There is nothing like a precipitous decline of nearly 35%, followed by a swift rise of about 50% in the S&P 500 index — all within the span of five months — to motivate people to bust out the old cliché "buy low, sell high."
Ah, yes, if only it were that simple. Without the benefit of hindsight, it is quite difficult to know in real time when and whether an investment's lows or highs have been reached. Yet that is not always the case. Consider the universe, not of investable stocks, but of publicly-supported non-profit organizations. Major equity indices like the S&P 500 may have recovered — at least for now — but the non-profit sector remains mired in turmoil and uncertainty from which many organizations will never recover.
In turn, there is an unprecedented opportunity to "invest" in the non-profit sector at historically low levels, with charitable contributions now offering disproportionately substantial returns, albeit measured a bit differently — in essential units of impact, influence and legacy-building fulfillment.
It should surprise no one that many charitable organizations have been hit even harder than the overall business community in 2020. The Covid-19 pandemic and the job-destroying recession it induced has been especially hard on philanthropic organizations that rely heavily on public generosity to survive.
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Individual donors who are out of work or otherwise fearful of losing their livelihoods are simply less likely to allocate essential money to their charities when they are now worried about whether they can adequately support their families. And as for corporate donors, when they are having financial difficulties, it's hard for them to continue making charitable contributions if they are struggling to keep their employees on the payroll.
Making matters worse, traditional in-person fundraising events such as walks, rides, races and galas have been canceled for the foreseeable future. While some of these events are transitioning to a digital format (with less expense), they are less likely to be compelling to physically disconnected donors.
The government has offered the non-profit sector some much-needed assistance through the Paycheck Protection Program and other important measures, but those measures are not enough. Actually, they're not even close to being enough.
A recent article written by Adele Peters for Fast Company suggests that nearly 40% of all U.S. non-profit organizations are at risk of not making it, as they may run out of money. Take that in for a moment. More than a third of the organizations that play a vital role in our society filling the underfunded gaps left by industry and government are potentially on their way to extinction.
This could be a crushing blow for countless organizations fighting for food and housing security, social justice, education, health-care access, medical advances, environmental sustainability, animal welfare, the arts and many other important causes.
In this sense, it is possible to see that the non-profit sector has hit a low. For many of these organizations, it's more like desperation than just a low.
But in times of great distress, there are almost always great opportunities for those who seek them.
Getting back to our investment analogy, it's time for people whose portfolios have recovered from the lows of late March to consider what wealth-management professionals call a "re-balancing" exercise. We must re-examine our portfolios relative to our long-term goals and adjust our asset allocation to reflect gains and losses in each asset class over time.
If our goals include financial security as well as social impact, societal betterment and spiritual fulfillment, then perhaps it's time to realize some of the gains from the purely financial components of our portfolios and reinvest them in the portion of our "portfolios" dedicated to investing in improving our world. Stated more directly, it's time for people with the means to do so to consider whether now might be a great time to divert some of their profits to the causes that could, for example, lead to a cure for a fatal disease or an end to poverty or injustice.
There has never been a better or more necessary time for this exercise. A donation of, say, $1,000 has always been welcome by any publicly-supported non-profit organization. Today, however, that same $1,000 is probably far more valuable to the very same organization. It has substantially greater impact if only because funds are so much scarcer. It might even be the exact amount necessary to sustain the organization so that it can live to fight another day when the pandemic and associated recession are bad memories.
We make investments in stocks and get excited when we see those stocks make future gains. We may even begin to dream about what those gains can mean to our futures. Can we think about investing in a non-profit organization the same way? Can we think about the gains that a philanthropic investment can make? Can we dream about what those gains can mean to our futures — and those of our communities? The answer to these questions is of course a simple but resounding "yes."
You didn't miss the opportunity to buy low in March. The opportunity is there in front of you right now. You can invest in some of the most important causes in our nation, and, if you act now, you can do it at bargain prices. Your investment can lead to extraordinary gains that may never be available to you in this way again — gains for your community, your world and your very spirit.
These are gains that are worth dreaming about — ones that could last a lifetime. To reverse and rephrase one of the most famous financial movie quotes of all time, and consistent with the changing, challenging times: "Generosity is good."
— By Michael J. Nathanson, chairman/CEO of The Colony Group, and Bradley P. Boyer, partner at Kutak Rock, LLP