Donor-advised funds offer stability during uncertain times

In times of market volatility, emotions can run high, and decisions may be made in haste. However, once things settle, impulsive decisions are often looked back on with regret. 
 

Just as conventional wisdom recommends investors stick to the plan in times of swirl, the same is true for charitable giving goals. Let’s consider the value of “staying the course” in philanthropy and how donor-advised funds (DAFs) can bring donors peace of mind knowing that the causes they care about will continue to receive their support, even in tumultuous times. 
 

When markets are turbulent, "stay the course" 

Mark Froehlich, Vanguard Charitable’s Chief Financial Officer, advises donors that instead of shifting their charitable investing strategy in the moment, they should remain disciplined and allow their charitable investments to reap the rewards. 

Froehlich cites the COVID-19 pandemic and related market downturn to illustrate his point: Vanguard Charitable calculates that “If an investor had exited the market in March 2020 through the recovery in July 2020, they would have seen a negative 2% return. On the other hand, those who maintained a conventional portfolio balance of 60% stocks and 40% bonds would have seen a 21% return over that period of market volatility.” 

“Staying the course” is a fundamental principle of Vanguard, who founded Vanguard Charitable in 1997 as an independent public charity. Vanguard Charitable believes in the same tried-and-true investment principles of discipline and diversification—with a charitable focus.

Doubling down on your charitable giving investment strategy while everything feels in flux is neither easy nor comfortable, but it is rewarding. For example, a donor who invested $100,000 in their Vanguard Charitable DAF in 2020 and stayed the course would have grown $42,000 in additional charitable funds five years later.¹ 

DAFs are built to weather turbulent times 

For almost three decades, Vanguard Charitable donors have relied upon their DAF accounts to anchor their charitable giving during times of economic upheaval and uncertainty for the nonprofit sector. That’s because DAFs are built to weather turbulent times. 

This popular philanthropic vehicle allows donors to make a charitable contribution, receive an immediate tax deduction at the time of contribution, and then recommend grants from the account to nonprofits over time. 

When investing and giving with a DAF, the funds contributed to the account are earmarked for philanthropic purposes and grow tax-free. This gives donors greater flexibility to execute their giving strategy. Donors can make contributions to their account when markets are strong and recommend grants quickly even when the market turns.

While charitable giving usually declines during financial disruption, giving with DAFs remains consistent over time and grant amounts and frequency can even increase. For example, Vanguard Charitable donors granted $3.1 billion to more than 62,000 nonprofits in 2024. This marks Vanguard Charitable’s eighth straight year of record giving with granting levels in 2024 reflecting a near 20% increase in giving from the year prior. 

What’s more, Vanguard Charitable donors are able to be more generous year after year by giving larger grants more often. Research from Vanguard Charitable’s 2023 Why Giving Matters report indicates that the longer a person holds a Vanguard Charitable DAF, the more generously they give. For instance, donors who have had their DAF account for more than 10 years typically issue grants that are 61% larger than grants from donors who have had their DAF account for 6 years or less. 

What you can do today 

In times of rough financial seas, including the 2008 financial crisis, the COVID-19 pandemic, and the recent market volatility and significant change for the nonprofit sector, DAFs have enabled donors to “stay the course” and move with the winds of change, rather than be broken by them.

It’s important to remember that ebbs and flows in the market are part of the investing landscape, and, in turn, philanthropy. As with traditional investing, it’s essential to remain disciplined and not make impulsive decisions in response to market fluctuations. 

Tuning out the noise, staying invested, and focusing on the long-term are winning strategies that will ensure donors can be an active partner for the causes they care about for years to come.

If you’ve been looking to maximize the tax benefits of your giving, opening a donor-advised fund is a powerful way to "stay the course" and follow through on your philanthropic plans.