation in the process. This year I’m skipping the United Way and sending checks directly to the charities.

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avatar nickel

Flexo: Following up on Todd’s comment, you get the tax deduction either way, correct? Once the money is in the account, I thought it was (technically) donated, even if you haven’t disbursed it. Assuming that to be the case, there’s no harm in waiting for a recovery (though as others point out, most charities would love a smaller check now as opposed to a bigger check later). Regardless, this is a good lesson for your readers. Never expose funds that you might need in the short term to the stock market.

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avatar Kevin

What makes you think the charity will sell it immediately and take the “loss”? Maybe they are holding on to some securities as well, hoping for a rebound, and thus more funds to use for their charitable purposes? If you have a charity in mind, just donate it already and quit worrying about it.

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avatar kaitlyn142

If you don’t mind a suggestion, something that you might consider while you look for a permanent place to contribute is micro-lending. Kiva.org is an excellent organization that gives small amounts to small businesses in third-world countries. The loan is paid back, and that way your money is doing good directly aiding people.

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