If You Think the Market's Doomed, Do This Now

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

After last year's rally, many think that the stock market is due for a crash. If you're among them, then there's one thing you might not want to wait long to do: give to charity.

In many people's eyes, the season for charitable giving ended when the Big Apple dropped at Times Square last weekend. But you can still make a big difference even before you've had a chance to turn the first page on your brand new calendar -- and doing so might do you some good, too.

Giving to stiff the tax man
Most charities receive a huge percentage of their gifts toward the end of the year. That's due in part to the fact that you can use charitable donations as tax deductions, and since most people only start thinking about their taxes toward the end of the year, charitable gifts during November and December tend to be a lot more prevalent than during other parts of the year.

Waiting until the last possible moment to make a charitable gift can work out well for you, too. If you're smart and take the opportunity to make gifts using stock that has gone up in value, then you can both earn a valuable tax deduction as well as avoiding the capital gains that you'd owe if you sold the stock. That double benefit works especially well during years like 2009, when the stock market finished the year much higher than where it started. If the shares you own rise in value, then it takes fewer of them to make your planned gift -- or, if you intend to give a fixed number of shares, their higher value will get you a bigger tax deduction.

Hedging your bets
Of course, that trick can work both ways -- and that's why an early gift can make sense. Consider, as an example, the terrible market year of 2008. Riding the bull market that started in early 2003, investors had a lot of stocks that had substantially risen in value. Using those stocks for charitable giving would have saved you a ton of money in taxes.

But by the end of the year, the broad market was down almost 40%, and the giving power of your stocks had fallen dramatically. Just consider these examples:


Shares Needed for $1,000 Gift in January

Value of Those Shares by December

Shares Needed for $1,000 Gift in December









iShares Silver Trust








Bank of America




Morgan Stanley
(NYSE: MS  )




Dow Chemical




Source: Yahoo! Finance.

By the end of that year, some of your shares didn't even go half as far toward your charitable purposes -- meaning that you faced the unappetizing dilemma of either giving a smaller amount or having to pony up more shares to preserve the dollar value of your donation.

Reading the future
Nobody knows what the future will bring in 2010. But after last year's big rise for stocks, many are looking for a pullback. And whether a correction comes sooner or later, you can count on it coming at some point.

So one thing to consider is making a charitable gift early in the year. Not only will it help protect against a future market downturn, but it will also support worthy charities at a time when most donors have already done everything they can.

Here at the Fool, we believe that charitable work is a year-round endeavor. That's why this year, our Foolanthropy campaign is focusing on a local public charter school, the Thurgood Marshall Academy. Through a combination of financial and volunteer support, we hope to make a difference in the lives of hundreds of teens by giving them the foundation to be smarter about their finances.

Regardless of which charities you help, making a gift now can make a huge difference. If it can also help you protect against a financial downturn, then that's just icing on the cake.

Look to see the latest on what the Fool community is doing to support financial education. Christopher Barker has the scoop as Foolanthropy sprints toward the finish.

Fool contributor Dan Caplinger works with several charities who need all the help they can get. He doesn't own shares of the companies mentioned in this article. The Fool has a synthetic long position in iShares Silver Trust. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy has its heart in the right place.

Read/Post Comments (0) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1077901, ~/Articles/ArticleHandler.aspx, 10/24/2016 10:41:58 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,227.17 81.46 0.45%
S&P 500 2,150.25 9.09 0.42%
NASD 5,302.76 45.36 0.86%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/24/2016 10:26 AM
BAC $16.66 Down -0.01 -0.06%
Bank of America CAPS Rating: ****
COP $42.09 Up +0.55 +1.32%
ConocoPhillips CAPS Rating: ****
DOW $54.04 Down -0.06 -0.11%
The Dow Chemical C… CAPS Rating: *****
MS $33.52 Up +0.08 +0.24%
Morgan Stanley CAPS Rating: ****
POT $16.40 Down -0.01 -0.06%
PotashCorp CAPS Rating: ****
SLV $16.70 Up +0.05 +0.30%
iShares Silver Tru… CAPS Rating: ***