09 Apr EP 161 | Ask Hilary: How To Make The Most Of Your Money in an Uncertain Economy

Posted at 07:23h in Podcast Archive by Hilary Hendershott

Welcome to episode 161 of The Retirement Years on Profit Boss® Radio! In this episode, I’m answering several listener questions about the coronavirus pandemic, the economy, stock market investing, and personal finance.

I’m hoping my answers to these questions will help you better understand how to think through tough decisions when it comes to money and your family, why you should manage your mindset instead of trying to predict the future, and how moments like now prove the importance of having an investment strategy — to name just a few of the issues we dive into.

We also get into what you can do to make money right now, what types of businesses are thriving in this tumultuous time, what you can do as a business owner to protect yourself and your employees, and what resources may be available to you as individuals via the $2 trillion CARES Act passed by Congress.

Things may feel like they’re constantly changing right now, but by deepening your understanding of what’s going on and how you can best stay physically and fiscally healthy, you can come out of the other side of this empowered, educated, and ahead of the media. Tune in to Profit Boss® Radio today!

Here’s what you’ll find out in this week’s episode of Profit Boss® Radio

Cara asks: “Should I pay off the loan on the house I inherited from my grandparents, or should I refinance and invest my money, even though the economy feels shaky right now?”

Monica asks: “How long do you think the trickle-down effect of the global reaction to the coronavirus is going to be?”

Carl asks: “How should the fiat currency issue play into my investment strategy, and should I listen to people telling me to buy precious metals or Bitcoin right now?”

Lela asks: “How should someone arrange their stock-bond IRA or Roth IRA if they’re over 65?”

Ana asks: “Why do we need to hang on tight and not sell or panic in a crisis, and what can we do to maximize our investments right now?”

Brandy asks: “Will we all get back the money we lost in our investments once the coronavirus event has ended?”

Financial Recovery Resources Center

In the wake of the coronavirus pandemic and subsequent CARES Act, it became very clear to me very quickly that ordinary Americans would need help understanding and making use of the various rebates and tax opportunities made available to them. As such, my team and I have worked very hard to offer you this comprehensive Financial Recovery Resources Center. CLICK HERE to get access.

Resources and Related Profit Boss® Content

Call for Listener Stories

Hey Profit Boss® Radio listeners! If you reach a financial goal you’re proud of, tell me about it! I will continue to share listener win stories throughout 2019. Remember, the Profit Boss® community is here to support you and that includes celebrating with you when you accomplish something incredible.

If you crush a specific financial goal, I want to hear from you.
If you’re thankful for something that has happened in your financial life or career, I want to hear from you.
If you are making big financial or career plans, I want to hear from you!

Your financial success is possible and so many of you are already making that a reality! So, don’t keep your wins to yourself! Share them with me so that I can air them throughout the year on Profit Boss® Radio.

Email your audio clip to media@hilaryhendershott.com. And we’ll be in touch if we plan to air your story. Thanks, ladies!

#AskHilary

And let’s not forget that this show is powered by you and your stories and questions. Every month I’ll be doing an #AskHilary episode where I answer listener financial questions.

So, what’s that top of mind money question that’s been pinging around in your brain?
Where have you been stopped?
What have you been arguing with your spouse or significant other about?
What tip or tool aren’t you sure about?
Do you have questions about saving? Spending? Budgeting? Investing?

Pick up your mobile phone right now. Yes, right now. And open your voice recorder app. Yep, go ahead and open that app and record yourself asking me that question. Just say your name, first name only is okay, and then what city you’re from, and then ask away.

Anything you want to ask. And once you’re done recording, export that beautiful little recording and email it to media@hilaryhendershott.com. I can’t wait to hear your questions!

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Transcript

Hilary Hendershott: I’m Hilary Hendershott, your host and this is The Retirement Years on Profit Boss Radio, Episode 161.

The Retirement Years on Profit Boss Radio is your weekly wealth building and retirement mastermind. Profit Boss is also a movement for women who want to reach their full wealth potential and be financially free. Let me be your guide as you defy the odds, take control of your money, grow your wealth and retire well. Do you want the secrets of wealth and retirement to be yours? This is the place. I’m Hilary Hendershott. I’m a certified financial planner running a leading advisory firm for women and couples and I’m sharing with you real stories from real life and real people who are making it happen. Forget Wall Street. You ready? Let’s do this.

Hilary Hendershott: Welcome to this episode of Ask Hillary: Coronavirus Pandemic, the economy, stock market investing and financial related questions. Thanks for sending in your questions for today’s episode. First, a little Hendershot family update. As I’ve shared with you, we are here in Dorado Beach, Puerto Rico, enjoying or attempting to enjoy a tropical lifestyle while working full time. It was a test to see if this was a lifestyle we were interested in pursuing. One cool thing is after the first time I published or aired, talked about us being in Puerto Rico, a lovely Profit Boss listener named Nicole reached out from San Juan, so she made contact. That was cool. I wasn’t expecting to have Puerto Rican listeners reach out to me. We were going to get together for coffee but now, of course, we can’t get together to do anything. And I realized our experiences of this shutdown shelter in place have all been a function of our geographic location.

So, Puerto Rico went on shelter in place I think much earlier than most places. I was really shocked to read here we are essentially locked in our condo and the Spring Breakers were living it up on the beaches in Florida. So, I think that things have gotten, I don’t know how to say, pretty bad. They feel a little weird here in Puerto Rico. At this point, I don’t know what it’s like to run an island. I imagine the contagion issues, the health issues are a lot different in a closed environment ecosystem because there is an easy access to resources that are on the mainland or whatever so I’m not criticizing the rule-makers. But at this point, we definitely have police interpreting the rules, kicking people off the streets, and there are people divided into factions. There are the “We have rights” group and there are the “Go the heck home. Stay in your house and never come out. You dangerous people” people.

So, tensions are high. And to be totally honest, we are considering going home to California. Unfortunately, though, as you know, my daughter is immune-compromised and we’re not sure that things are actually better in San Jose. What we would have in San Jose is our house. I have my office that’s set up. My husband has his office. We have more space. I have a gym. By the way, I’m literally working out with and thank goodness I purchased my resistance bands from Amazon right when this thing started, so I got them. I have three different kinds of sets of resistance bands that I use on our patio, in this little condo unit, and thank goodness there are like bars I can use to tie the resistance bands to. I had no idea how many exercises you can do with resistance bands, but I have an excellent coach who’s virtual and she’s sending me workouts. It’s awesome.

I did a complete cardio workout in my unit, literally like running in place, running back and forth, doing the cross country ski movement. I’m sure all of you are supporting yourselves and your health in the best way you know how. And I know we’re all making it work. And look, just please don’t interpret any of this as a sob story. Obviously, the people who don’t have their health are the people worse off right now and I know more than just like any of you who know the worst of what it’s like to not have your health or not have someone that you love dearly have their health so this isn’t a comparison. I’m simply sharing what’s so. But I remain confident financially. My income is down, my husband’s income is down, but much different than my situation in the last economic crisis, I have all the cash that I need. I know we can pay our bills. I know that my team will get paid so no one on my team is going to lose their job. No one on my husband’s team is going to lose their job because we spend less than we make. During the good times, we don’t spend it all.

So, we’re going to be all right and I’m happy to provide optimism for you from a financial perspective. And I love hearing from you so if you have more questions or comments, you know how to reach me, media@hilaryhendershott.com. Okay, without further ado, let’s get to my answers to this set of listener questions. Thanks, profit boss.

[EPISODE]

Hilary Hendershott: I know many of you are interested in what stimulus money is available to you. My team and I have spent a massive amount of time collecting and analyzing the various programs that are passed in the CARES Act and more. So, if you go to the show notes from today’s episode, HilaryHendershott.com/161, you’ll find links to an article about the CARES Act and then a more extensive resources list. So, just to review what’s happened in the CARES Act, first of all, you have support for families and individuals. So, if you’re a single person making less than $75,000 of AGI in 2019, if you haven’t filed your tax return for 2019 yet, the IRS will look at 2018, you’ll be eligible for a full payment of $1,200. If you are a couple who file with a joint AGI of less than $150,000, you’ll get $2,400 and there are different levels if you file as head of household and then qualified households will receive $500 per child up to a maximum of $3,400.

Those stimulus dollars start tapering off pretty quickly over those AGI thresholds. It’s not a cliff but it is a steep hill as it were, and the IRS is supposedly going to find digital ways to transfer that money to you so hopefully you’ve filed your taxes in the past and you’ve got direct deposit for any refunds that you may have received. They’ll just use that bank account information. Otherwise, I think they’ll issue checks. Stay tuned. I haven’t heard of anyone receiving that stimulus check as of today. I’m recording this on Monday, April 6. There’s also support for small businesses and the self-employed. Largely, what we’re talking about is the Paycheck Protection Program. I think the federal government learned a lot of lessons in the last financial crisis and they’re getting out ahead of it. So, one thing that really made people upset last time is that large banks got lots of money and individuals did not. There were lots of stories of CEOs getting their huge multimillion-dollar bonuses while half their staff and not to mention their investors lost millions of dollars and people didn’t find that fair. Imagine that.

So, Congress got together and passed the Paycheck Protection Act. They’re essentially utilizing the Small Business Administration to give loans that can be forgivable to companies that have 500 or fewer employees. I am part of a group of folks who are working very hard to apply for these loans so I’m watching the details very carefully. Right now, it looks like you need to apply through your regular business bank, that that’s how they’re funneling people. So, your banker acts as your loan officer and the money will be provisioned by the Small Business Administration. So, that is designed to tide you over for a couple of months of payroll. They want you to use that money for payroll and then it can be forgivable. And if you don’t use it for payroll, if you don’t use all of it in the way they want you to, they’ll simply make it a low-interest loan for a period of time. So, you should definitely apply for the PPP. Check with your business bank on that.

There’s also Expanded Unemployment Insurance. So, the federal government is making unemployment insurance available in additional amounts to people who have previously applied with their state and also for the first time to self-employed individuals. So, if you’re a member of the gig economy or if you file 1099, you have a business and you just file on a Form 1099, you can get an additional $600 per week for up to 13 additional weeks. So, if you are taking required minimum distributions, if you’re over age 72, and you’re taking required taxable distributions from your IRA, and you don’t want to do that, they are suspended for 2020. So, let your financial advisor or financial institution know there’s lots more details. So, if you want to check it out, go to HilaryHendershott.com/161 and we will be developing and adding to the resources page that’s linked to there over the next several weeks. Let me know what resources you want, but we’re including information about federal programs, recruiting information about how to continue making money. Right now, we’re including information about behavioral finance and how to think about your money. There’s lots of stuff there. So, I intend for this to be a comprehensive resource and we, of course, are interested in your questions that you want answered on the page.

[QUESTION 1]

Hilary Hendershott: All right. First question is from Cara. “Hi, Hilary. Question for your podcast. The loan from my house originally came from my grandparents but they’ve both passed away in the five years since. My family is asking me to pay off the loan so they can settle the estate, about $110,000 left on the loan. My dad also passed away in 2018.” Sorry, Cara. “And I received an inheritance. I have one-third of that saved to put towards a down payment on a new house and currently one-third invested in a brokerage account along with maxing out my 401(k) last year.” Sounds like you’re being very diligent, Cara. “I received the final estate check recently and it is enough to pay off my mortgage. My question is should I pay off the loan with that money or refinance so I can invest that money? It seems scary to invest more right now with how shaky the economy is. Our jobs are secure at the moment, but if this pushes us into a long recession, my work will slow significantly.”

I got it, Cara. Okay. And then she goes on to say a number of really nice things about Profit Boss Radio, which I cannot read to you because I am prohibited by the federal government from ever publishing a testimonial. Cara, I read all the nice things that you said and I’m so glad to hear that you’re getting a lot out of Profit Boss Radio. That really is my intention every time I pick up the microphone. Okay, so you have three things at play here. Your family is asking you to pay off the loan. You might in the future have your work slow significantly if the economy doesn’t recover, and so you might need some cash to pay your bills and then a question about investing. So, I can take the easy one first the question about whether now is a good time to invest money. Absolutely it is. If you have money that you don’t need to live to pay your bills, it is absolutely a great time to invest in the stock market where the broad market is down about 30% today from its peak, so you’re getting a 30% discount on stocks, and I did not say it’s the best time to invest. It could decline further. So, I do not, absolutely, do not try to pick the peak or the trough. I don’t try to guess when we’re at the absolute low or the absolute high. And the fact of the matter is if you are able to put so-called excess money into your investment accounts right now and build a diversified portfolio that’s appropriate for your timeline and goals, now’s a great time to do that. Hands down. I have no qualms saying that.

Then the question is should you pay off the loan that your family wants you to pay off? And I’m not really sure what you mean about receiving a final estate check. Oh, maybe that’s from your father. Understood. Okay, so you got your inheritance from your father and you want to know, should you use that to pay off your family? Well, it depends where you rank family relations in your set of values. I think if it were me, I would just do what my family was asking because it seems like from the way you’ve described it is sort of your responsibility is to allow them to distribute your grandparents’ estate fairly. I don’t know the inner workings of your family and I don’t know how you’re ranking your financial priorities.

And then the third thing is about whether or not you should take the money that seems extra right now and invest in a brokerage account or invest in a savings account, because you might need to have it to pay bills later because your work might decline and therefore your income might decline. I would say that is the top priority because if you can’t pay your bills, you’re in big trouble and your investments don’t matter, your inheritance doesn’t matter. There’s a reason they say cash is king. I wish that that had as much alliteration as cash is queen. We could just say cash is queen. You got to have cash on hand. So, I don’t know the details of your work or how likely it is that your income would decline so I can’t give you a direct answer right now. And even probably, if you were my client, and I knew all the details, I would tell you this sounds like a question that has a lot of nuances to it. Just off the face of things, I might do what I could to pay off my family so that we can have that item be complete. I might take a small portion of the money that’s remaining and put it in an investment account and keep the rest for cash on hand until I’m sure that my job and my income and my ability to pay my bills is safe. I hope that helps, Cara. Good luck to you.

[QUESTION 2]

Hilary Hendershott: This question is from Monica. “Hi, Hillary. Thank you for being a voice during this economically challenging time.” You’re welcome, Monica. It’s my pleasure. “My question, how deep and how long do you believe the trickledown effect from this global reaction to the C-virus is going to be? I think the short-term plans to buffer the individual impact with the $2 trillion package is very short term and designed to keep state unemployment resources from imploding as much as it is to help small businesses and their employees. Curious about your thoughts and who were you listening to for advice and counsel on your finances today in light of what’s happening. Thank you for considering these questions.” Monica, I’m going to take your question in two parts. First, how long do I think this is going to last? Okay. And I think this answer is going to surprise you. While if you are an economist or an academic or a news pundit, the answer to this question may have relevance to you. You could spend a bunch of time digging into the intricacies of the economy and studying that. And the truth is, Monica, nobody knows.

And to all of you, as many smart-sounding people as you hear on the media talking about everything that went wrong, first of all, something going this wrong, something having this much of a negative impact just opens the floodgates on people who can come and criticize the decision-makers and everything that was done. And of course, hindsight is 2020 and we can pick specific actions that were taken or not taken and we can blame that lawmaker or that advisor. And the truth is, that’s just rampant right now and it all seems credible because like I said, hindsight is 2020. Now looking forward, I am going to say some. I know this is going to surprise you. The answer to your question, how long is this going to last, is I don’t know and I’m not that worried about it and I know it’ll work itself out. And, Monica, specifically, I did look you up so I have a sense of what you do for work and I think maybe one of your concerns could be how much cash do I need to have on hand?

So, if you’re out of work right now or your income is down, for example, my business right now I have cash set aside but I don’t want to run my business forever at this income level. So, my income is down. So, I might be concerned. How much cash do I need to have on hand? And I think you have to be very smart about that. I can’t answer that question for you. But the truth is, human beings are pretty amazing and we work it out, and the economy recovers. And if you made it through 2008, I say you can make it through anything. And already, we’re having great days in the stock market already, 6%, 7%, 8% days. It’s pretty incredible. So, while I have a degree in economics and an MBA, and I’m a certified financial planner, and I could go to the math with technical-sounding analysis of what’s going to happen, I don’t think it matters to you. First of all, I have a promise to you that I’m never going to say something that doesn’t come true.

There are plenty of people making predictions about the future who never look back and track for you what they said was going to happen versus what actually happened. The world is so complex, Monica, and I encourage you to just manage your mindset, manage your cash, and stay the course as far as your investment plan. But the answer to your question and I’ve probably said this five times already but is nobody knows. It doesn’t matter what economist or expert you connect with, certainly not the news pundits. They don’t know. And we have to write it out. There’s like no option. So, I’m a pragmatist. I don’t worry about how long it’s going to take. I know we’ll recover and I need to be in place to succeed to thrive now and then.

And then your next question is, who are you listening to for advice and counsel on your finance today in light of what’s happening? Okay. So, I continue to listen to the behavioral finance experts and the investment plan committee that I’ve assembled, investment planning committee, investment committee. So, I have a team of PhDs and finance that work for my clients through me, and I trust them when it comes to the stock market and the portfolios that we’ve built. I love to listen to people who are experts in behavioral finance because there’s a lot that we know about how the mind works during downturns and scary times like this. Uncertainty is really, really, really bad for us. But my news sources here’s what I recommend. Pick one daily news podcast. I recommend the NewsWorthy with Erica Mandy. I will link to it in the show notes. I listened to that show each morning. It’s 10 minutes. She’ll often have a five or six minutes segment afterward based on the day of the week but it is, as she calls it, fast, fun and fair. And I’m not interested in slanderous news. I’m just not. And then I turn it off. I don’t listen to or read the news after that.

I have a set of stocks that I follow on my Yahoo Finance app and that’s it. I am interested and I’m fascinated by the virus and so I’m following a couple podcasts that are about the spread of the virus and sort of how to deal with pandemics like this. And I think that Bill Gates and his foundation are doing some very interesting and generous things right now. So, that’s of intellectual interest to me but the news isn’t going to do you any good. You got to manage yourself, the people you care about, your money, your health. I mean, yes, certainly the news that’s about how to stay healthy so the type of mask you should wear and don’t be shaking people’s hands and stay six feet away from people but other than that, I’m not going to fill my mind with negativity or things that make me nervous or scare me during the day. I have more productive things to do. So, I hope you find that helpful. I hope it nudges you toward insulating yourself from the slanderous vocabulary that is often the news and I want you to know that podcasts I mentioned, the NewsWorthy is extremely upbeat and Erica is a personal friend of mine and I’ve just grown to rely on her show for my daily bit of news. Thanks for the question, Monica.

[QUESTION 3]

Hilary Hendershott: Next question is from Carl. Carl, you have specific names in your question and I am going to remove them and instead speak generally because I just am afraid of lawyers. That’s the flat out truth. Here’s the email, “Hilary, can you discuss the fiat currency issue and how they should play into our investment strategy?” Yeah, I’m going to stop right there just so people listening know fiat currency is the type of currency environment that we play in around the world where you spend paper money or credit card, digital dollars, with nothing to back them up. So, in the past, every time you wrote a check, you had to have gold in the bank to back up that cheque or there was gold in the bank to back up your cash that you were spending so that cash was a promissory note to the gold that you were holding in the bank. We no longer have that system. You don’t have gold in the bank to back up your cash. We just trust the cash. So, that’s what fiat currency is.

Continuing with Carl’s email, “I listened to several podcasts, including one by a gentleman who recommends buying cash and another by a gentleman who recommends investing in real estate. They are big precious metals, hard assets proponents.” Yes, they are. “I don’t have the time or desire to manage rental properties and I heard unless you have a lot of properties that a property management company is not worth it or takes what little profit/cash flow that you would receive. With precious metals, you also have the problem of safe storage. I’m about 15 to 20 years out until retirement, married with three kids. I have 85% of my assets invested in the market with about 15% safe. A penny for your thoughts.”

Carl, are you really going to send me a penny? I’ll give you my Venmo. I would like to have that penny. So, Carl, sounds like you’re considering gold or silver. We can also include in that conversation Bitcoin because a lot of the reasons people give for investing in or owning these assets are the same and then sounds like you’ve rejected rental real estate, but I can address that too. So, first of all, if you listen to my podcast and those two podcasts, you’re not going to get cohesion, you’re not going to get an explanation that makes sense to you, and you’re not going to get our three voices agreeing. It’s going to be very confusing and I have to think you’re going to align with one or the other relatively soon because we’re saying very different things. So, I make money and believe in doing the best thing for investors based on historical evidence. So, we have a lot of historical evidence about what to expect from the stock market and there are very, very academic and successful ways of building investment portfolios that include lots of different assets.

Okay. The other two people you mentioned, and there are lots of people who do the same things they do, advocate and make money when you take specific actions. So, you’re going to buy gold because this person offers a program to buy gold or silver or Bitcoin, and that person is going to make money when you do that. So, they’re advocating a certain thing that they get paid on when you do it. The real estate person, most real estate podcasts are advocating a course or a coaching program. They sell that and they make money when you do that. So, contrast that with independent advice, which is we’re looking out in the world and we’re saying, “Okay, let’s assimilate all the information that we have, put together a program that we know works, and we’ll work with people to build that and do that over the long haul.” Okay, so very different, and how people get paid matters.

So, let’s talk about gold and silver, specifically what you call alternative or hard assets. So, I can’t really assert an opinion about a future prediction that our economy is going to completely break down. So, fundamentally, what these guys are saying is, “Look, at some point in the future, this system of fiat currency, the fact that we all trust each other to spend dollars, and the only reason you’re willing to accept my cash today is because you trust that you can spend it tomorrow or later than that for something you value.” So, cash has no fundamental value to you. So, these folks say, “Look, this system is going to break down at some point in the future. You need to be stockpiling these other, essentially precious metals.” And the reason they use gold and silver is because those metals or rocks are limited. So, there’s a finite amount of them in the world and so they say that it has value.

So, first of all, they’re talking about a scenario that has never occurred in human history. So, I can’t predict the future. I don’t think it’s going to happen but let’s talk a little bit more about it. So, imagine an environment where things have gotten so bad and so, I don’t know how to say this, broken down that cash no longer works so you can no longer spend cash. But it’s not just cash. It’s credit cards too. You can’t use the money in your bank accounts. You can’t put your credit card down or give someone your credit card number and have them do an exchange with you. So, imagine all the systems that have to be broken down, like the internet, banking, credit card processing. So, I’m imagining some cataclysmic event. It’s probably a natural disaster. Internet’s down, power’s down. So, just imagine these people are saying that we’re going to stop trading cash and then instead, everyone’s going to need gold and silver in divisible amounts and that human beings are going to stop trading cash and start trading gold and silver.

Makes no sense to me. I don’t buy it even a little bit but again, and I’ve had conversations with people who are stockpiling gold and silver and you can’t convince them otherwise because they’re talking about some future event. And no one knows what will happen in the future. And of course, if that does happen, obviously, if you can’t spend cash or credit card and there’s no internet, I won’t be podcasting anymore but I will humbly eat crow and then, of course, you have the problem of as you said, keeping it safe. So, you need a storage place for your physical gold and silver. And so, gold and silver are not an investment. They don’t go up in real value over time. That’s a historical truth. And like Apple and Facebook and the companies that we trade on the stock market, those are real companies with real shareholder value, real book value, as we say, and they’re producing real products that people buy.

So, people say, “Oh, the stock market’s a Ponzi scheme.” No, it’s not. Companies have very, very real value and the price of the stock at any given moment is the book value of the company plus or minus investor sentiment and investor sentiment is always temporary. So, I don’t see any reason you would own gold or silver. I own a little bit of it. I wear it on my hands in the form of rings, around my neck in the form of necklaces. I don’t see any reason why you would stockpile it and there certainly is no one doing what I do that I know who is an independent financial advisor who again has the perspective of looking out into the world and synthesizing all that we know that advocates diverting your investments into these what you call hard assets.

Similar is a conversation about investment real estate. So, I see the tax returns and real estate returns for thousands of people when they come into my office. And I will say maybe one in 150 people is actually making money in residential real estate. So, you buy a house or an apartment or a condo and you rent it out. And those people have owned those properties for, the people who are actually making money, maybe they’ve owned those properties for 20 years or more. So, I think, Carl, your hunch is right about residential real estate. The interesting thing is that when you point out to people that they’re not making money, they’re actually losing money on their residential real estate investment, they say, “Oh, well, I still think it’s a good idea.” It’s really funny. So, no, Carl, I don’t see any reason why you would get dissatisfied with a good stock portfolio. I don’t know what your 85% stock portfolio is but I hereby and humbly set you free from the desire to buy large safes, bolt them to your floor, put gold and silver in them, and then buy an armory to protect them. By the way, if we do have that kind of cataclysmic event, I think that the currency you will want to be invested in is not dollars or gold or silver, but rather, guns, canned food, water, and ammunitions. There you have it. I hope that future never happens. And Carl, I hope that helps.

[QUESTION 4]

Hilary Hendershott: Next question is from Lila. “Hi, Hillary. In light of the current economic forecast, how should someone arrange their stock-bond IRA, Roth IRAs if they’re over 65? My husband and I have our money and mainly ETFs with Vanguard. Should we go with more bonds? How would you advise someone or a couple to have their money now if they are over 65 and will need their money in less than 10 years, maybe less than five years when the market has lost so much value? Please feel free to answer with a more general response that would apply to the greatest number of people over 65. Thanks very much and thanks for all you and your team do. Lila.”

Lila, I am probably not going to give you the answer that you wanted but I’m hoping that I am going to give an answer that is valuable to the folks listening to this podcast. I am a little bit boxed in on what I can answer. First of all, as a financial advisor, I can never offer you anything that even remotely sounds like specific investment recommendations on this podcast. I haven’t seen you. I don’t know you, your timeline, your values. I don’t know anything about your income or how much you’ve saved relative to how much you need to spend in retirement. I will say this, I would recommend that someone arrange their stocks and bonds in their IRAs and Roth IRAs exactly the same way that I would have recommended it before. So, nothing about how we arrange portfolios has changed because of a normal market decline. I would say at the age of 65 given you clearly don’t have an investment philosophy, sounds like you’ve just got random ETFs with Vanguard. I don’t know really what that means. ETFs, it’s just like the vehicle and what matters is the passenger in the vehicle, what you’re actually holding.

Sounds like you don’t have an investment philosophy and you’re definitely at an age where financial mistakes could be irreparable. The most important thing you need to know when you stop working, by the way, the day that you stopped working is the most important day in your financial life is how much you can take from that portfolio and never, never, never overspend it because if you accidentally take too much out in a down year like we’re in right now, you could, in essence, amputate the portfolio from regrowth. But it is important that you be able to take money because your expenses don’t go to zero. So, I would say, I see a situation where It sounds like you’re taking a big amount of risk. If I had to guess, you and your husband or your partner have a conversation about you don’t need to hire an investment advisor or wealth manager. You want to avoid the cost of that which is 1% a year or something like that. And I just want to say that I’ve seen so, so, so many cases of people who cost themselves millions and millions of dollars for fear of paying for good advice. So, Lila, if you’re considering working with a financial advisor, I would recommend it sounds to me like at the age of 65 you’re a prime candidate to consider that cost as big financial mistake insurance. So, insurance policies are worth their premiums. I hope that helps, Lila.

[QUESTION 5]

Hilary Hendershott: Next question is from Ana. “Hi, Hillary. I hope you and your family are doing well.” We are. Thanks, Ana. “I would like you to explain why as we see our investments drop, we still need to hang on tight and not sell or panic. How a diversified portfolio, in my case, segregated funds in Canada still works in this crisis? Also, if we cannot save more money right now, what can we do to maximize our investments? Thank you. Ana.” So, Ana wants me to talk her into her current investments and then tell her how to grow them bigger. I get it. Normal. So, first of all, as you see your investments dropped, so let me just caveat this by saying everything I’m about to say is a function of assuming you have a professionally built globally diversified portfolio that’s appropriate for you and your timeline. I’m sure you get tired of me saying that in this podcast, I get tired of saying it but I have to. So, it says, why we need to still hang on and not sell or panic? Basically, Ana, because it’s coming back up.

That’s in a nutshell, the market always comes back up. It goes up in two-thirds of the years and down in one-third of the years. Over the last almost 100 years, the average annual return from the stock market is somewhere between 8% and 9%, depending on what inflation has been, but it’s almost never actually 8% or 9%. So, it’s pretty wildly dispersed. There’s a lot of volatility. You can have 30% positive or 30% negative. Well, specifically, let’s say you had 30% positive and 20% negative, those two numbers might produce a lot of strong emotion in you like 30%, we like that, 30% positive. 20% negative, we don’t like that, but that’s a 10% average annual return. So, the other piece to that is because when people take action in their investment portfolios based on emotion, they tend to make really big mistakes. So, I’m going to use some numbers that don’t make sense given where the S&P or the Dow actually are right now.

But let’s say you have a portfolio that’s at 100 and it goes down to 75. And you panic and you sell out, and now you have $75 and you say, “I’m just going to sit this one out.” And then the market maybe goes down to 70 but then it goes up to 80, and then it goes up to 90. Finally, it gets up to 100. And you think to yourself, “Okay, I’m comfortable with that number. That’s where I was before. Let me buy back in now.” What you don’t realize is that you’ve lost another $25. So, you have to buy back in below where you sold out, in order to have that be a transaction that doesn’t actually cost you money. And emotionally, if you can’t handle 75, I promise you, you can’t handle 70 or 65, which would actually make that a profitable transaction. So, leave that kind of market timing to the hedge fund managers and just leave your money invested. So, even for my clients who are in distribution this year, so they’re taking money from their accounts to pay their bills.

You know, I have one client so you look at your portfolio and it started at 2 million and now maybe it’s down to 1.5 million, well, but if they only need $60,000 to pay their bills this year, they’ve maybe lost from peak to trough $15,000. So, that’s $60,000 or $65,000. Maybe it was worth 15,000 more a few weeks ago and, yeah, $15,000 is real money, but you’re talking about a $2 million portfolio. That’s less than 2%. So, if you don’t like the price of your portfolio today, definitely don’t sell because the price will change. I promise you it will go back up. And then on to the second portion of your question is if you don’t have extra money, how can you maximize your investment? Well, there’s no magic so you can start a side hustle. You can ask your parents to borrow money. I mean, you got to find cash that’s currently unemployed, right? So, I don’t think I have any obvious solutions there. A lot of my clients are asking, “Well, is now a time for us to be putting in cash that’s sitting on the sidelines?”

And it’s like, well, if you have cash that’s sitting on the sidelines, I really haven’t done my job because it’s not smart to leave money out of the market hoping for a downturn when two-thirds of the time all you get are upturns. So, I know it’s scary and the whole coronavirus situation and quarantine shelter in place, it’s really awful. But the stock market what’s happening there, totally normal and, yeah, don’t panic. It’s not different this time. It’s definitely coming back. I hope that helps, Ana.

[QUESTION 6]

Hilary Hendershott: Final question for today is from Brandy. Brandy, I do think I already kind of answered your question when I answered Ana or Ana’s question, but here we go. “Hello. I love your show. It’s very informative. My 401(k) has dropped about 5,000.” I assume you mean dollars. “I’m 41 years old and I’m trying my best to save for retirement.” Aren’t we all, girl? “Do you think we will all get back the money we lost once the virus has ended?” Brandy, more than that, not only am I certain of that pending some kind of Armageddon type event, the market will absolutely recover but the market is likely to recover before the virus has ended. Remember, the market is a leading indicator so the market is about six to nine months ahead of us. Market is a leading indicator. The economy is a lagging indicator. The market already incorporates everything that we already know. So, everything we know about the virus and its cost and its likelihood of sticking around and continuing to play guess, no pun intended, is already baked into the market.

So, if we look back on the timeline of history and we look at some of the most frightening news headlines that were out there, we also in the same time period, we had those frightening news headlines, we end up with super high stock market returns. I realized that’s a claim that needs evidencing. I’m not going to do that right here right now. I’ve done that in other episodes. But that is my answer to you is I don’t think you should be concerned about your $5,000 account dip at all and as long as you have a good portfolio, as long as you have diversification, as long as you have different kinds of stocks, as long as you’re invested in different geographies, as long as you have something that’s appropriate for you. Okay, Brandy, thanks for being a listener.

[INSERT]

Hilary Hendershott: This is just a quick insert. This is not a question someone asked me but I wanted to do some market research, some market testing, figure out who is actually making money right now. So, for those of you who are completely out of work, if you can pivot or find a friend or a colleague, someone you used to work with who’s in one of these markets and potentially get on board, I wanted to help out where I could. I also think it’s interesting because we tend to live in a microcosm. Here I am alone in this little apartment recording in a makeshift bedroom studio and life seems changed dramatically. But I know that for everyone, your perception of the world is what’s going on around you, your money, your friends, your health, your business, and there are lots of corporate folks who are still working full time from home. So, for them, they’re not necessarily worried about income, maybe just investments, but maybe some of you don’t have investments yet, so you’re not even worried about the market at all. So, anyway, I went ahead and asked about 400 business owners what’s making money right now and the one thing I learned that was most interesting and of course I’m going to put into play for myself as soon as I can, is that Facebook ads and ads in general, the cost, the price is down 70% right now or more.

So, anyone in marketing or advertising, they’re making money hand over fist right now because they’re able to do ad buys at a significantly discounted price. So, people are saying, “Look, you used to get 3% conversion and now you’re only getting 1% conversion, but the cost of that ad was down 70%. So, your costs are down anyway.” The results are better, in other words. People are still launching programs, business coaching programs, programs about how to launch a profitable course. So, if you have a knowledge set that can be marketed online, there are people launching programs to tell you how to put that knowledge set online so you can sell it, people selling sales funnels and social media coaching. Anyone working in media or supporting people to do media, if I had someone next door who had a safe suit, this is like they could be in the room with me but who could help me do video right now, I’d be all over it because like I’m all alone out here.

But anyone coaching people in online media skills, television interviews are up. People doing Facebook Lives, getting on video, on Instagram, this is all making money. Parenting coaching, interestingly enough, actually not that interesting, right, because people are home with their kids for hours and hours on end. So, people are wondering how to be good parents. And then business coaching, but also, I think spiritual coaching is up. And that can be in a lot of forms. It can be in coaching yoga or meditation, but also there’s a big movement, especially among women to get spiritual about your business. So, there are spiritual teachers who want to come into your business and look at how are you aligned with your purpose on the planet with your values and principles? How are you out of alignment? How is that impacting your business and your customer flow? So, there’s all kinds of interesting and unique opportunities for people to provide value and for you to consume value probably at discounted prices right now. So, I hope that helps you make some profit.

[ANNOUNCEMENT]

Hilary Hendershott: Hey, profit boss, if after listening to today’s episode, you think you might be ready to take meaningful actions with your wealth and perhaps consider working with me and my firm in some way, then I’d love to hear from you. Just go to HilaryHendershott.com/Start-Here. When I’m not sitting behind the mic, I’m running Hendershott Wealth Management. We’re a fee-only fiduciary financial advisory firm. We work with women and couples to take their finances to the next level. Everything I talked about here on the show gets personalized and put to work for my clients. So, I ask you, why wait until tomorrow when you can start realizing your full wealth potential today? The life you want to live, it doesn’t have to wait. Just imagine the freedom and joy you’ll experience when you’ve secured your retirement and enjoyed the years leading up to it. That’s what I want for you. That’s what I do for my clients. And if that’s what you want for yourself, just head on over to my website right now, HilaryHendershott.com/Hello. All of our initial conversations are totally complimentary. So, let’s just see where our friendly conversation may lead. HilaryHendershott.com/Hello.

[CLOSING]

Hilary Hendershott: As we wrap things up here for today, I need to review with you the things I have to disclose as a fiduciary financial advisor offering wealth management services through my firm Hendershott Wealth Management LLC. You should know that the opinions I express on Profit Boss Radio are my own and they can change. The content I provide in the show is for general education. It’s not intended as specific investment advice, nor do I recommend any specific financial products. Unlike how I roll at home with my husband, I can’t guarantee that my statements, opinions, or forecasts are always 100% right. Of course, I wish I could peek into that proverbial crystal ball but so far, I haven’t found it. Past performance is not indicative of future results. I talk a lot about indexes and I want you to know, you can’t actually buy an index because, of course, when you take a list of companies and create a product that allows people to invest in those companies, there are fees and expenses involved that reduce returns. Remember, all investing involves risk, which as you know, means you could lose your money and I have to tell you that there is no guarantee that any investment plan or strategy will be successful. And that should keep my lawyers happy. Have a great day!

[END]

Disclaimer

Hendershott Wealth Management, LLC and Profit Boss® Radio do not make specific investment recommendations on Profit Boss® Radio or in any public media. Any specific mentions of funds or investments are strictly for illustrative purposes only and should not be taken as investment advice or acted upon by individual investors. The opinions expressed in this episode are those of Hilary Hendershott, CFP®, MBA.

Tags:

ask hilary, CARES ACT, Coronavirus, economy, investment strategy, mindset, stock market

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EP 161 | Ask Hilary: How To Make The Most Of Your Money in an Uncertain Economy