Don't Squander Your Returns

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Last summer, Warren Buffett gave away 512,169 shares of Berkshire Hathaway (NYSE: BRK-B) stock worth more than $2 billion.

Of course, that was in keeping with the plans he outlined in 2006 -- when he announced the largest charitable donation in history. His total gifts of Berkshire stock will ultimately depend on the share price of the stock itself, but many have valued the contribution in the $40 billion range -- give or take a few billion. Not to be flip, but that donation matches the entire market cap of Disney (NYSE: DIS)!

According to The New York Times Magazine, "On an inflation-adjusted basis, Buffett has pledged to give more than double the lifetime total given away by two of the philanthropic giants of the past, Andrew Carnegie and John D. Rockefeller, put together."

A commitment to giving
Buffett's oft-quoted Rule No. 1 in investing is "never lose money." While he may live by that rule and, to the point raised in my headline, never squander his returns, he's certainly giving them away. Indeed, part of the beauty of Buffett's generosity stems from the manner in which he's giving it away -- as stock in his beloved Berkshire Hathaway. He is, quite literally, tying the performance of his investments to his charity.

In that respect, he's a microcosm of Americans. According to a recent report from the Giving USA Foundation, in 2006, Americans donated $295 billion to charities -- a slight but impressive increase over 2005, which saw more than its share of (hopefully) once-in-a-lifetime disasters. (Back out the natural-disaster donations, and 2006 giving was up 3.2%.) Giving USA stats show that the United States ranked first worldwide in philanthropy, at 1.7% of GDP. (The United Kingdom is No. 2, at 0.73%.)

Back to investing
75% of that total came from the checkbooks of individuals. And perhaps the most interesting finding from the report: "Giving historically tracks the health of the overall economy, with the rise amounting to about one-third the rise in the stock market.... [2006] was right on target, with a 3.2% rise as stocks rose more than 10% on an inflation-adjusted basis."

Now, we know that approximately 46% of American families -- roughly half of all households! -- own stocks. And 2008 was brutal to nearly all these investors. Major indexes plummeted. Unless you were one of the lucky few to have spotted gems such as Amgen (Nasdaq: AMGN), H&R Block (NYSE: HRB), and Ross Stores (Nasdaq: ROST), you're likely hurting. (I know I am.)

Charity in a time of distress
If "giving historically tracks the health of the overall economy," then it will come as no surprise that giving was way off in 2007. Here in the Washington, D.C., area, for example, lost funds from the quasi-nationalized duo of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) has strained many important local charities.

Anecdotally, too, individuals have tightened up. This year's annual Foolanthropy campaign, for example, has felt the pinch compared to its impressive totals of recent years -- despite the fact that we've partnered up with a wonderful charity, DonorsChoose.org, to fight a cause near and dear to our hearts, fighting financial illiteracy among America's children.

"Charitable giving down as needs increase," read a recent headline. I understand and applaud household belt-tightening in these murky economic times. But it's easy to forget causes with long-term effects or those who are worse off than us. If you have just a little extra in your next paycheck, I'd encourage you to follow Buffett's lead and do well by your favorite charity. Or check out our campaign on DonorsChoose.org, where your donation will support financial literacy in high-needs public schools. You can donate any amount and it will go directly to a classroom in need -- even a $10 donation can have a real impact.

Happy investing (and giving) in 2009!

Brian Richards does not own shares of any company mentioned. Disney and Berkshire Hathaway are both Inside Value and Stock Advisor recommendations. The Fool owns shares of Berkshire. The Motley Fool has a disclosure policy.