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Investments Just Get “Trashed”? It’s Time To Get A Handle On Your Personal Finances

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Sandra Block, Handle Your Personal Finances

With Sandra Block, Senior Editor at Kiplinger’s Personal Finance

Steve spoke with Sandra Block, Senior Editor at Kiplinger’s Personal Finance, to get her advice on how to manage investments and personal finance in the turbulent times of the coronavirus.

How To Manage Your Investments

Steve started off the conversation by asking Sandra what Kiplinger’s is recommending in terms of managing investments. Sandra replied, ”Well, what we’re recommending is what we always have recommended, that if you’ve got a good asset allocation and a good plan in place, you shouldn’t be messing around with it now. Times like these are a good measure of your risk tolerance. If you have a diversified portfolio that properly reflects your age and your tolerance for risk, you shouldn’t be really doing anything.”

She added some reassuring words for anyone who’s regularly contributing to a retirement plan such as a 401(k). ”If you have a 401k plan or any kind of plan where you invest regularly, you’re basically doing what smart people say to do—you’re buying on the dips. You’re buying stocks when they’re low and that’s usually what pays off over the long term.”

Steve agreed with Sandra’s advice to ”stay the course”, noting that companies with good balance sheets, while they may experience some temporary declines in their stock price now and again, generally speaking, they’re going to grow over time. He also made the point that ”when you’re paying 20% less for that growth, that means that your future return is going to be higher.”

A Note To Retirees

Steve then shifted the subject to retired people who depend on their investments for income. He asked Sandra for her advice on how they should manage the current situation. Her reply was, “Ideally, when you’re retired, you want to have a couple of years, maybe up to five years, of living expenses in cash so you can wait things like this out. Hopefully, you have enough in low-risk assets, such as short-term bonds, to live on until things shake out.” Another alternative is to cut your expenses. That way, you can avoid damaging your portfolio by having to sell assets at a loss just to pay your bills. Of course, not everyone is in that ideal situation. If you’re not, then once things settle down, you can start working on a plan to put yourself in that situation so that you’re better prepared to handle the next downturn in the market.

Steve noted to investors, “Don’t forget that your portfolio is throwing off dividends and right now the dividends are approaching 3%. And there’s the probability that dividends will rise over time, which is one of the reasons for people to be invested in the economy.”

Personal Finance Tips For Dealing With The Coronavirus

Steve next turned their conversation more to the personal finance side, specifically addressing how people can best handle one of the most dangerous aspects of the current situation, scammers who try to use a crisis to take people’s money. He stated the sad fact that “When crises happen, bad people start to take advantage of people who are fearful. And what I’m speaking about particularly is the idea that scammers are out there now overcharging people for things as simple as hand cleaner.”

Sandra was well aware of the situation and had plenty of information for listeners. “The Secret Service, the FDA, the FTC, and the Consumer Federation of America have all put out warnings about different kinds of scams. One of the things they’re warning people about is to be very wary of any emails that claim to come from a legitimate medical organization such as the CDC, with attachments that claim to have information about the coronavirus or how to avoid it. These are just your basic phishing scams that try to get people to either implant malware on their computers or provide personal information that can be sold to identity thieves. The CDC is not going to email you personally.”

She had the following advice for dealing with buying products that people are stocking up on, such as hand sanitizer and face masks: “As far as products, a lot of third-party sellers and some just outright crooks are using platforms such as Amazon and eBay to hawk things that people seem to want, like face masks and hand sanitizer, at huge markups. People have to be very careful when they’re shopping for things like that online. I think you’re probably better off going into a store because then, at least, you know what you’re getting.”

Steve added an important note about face masks, saying, “From what I’ve read, a lot of the face masks don’t really work. Also, we need to leave the good face masks alone. We need to not buy those because we need our healthcare workers to be able to have them when they need them. They’re putting themselves on the front line and they need to be protected.”

His final bit of advice to listeners was, “I think the most effective thing you can do is to try to stay socially separated to some degree when you’re in a crowd and wash your hands. Treat it like a regular virus.”

You can find plenty of investing and personal finance tips at Kiplinger’s Personal Finance.

Disclosure: The opinions expressed are those of the interviewee and not necessarily of the radio show. Interviewee is not a representative of the radio show. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by the radio show.

Read The Entire Transcript Here

Steve Pomeranz: It’s a good time to talk about investing amid this coronavirus panic, and instead of going to a lot of the usual suspects, professionals from Wall Street, I think it would be a good idea to go to Kiplinger’s Personal Finance site, And they also do a podcast as well. And I invited back Sandra Block, who is Senior Editor at Kiplinger’s Personal Finance to discuss this with me today. Welcome back to the show, Sandra.

Sandra Block: Thank you for having me.

Steve Pomeranz: So coronavirus, or COVID-19, of course, there’s nobody in the world that hasn’t heard of this. And so much information and so much talking about it is abounding and it gets hard to know exactly what to do and what to believe. So today instead of trying to prognosticate, I want to talk about some particular specific actions that people can take investment-wise, but also with their personal finances as well. So why don’t we start with that? First of all, in terms of the magazine’s point of view and on the investing side of things, what are you/they recommending?

Sandra Block: Well, what we’re recommending is what we always have recommended is that if you’ve got a good asset allocation, a good plan in place, you shouldn’t be messing around with it now. Times like these are a good measure of your risk tolerance to see how much you can stand.

Steve Pomeranz: Yeah.

Sandra Block: But if you have a diversified portfolio that reflects your age and your tolerance for risk, you shouldn’t be really doing anything. Panic selling, you might want to review going forward whether you are in a good position to withstand these kinds of shocks.

Steve Pomeranz: Yeah.

Sandra Block: But for most people, they should just keep doing what they’re doing. And if you have a 401k plan or any kind of plan where you invest regularly, you’re basically doing what smart people say to do, which is you’re buying on the dips. If you’re putting money regularly into the market by contributing to a 401k, you’re buying stocks when they’re low, and that’s usually what pays off over the long term when you stay in the stock market.

Steve Pomeranz: You know if you buy an asset, let’s say you buy an apartment and you’re going to rent it out, you know what the cash flow from that apartment’s going to be. And let’s just pick a number. Let’s say that apartment sells for $200,000 and you calculate your numbers, you’re going to bring in X, you paid Y. X divided by Y means your rate of return is Z, let’s say. Well, if instead of paying 200,000 if you’re paying 150,000 for that same cash flow, then your future yield, or rate of return, will rise. And that’s what’s happening here.

You have all these companies, they may experience temporary slowdowns, but these companies generally have good balance sheets. Like you said before, if you’re well-diversified, you’ve got great companies, you’ve got mediocre companies, maybe you have some poorly structured companies, but in general, you have probably tens of thousands of stocks all over the world. And in general, they’re going to grow at X rate.

We’ve seen that time and time again, and after you’re paying 20% less for that growth, that means that your future return is going to be higher. So if you’re thinking about the longer term, then this is the way to understand why, as you said with the 401k, if you’re accumulating money for the long term, buying when prices are low is exactly what you want to do. So, Sandra, let’s talk about people who are counting on their portfolios to live on. Let’s say they’re retired, or they’re using the dividends from the portfolio to live on. Should they take a different tack?

Sandra Block: Well, hopefully, they are well-positioned so they’re not having to sell stocks that are deeply depressed. Ideally, when you’re retired you want to have a couple of years, maybe up to five years, of living expenses in cash so you can wait this out. So hopefully your portfolio is appropriately diversified to withstand this. You have enough in stocks to stay ahead of inflation, but enough in low-risk assets to live on until things shake out. And this happened after 2008. Some people got so bullish that they went into that big crash having to sell some funds at a loss to pay the bills. And basically, that puts permanent damage on your portfolio.

So if you went into this downturn with too much in stocks and you’re realizing you’re having to sell some stocks or funds to pay the bills, I would say the solution there is to cut your expenses. Try to sell as little as possible. And when the market recovers, take a hard look at your allocation and make sure that you are better prepared for the next downturn because they will come.

Steve Pomeranz: Yeah. As an advisor, we always look at retired portfolios, making sure that there is enough cash around or short term bonds or something that’s pretty stable to cover those kinds of expenses. Because you really don’t know when, and in this case, how deep a market selloff might be, and you need that time to get through to let the dust settle and the air clear. Literally, since we’re talking about a coronavirus. And so now you don’t have to really worry. What does it really matter your portfolio value is bouncing around?

And don’t forget too that your portfolio is throwing off dividends and right now the dividends are approaching 3%.

Sandra Block: Right.

Steve Pomeranz: So that makes it attractive, especially when you can invest in a 10-year Treasury for three-quarters of 1%, a 3% steady dividend. And actually, with the opportunity or the chance, the probability that dividends will rise over time. There’s a reason to be invested into the economy and into business in general. Sandra, I want to change gears here because when crises happen, bad people start to take advantage of people who are fearful. And what I’m speaking about particularly is this idea that scammers are out now overcharging for things as simple as hand cleaner.

Sandra Block: Right, right.

Steve Pomeranz: Maybe toilet paper. All those things that everybody is hoarding now. Why exactly? I’m not sure. I don’t know what they’re thinking. But nevertheless, it’s not a hurricane, it’s a virus that’s going to pass. But nevertheless, what have you seen with regard to what’s happening online and how can people protect themselves?

Sandra Block: Well, there are a lot of things going on. The Secret Service, the FDA, the FTC, Consumer Federation of America have all put out warnings about different kinds of scams and markups. One of the things they’re warning people about is to be very wary of any emails they get the claim to come from a legitimate medical organization such as the CDC with attachments that claim to have information about the coronavirus, or how to avoid it, or something like that. And these are just your basic phishing scams that try and get people to either implant malware on their computers or provide personal information that can be sold to identity thieves. So the CDC is not going to email you personally.

Steve Pomeranz: Nope.

Sandra Block: So avoid anything like that. As far as the products, a lot of third-party sellers and some just outright crooks are using platforms such as Amazon and eBay to hawk things that people really seem to want, like face masks and hand sanitizer. Some of them are just the products themselves marked up, but in other cases, it’s just they’ll ask you for a big upfront payment and then disappear. So I think people have to be very careful when they’re shopping for things online that they think they desperately need and are willing to pay a high price for. If you really are willing to pay an extra price, I think you’re probably better off going into a store and buying it because then at least you know you have something to take home.

Steve Pomeranz: I went into a local Walgreens the other day to pick up something, and I was looking around and the woman behind the pharmacy counter said asked me if she could help me. And I said, “I’m looking for Purell.” And she actually laughed. She laughed at me.

Sandra Block: She said, “We don’t have any?”

Steve Pomeranz: Well, yeah. She goes, “No, there’s none of that. I mean, really, are you that much of an idiot that you don’t know that there’s none of that stuff left?” And I thought I knew that, but of course, I was thinking maybe that the companies had restocked the shelves by this point. My guess is that the companies are working hard to restock the shelves of all of this stuff.

Sandra Block: Yes, they are. They’re gearing up. There’s going to be a lot of this out there. And if you really are desperate, there are actually, I’ve looked them up, there are recipes online that you can make it yourself.

Steve Pomeranz: Oh, sure.

Sandra Block: So, yeah, there are ways around this problem. As I said, I think what people should be particularly wary of is buying any of these things online. And it’s a real worry with the face masks because people are selling these at a huge markup, and a lot of times they don’t even work.

Steve Pomeranz: Yeah.

Sandra Block: So you’re spending a lot of money on something that doesn’t even protect you. If it is something that potentially could protect you, you might be buying something that is better reserved for people who truly are ill, or healthcare workers. So I think this is just basic exploitation, trying to take advantage of people who are really scared and there are much better things to do with your money.

Steve Pomeranz: You, you mentioned the face masks. From what I’ve read, continually, the face masks don’t really work, but we need to leave the good face masks alone. We need to not buy those because we need our healthcare workers to be able to have them when they need. They’re putting themselves on the front line and they need to be protected as well because that’s how the system will work. So think about that and the fact that the face masks really are not that effective.

I think the most effective thing you can do is try to stay socially separated to some degree when you’re in a crowd and wash your hands. Treat it like a regular virus. Make sure if you’ve got a cold or something like that or you sneeze, sneeze into your arm and your elbow, that inner elbow part and just use common sense. The virus is around with us every year. Thousands of people die every year from the typical virus. Millions catch it around the world. This, maybe it spreads a little easier, but from what I can tell from my reading and understanding that the mortality rate really isn’t as high as people fear. So just be sensible and keep your fear at bay. Any final words?

Sandra Block: That’s right. No, I think that that applies to both shopping and investing as well. Nobody ever makes money by investing when they’re afraid. And I think that is a good strategy to apply to your portfolio just as it is to when you’re shopping for things online.

Steve Pomeranz: My guest, Sandra Block, Senior Editor at Kiplinger’s Personal Finance. And as you know, my mission is always to educate you and to remind you week after week, segment after segment, that we love to get your questions. So contact us, come to our website, stevepomeranz.com. And while you’re there, sign up for our weekly update. This is an update where every week in your email inbox you get the entire show summaries, transcripts, plus of course the audio, so you can listen to any particular segment that you would like. And you can also share it with your family and friends. Don’t forget to go to stevepomeranz.com. That’s stevepomeranz.com. Sandra, once again, thank you so much.

Sandra Block: Thank you for having me.