Market selloffs are never easy. Whether you are an individual investor, a financial professional, or a non-profit organization, down markets are challenging to endure. However, unlike many investors, the endowments and foundations that support non-profits and their missions have a unique advantage: time.

Most investors have a specific, time-sensitive goal—saving for retirement, buying a second home, leaving a legacy, etc.—which creates difficult tradeoffs. They can take on risk by investing in growth over the long term versus taking less risk and worrying about running out of money down the line.

Many non-profits' missions are already here and matter today, and their goals are perpetual. Community support, educational funding missions, and other organizations are all thinking about making an ongoing, lasting impact. This perpetual, long-term focus can be very valuable during difficult market environments.

Patience is a Virtue

Defining objectives is the starting point for any customized investment solution, and mission statements with long-term goals give investment managers the broadest range of strategic options – for two reasons.

First, when market volatility strikes, often the best thing investors can do is stay patient and keep perspective. Seeing unrealized losses might be difficult to stomach, but most nonprofit organizations aren’t looking for short-term investment results. They’re looking for stable, sustainable growth over the long run. This means that when markets fall, non-profits are especially well-equipped to lean in and stay the course or adjust their portfolios to take advantage of new market opportunities. Reframing volatility from something to be feared to something that can be capitalized on is the first advantage non-profits with long-term focused missions have.

The second benefit is alignment. In the short-term, the financial markets can seem more like a popularity contest, with rapid swings from optimistic to pessimistic to optimistic again. But over the long run, markets are driven not by sentiment and mood, but by the economy and underlying fundamentals. Investment managers that deploy a long-term, fundamental approach are particularly well-suited to match their investment strategies to the goals and objectives of most non-profit organizations.

Staying Opportunistic Today

Having an investment approach with a wide range of tools that can adapt to fast-changing market environments is always essential, and even more so during times of volatility.

Whereas some managers take a passive, one-size-fits-all ‘set it and forget it’ approach, a truly active manager will tailor your portfolios to both changing markets and your organization as it evolves. Whether that’s staying nimble with asset allocation, utilizing alternative asset classes, or adjusting exposure across subfactors such as sector, size, style, and strategy, your investment manager should be proactively working for you in all market environments.

The information in this paper is not intended as legal or tax advice. Consult with an attorney or a tax or financial advisor regarding your specific legal, tax, estate planning, or financial situation.