Many of our clients in Indiana and around the country are extremely active in giving to religious establishments and in other philanthropic areas of their life. They feel a sense of commitment and pride in filling up the donation basket or giving back to organizations that were instrumental in their success.
As standard as this practice has become, individuals may not be benefiting themselves or their charitable recipient as much as they could. By providing your charity with an investment vehicle, rather than cash, both parties can benefit greatly over the long term: You’ll be offering the place you worship a much-appreciated asset boost, and you’ll help avoid big buildups in your portfolio in highly appreciated stock.
To start, you must first determine whether your religious institution or organization has an account with a financial institution. Once you know they can accept your gift(s), there are a few steps you should follow to make the transfer a smooth one:
Step 1: Obtain the transfer information from your organization’s financial institution. This would include both the routing and account numbers.
Step 2: Determine the monetary amount you’ll want to give your religious establishment or organization for the year. Then talk to your financial adviser about which appreciated stock you’ll want to donate and how many shares you will need to donate to meet your annual giving goal. If you still want to give on a weekly basis, determine how much you want to deduct from your annual amount to cover your weekly contributions.
Step 3: Have your Indiana financial adviser prepare an authorization form to transfer the stock to your institution’s brokerage account. You will need to initiate the transfer, which will require you to sign the appropriate paperwork. Your financial advisor can help you with this.
Step 4: Your financial adviser prepares a letter to be sent to your church/temple so that they are aware of the stock transfer as well as stock price on the day of the transfer.
If you would like to learn more about the tax advantages and other opportunities associated with charitable giving, we invite you to learn more at www.midwest-wealth.com.
Midwest Wealth Management, Inc does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.
Pelko, Lee. Why You Should Consider Donating Stock to Your Church in 2015. Rogers and Associates. 13, Jan. 2013.
Cohen, Gail. Can You Make Your Church a Beneficiary of Your IRA?. ZACKS.
Dalbar’s Quantitative analysis of investor behavior has become a popular resource for many Indiana wealth advisors in studying the psychology of investor’s decisions and how those decisions affect results. In the study, they talk about how behavioral biases that lead to poor investment decisions are the single largest contributor to underperformance over time.
It is these types of behaviors that can cause very smart and successful individuals to make choices they end up regretting — the type of emotional decisions that were made on a whim or formulated outside of the investor’s original plan.
The Dalbar study clearly illustrated just how poorly self-made investors perform relative to market benchmarks over an extended period. Granted taxes, trading costs and the internal dynamics of an index will affect the purchasing power of an investor against the index, but overall investors do underperform in the long run:
The average 2014 equity fund mutual fund investor underperformed the S&P 500 by a wide margin of 8.19% .(13.69% vs. 5.5%).
In 2014, the 20-year annualized S&P return was 9.85% while the 20-year annualized return for the average equity mutual fund investor was only 5.19%, a gap of 4.66%.1
Hiring an advisor to help manage these common pitfalls is where clients can take the emotional aspect out of the equation and rely on the advisors ability to look at the bigger picture. A good advisor will always ensure that the client has a highly diversified portfolio with a mix of traditional and alternative investments. But most importantly, being able to build a comprehensive plan to manage the emotional side of the equation is showing to be just as important as the underlying investments themselves.
To learn more about how you can achieve a successful investment strategy, visit Midwest Wealth Management at www.midwest-wealth.com, or call us at 317-288-4989.
1Roberts, Lance. Dalbar:Why Investors Suck and Tips For Advisors. Advisor Perspectives. 8 April 2015