Some Stocks Go Down, Some Fruit Goes Bad, Some Charities Are Better Than Others

This week’s announcement from the FTC that it, along with

all 50 states and the District of Columbia, was filing a complaint against four

nonprofits that had reportedly used virtually none of the $187 million raised

for charitable purposes, has sent shudders through the nonprofit community.

Organizations are afraid what this news will do to fundraising.

Here’s why you should continue to give to charity enthusiastically.

When you buy fruit at the grocery store, you know there is a

chance, in fact a near certainty, that some of the fruit you buy will get

thrown out. Some will be bad when you get it home, either because it was

already overripe or under ripe when it left the store or because it was damaged

in transit. Most fruit is sold by the pound, but there is hardly a fruit on the

market that you can eat entirely. Have you ever eaten a banana peel or an apple

core? Then there is the risk that the fruit is prepared for someone who doesn’t

eat it and finally the risk that no one happens to eat it before it goes bad.

How much of the fruit you buy actually ends up in someone’s tummy? You still

buy fruit because it is healthy and delicious.

When smart investors buy stocks, they buy lots of them. Most

mutual funds have many dozens of different stock positions in their portfolios

because they understand that some will go up and others will go down. Some may

even go to zero. In the middle some will be parked money, after decades still

worth only what was paid for them. Some stocks, however, will grow dramatically

and may after just a few years be worth 10 times or more than what was paid for

them. Smart investors buy stocks even though they know with certainty that some

of the money invested in stocks will be lost.

Venture capitalists and angel investors who invest in

startup companies know that it is so hard to predict which companies will

thrive and which will tank that they make sure to diversify their portfolios,

too. They know that when investing in early stage companies, easily a third of

the companies will flame out completely, a few will struggle on endlessly and

only a few will thrive, providing all of the return in their portfolios. Think

about that; early-stage investors give entrepreneurs knowing that there is a

very good chance they will never see a dime in return.

So, here’s the question for you? Is it reasonable for you to

expect that every dollar you give to charity will go directly to a noble

purpose and that none will ever be wasted? The frank answer is simple.

Absolutely not. Some nonprofits will use your money to create fantastic social

impacts. Some will not. How many millions of dollars for cancer research have

yielded only another compound that doesn’t work? Does that mean we shouldn’t

fund cancer research? Of course not! A cure will only come from more funding.

Sometimes I hear people say, “I will only give to this one

nonprofit because…” I have news for you. There isn’t a perfect nonprofit out

there. While some may use volunteers to allow 100% of donations to go directly

to programs, those organizations may not have the same impact as other

organizations using professional staff to do more with the same donation, even

after paying the staff.

Does this mean that you should give

indiscriminately? No, of course not. See my tips for smart giving here. But it

does mean that you should keep giving!

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