A Guaranteed Stock Market Return?

December 04, 2011 | Seeds
By Blake Weaver

A Guaranteed Stock Market Return?

Part of my career background includes experience in the financial industry. So, I have learned to pay relatively close attention to the stock market. As you are well aware, the stock market has been a point of frustration for many over the past few years. Considering the volatility within the market as of late, it is quite disheartening to follow the market closely.

Another truth about the stock market is that returns are never certain. Even those that have done well in the market are likely to agree. Warren Buffet, who is one of the richest men in the world, states that, “The future is never clear, and you pay a very high price in the stock market for a cheery consensus. Uncertainty is the friend of the buyer of long-term values” (http://mjperry.blogspot.com/2008/01/stock-market-investing-some-words-of.html). Such is the nature of investing in the stock market. Returns are never guaranteed.

Recently, a friend of NICS contacted me about donating to the NICS SEED Fund. He communicated to me that he and his family preferred to give a stock donation. I was so grateful for the heart of this donor, and I immediately saw the blessed irony in this type of gift to the ministry. You see, a SEED Fund donation to NICS is a gift that is leveraged over and over again. That’s because all SEED Fund donations are loaned to school projects at no interest, and they are paid back to the SEED Fund over a period of time. As the money is repaid, it is used over and over again for other school projects. Therefore, a stock donation (or any donation for that matter) to the SEED Fund carries a definite return on investment. Moreover, the SEED Fund supports and facilitates ministry expansion, which means that more kids can hear about Christ through international Christian education. That’s Kingdom return!

While I was initially unfamiliar with the stock donation process, I quickly learned that this was an absolute benefit to both NICS and the donor. Consider this quote from investopedia.com as it relates to donating stock (http://www.investopedia.com/ask/answers/07/donatestock.asp#axzz1cOAgrI87):


Giving stock, instead of cash, as a donation can greatly benefit both parties. You will find that most charities, hospitals, schools and other nonprofit organizations will accept stock as a gift or donation.

 


If the stock has increased in value from the time of purchase, the owner can avoid paying the capital gains tax by donating the security to another party. When the security is being donated to a charitable organization, the total amount will still be eligible for a tax deduction. Since taxation is avoided on the stock donation, the giver will be able to make a larger donation.

 


For example, let's say you were looking to make a $1,000 donation to a charity. You could either give cash or donate stock. Let's assume that the you bought stock for a original purchase price of $700, but it is now worth $1,128.55. To make it simple, let's assume capital gains tax is 30% of the stock's appreciation. Selling the shares for cash would net about $1,000 after capital gains tax (1,128.55 - (1,128.55 - 700)*0.30). In this case, you should be indifferent between donating the entire stock or giving cash, as both choices will cost you $1,000. However, the charity can receive more benefit from a stock donation, as they will receive a gift valued at $1,128.55, instead of the $1,000 in cash.

 

As you can see, donating stock is a great way to benefit your favorite charity. Furthermore, a stock donation is a great way to ensure a definite, long-lasting, and positive return on your investment.
 

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