As most everyone is aware, the stock market produced very large gains in 2019.  Such a strong rise in values is almost always accompanied by the question: “Should I take some ‘chips off the table’?”  There is no set answer to this question, and everyone’s particular situation calls for individual analysis, probably with a capable advisor.

One very effective way to at least partially rebalance your portfolio may be to make a contribution to your charitable donor-advised account (if you don’t have one, we can help you open one as New Capital is, according to our representatives at Fidelity, one of the most active firms in the country in this area).

By donating appreciated stock to your charitable account, especially after the further gains in 2019, you are automatically reducing the stock allocation in your personal account and transforming those dollars on an extraordinarily tax-efficient basis into charitable dollars to be given away as you see fit and when you see fit.   The tax efficiency of donor-advised funds is undeniable: with a contribution, you avoid capital gains taxes and also receive the usual charitable tax deduction (provided you itemize your tax deductions).  Finally, once the stock funds have been transferred to your charitable account, you may keep the money invested in a portfolio of your choice, from conservative to aggressive.

One of the most difficult obstacles to being charitable is to make the initial decision to give money away: “Do I want to give?” necessarily precedes “Do I want to give to organization X?”  By funding a charitable account, this first obstacle is overcome, because you have already made the decision to be charitable and acted on that.  What remains becomes easier: to whom to give, how much, and when.  

In a year when many portfolios were up 10%, 20%, even 30%, it may well make sense from portfolio, tax, and charitable standpoints to target additions to a charitable account.  However, it may make sense from an even more important perspective. Credible studies show that giving to others substantially increases happiness to the giver, even more than if they had spent it on themselves.

If we at New Capital can help you be happier with yourself, then we are happier with ourselves too.  If we can help you convert some of your concern over rebalancing your portfolio in the wake of gains that materialized last year into your enhanced personal happiness, please let us know.

We will be - yes - happy to do so.

Leonard Golub, CFA
Fiduciary Financial Advisor

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