It makes sense that people give more when they experience gains in their finances. Similarly, losses can inhibit generosity among those who might ordinarily donate to worthy causes. This relationship between financial performance and philanthropy is exemplified in stock market performance. As the market fluctuates and donations similarly rise and fall, this cycle will affect the ability of various philanthropic organizations to operate.
Every nonprofit organization must still operate like any business, weighing operating costs against the income it generates. When an organization can operate in the black, they have resources to apply to whatever cause they happen to pursue. To maximize these resources, many nonprofits rely on investments through endowment funds. When the market performs well, the organization’s overall portfolio becomes more lucrative.
The problem is that the market is more volatile than it used to be. Once expected to be a short-term condition, the trends in recent years have shown that the market isn’t as stable as it was in the past. In spite of this fact, nonprofits aren’t adjusting their holdings as frequently as they should.
Additionally, a fluctuating market is affecting the wealth of other investors. Both individuals and fund managers are faced with the volatility of the market in terms of managing their investments. The new trends that are affecting the market make everyone understandably jittery, which, in turn, affects feelings of generosity and empathy. When people are faced with the possibility of a sudden downturn in the market, they may be less willing to donate as much to their favorite philanthropic causes.
Between each nonprofit organization’s market investments and the concerns of other investors, many philanthropic organizations are facing uncertain futures. Since the donations, they rely upon largely come from market investors, the performance of the market is directly linked to their ability to operate. This may mean nonprofit organizations will have to look for ways to reduce their reliance on the performance of the stock market.
Since many philanthropic organizations operate on a five-year budget plan, the rise and fall of the market can affect their ability to operate from year to year. As the market continues following the trend of diving deep before a rebound, the managers of nonprofit organizations may have to rethink their spending patterns. Reorganizing budgets for philanthropic organizations may be necessary if they’re going to continue having positive effects on their respective causes.
About Raging Bull Trading
Raging Bull Trading is a trading program that teaches both new and experienced traders about the art of trading and the stock market. Originally launched in 2010 by professional traders Jeff Bishop and Jason Bond, Raging Bull Trading offers a comprehensive course on mastering stock trading from industry experts. The program includes lessons on stock picks, stock ideas, how to get started in trading, and an overall stock market education.