Use your investment earnings to help people in Ukraine
In the days following Russia’s invasion of Ukraine, many people tried to predict what it would mean for gas prices, interest rates, or your investments.
There’s no harm or shame in that, not exactly at least. Self-preservation – and its accompanying instinct, the preservation of wealth – is an understandable impulse. It is reasonable for forecasters to try to calm people and markets down, even though forecasters are routinely wrong.
But as with any act of military aggression that could rattle global finance, an immediate question should be: who is most likely to need immediate help?
Chances are babies that hospital staff have had to move to basements and people taking refuge in subway stations or fleeing their homes. Many of these adults didn’t have a 401(k) in the first place. Even those who have the least among their neighbors can lose more than they ever thought possible.
If you’re reading this, you’re probably not among them. We are entering year 3 of a global pandemic, but you are still alive, although you may have lost people close to you. The job market is strong for those who want to work and feel secure.
If you own a big, wide basket of US stocks, they are up about 40% over the past two years, even after the recent correction. If you own a home, those prices have gone up at least 20%, or more than $50,000 for those at the median.
It’s incredible. Your net worth may well be higher amid all the deaths from the disease, and it may stay that way as Russia’s invasion of Ukraine threatens to wreak havoc on global markets.
This is not a call to celebrate, but rather to marvel, briefly, that this can be your reality. And it’s true that the ability to dig deep to help others depends in part on preserving what you have.
My colleague Jeff Sommer noted that stock markets posted strong gains in the medium-term wake of the Pearl Harbor bombing and the US invasion of Iraq. Investors also fared well during the Cold War years, even as millions suffered.
For most people, it would not be pleasant to try to profit directly from these kinds of events, but simple patience is not a moral failure.
As stock markets fell and then rallied on Thursday, Michael Zawadiwskyi, a Ukrainian-American financial planner, said he had talked a few clients off the idea that they would have to sell various investments to hedge against potential losses. . About half of his clients share his roots.
But he didn’t get as many calls as you might have expected. Shared heritage aside, he and his clients subscribe to the universal principles of sound financial planning. They have their money in buckets of investments, some to use now and some for later. They are cautious about risk and diversification. They don’t deviate from the plan unless drastic changes in their own lives require it.
And he knows his story. “I don’t think the war is slowing down the economy in the long run,” Zawadiwskyi said.
That didn’t stop him from staring in disbelief at footage of tanks driving through Ukraine and wondering what would become of its citizens. Most of them, he thinks, have yet to pack their bags, especially those in the west of the country, where his family has its roots.
“Where are they going to go?” said Mr. Zawadiwskyi, a first-generation American who is part of a tight-knit community of Ukrainian Americans in northern New Jersey. “I don’t even want to imagine what it’s going to be like. I think they are still determined to fight for what they have there.
If he and his clients are, at the moment, more concerned with people than with the prospects of their investments, you should consider a similar position. After all, there is one thing we can predict with reasonable certainty in the short term: people will need help.
Understanding the Russian attack on Ukraine
What is behind this invasion? Russia sees Ukraine as part of its natural sphere of influence, and it worries about Ukraine’s proximity to the West and the prospect of the country joining NATO or the European Union. Although Ukraine is not part of either, it receives financial and military aid from the United States and Europe.
If you have lost little – and certainly if you have gained much – remember that your own family has been helped. Even if your ancestors were never officially refugees, they probably encountered difficulties if they moved from one country to another.
It’s an old story, with new protagonists every year. For decades, Refugees International has focused on public policies and other initiatives that can facilitate their struggle. HIAS is another mainstay in this area that sends money to Right to protection, its Ukrainian partner. Other established associations are likely to mobilize if the situation worsens.
A few omnibus websites offering ways to help are already doing the rounds, as are suggestions on social networks. If recent history is any guide, there will be tools and platforms you can use to get money directly, electronically, to people in need. Most of these efforts will work and be worth it. Inevitably, scams will also appear, so be careful and ask questions.
And if it helps, remember that there can often be a direct link between your own earnings and your goodwill.
You can donate appreciated stocks to many charities and avoid paying capital gains taxes on those gains. You can transfer a stack of securities into a donor-advised fund and spend it over time while taking advantage of any charitable donation tax deductions you may be entitled to. And if you have investment losses, deduct them if you can and imagine any tax savings as a subsidy to generous donations.
Maybe the invasion will affect your retirement or the price to fill your SUV, and maybe not. But other people are suffering a lot right now. Investing in them is one of the best ways to answer the question of what you could do about Ukraine in the immediate future.