Hi Reddit, Steve Weinberger here, and I'm here today to talk about investing during the coronavirus pandemic. As you know, I'm the Senior Managing Director at HCR Wealth Advisors, and we are here to help guide you to financial freedom through our innovative financial management framework.

Here's a link to our proof page: https://twitter.com/HcrWealth/status/1268280560201265152

This AMA is for informational purposes only and it is not intended as investment advice.

Comments: 72 • Responses: 30  • Date: 

Snoo_816626 karma

The market had dropped over 30% and now has rebounded. Have I missed the recovery?

HCRWealthAdvisors4 karma

The short answer is that you have missed the first recovery, but there will surely be follow-on buying opportunities. If you have cash available that you would like to invest, a solid strategy to consider is to divide it up into 3 or 4 tranches. Maybe you put the first tranche to work on an upcoming down day (or days) in the stock market. Then take a step back and wait. If there is a bigger pullback, look to put another tranche of your cash reserves to work in the market. Patient investors know that there are always pullbacks and corrections in the market to take advantage of. Investors don’t need to chase stocks higher just for fear of missing out. So be patient, and take advantage of weakness when it surfaces – as it always does.

prematurememoir5 karma

What's the difference between a recession and a depression?

HCRWealthAdvisors3 karma

That is a great question. People often confuse the two. A recession is typically defined as two consecutive quarters of declining gross domestic product (GDP) and is part of the normal business cycle. A depression is vastly different, it happens when the economic decline is sustained and could last for many years. That only has occurred once in American history in 1929 and it lasted for 10 years. It is still too soon to call a recession now but we are likely headed there later this year.

prematurememoir2 karma

Gotcha, makes sense. Thank you for your response!

HCRWealthAdvisors2 karma

You're welcome! Thanks for participating in the conversation.

BeneficialRoutine54 karma

Why is the stock market still so bullish when the economic situation looks so bleak? Do you expect another big drop in the near future?

HCRWealthAdvisors4 karma

The market is still bullish now even when the economic situation looks so bleak because there was a lot of Fed and Treasury stimulus, people are enthusiastic about reopening, and the market is generally looking forward. I wouldn’t be surprised if there was another drop in the future, but that will depend on a number of factors so it is difficult to forecast now. There's also been a lot of speculation recently, among people who don't know what they're doing.

NN-9993 karma

Any tips/books for teenagers who plan to get into the stock market?

HCRWealthAdvisors4 karma

There are many books and resources out there.  It can overwhelming and hard to tell what is good or not.  One that I can suggest is A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing by Burton G. Malkiel.  I would also suggest just simply taking a look at any titles that look interesting to you.

NN-9991 karma

Thanks so much!

HCRWealthAdvisors1 karma

You're welcome! Thanks for participating in the conversation.

learn4r3 karma

Are you hiring in Marketing, IT, or Sales? I'm sure many of us broke guys and gals would love to know.

How would you describe your average client? It seems you do everything from Estate Planning to VAS.

Also, what are your views on Bitcoin?

HCRWealthAdvisors5 karma

Currently, we are not hiring for marketing or IT but we are expanding our advisory team. If you or anyone you know has experience as a Senior Financial Advisor and would like to inquire, please email your resume to [[email protected]](mailto:info[email protected]).

Our clients are typically high net worth families and individuals who have need of our array of services. We use our financial management framework The Clarity Formula to guide our clients to financial freedom.

Right now, Bitcoin, at best, is a speculative investment. It’s hard to buy, and really hard to value. As such, it should not be viewed as a core investment, in the classic sense. But for a speculative venture, it could be interesting. We follow a fund (GBTC) that trades on the stock market and is a good proxy for Bitcoin.  For any of our clients interested in Bitcoin, we would recommend exposure of no more than 1%-2% of  net worth. The technology behind Bitcoin, the Blockchain, is more appealing. It is already being adopted in many sectors and industries and we believe this will continue.

truthtimeplz3 karma

Do you have any personal favorite books or resources for someone who is just getting started with investing? How do you feel about apps that help you invest like Robinhood?

HCRWealthAdvisors4 karma

There are many books and resources out there.  It can overwhelming and hard to tell what is good or not.  One that I can suggest is A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing by Burton G. Malkiel.  I would also suggest just simply taking a look at any titles that look interesting to you.  The most important thing is to have a plan that helps you reach your goals and keeps you comfortable.

While I do not have personal experience with Robinhood, those types of investment platforms represent an effort to make the financial markets accessible to more people.  I would be very careful about these types of trading apps. Investing should be done with a purpose and a goal in mind for the money being invested. Apps like Robinhood can take away from that style of investing and turn the focus more toward short term profits. This can lead to a multitude of unfavorable outcomes.  One of the things to be mindful of when utilizing them is the difference between investing and speculating.  These apps can also be dangerous if a person does not know how to use them or the information they report is inaccurate or misleading.

lovinonlola3 karma

Hi Steve @ HCR Wealth Advisors! Thanks for hosting this AMA!! I'm one part of a 30 y.o married couple. For our personal investing, would you recommend that we move money into a 'safety net' account while we're amidst these unknown times? And if so, what % of total savings makes sense to do this with?

Would you recommend the same thing to a retired couple (my parents)?

HCRWealthAdvisors4 karma

We recommend that our clients have a portion of their savings allocated into a “safety net”. This will help to reduce overall exposure and provide the opportunity to reinvest in the market if/when we see a re-test of the March lows. We typically recommend 15%-20% for clients in their early 30s and 30%-35% for retirees.

lovinonlola2 karma

Very helpful, thank you!

HCRWealthAdvisors3 karma

You're welcome! Thanks for participating in the conversation.

MasterfulMagic781 karma

Does the recent market volatility in response to the coronavirus favor investing in ETFs vs. mutual funds?

HCRWealthAdvisors1 karma

Market volatility should not guide your decision making process when it comes to choosing between ETF’s vs. mutual funds. Each investment vehicle has its own set of pros and cons that should be considered.

rayjones31 karma

With economies and cities reopening, and COVID cases steadily climbing, is there a risk of another significant drop in the market and/or economic downturn?

HCRWealthAdvisors2 karma

Absolutely. It would be imprudent not to consider this scenario. Over shorter periods of time, the market can be heavily influenced by investor sentiment. In the face of so much uncertainty, sentiment is bound to be all over the place which could result in more market volatility. As cities begin to reopen and more data is made available, we will begin to see a clearer picture, but we are not there yet.

brainervebndingheart1 karma

With so much financial news related to coronavirus, how do I differentiate what’s important from what’s not?

HCRWealthAdvisors1 karma

In the short term, markets trade on emotion, but in the long term they trade on the success of the underlying businesses. I would focus on deciphering between the fear that surrounds COVID and the ability of a firm to be profitable in the future. We will likely see a major shift in how businesses operate, which will open up opportunities for growth in given sectors yet to be seen.

millavilla1 karma

What’s the best way to make a charitable contribution to those in need during this time? And what might be some tax implications be as a result?

HCRWealthAdvisors1 karma

Consider gifting highly appreciated shares of mutual funds or stocks. From a tax standpoint, this can eliminate a tax liability from your portfolio and your donations could be tax deductible as well. Additionally, the size of your gift may potentially be larger because you may not owe any capital gains tax on the donation of your highly appreciated shares. Please consult your financial advisor or tax professional for advice specific to your situation.

succulent_love931 karma

Hi Steve, thanks for hosting this AMA! My question for you - Is it a good idea to invest more when the stock market is down?

HCRWealthAdvisors2 karma

It can be a great idea, provided you have sufficient cash flow and it fits within your financial plan. The stock market is the one place people are often very hesitant to buy when things “go on sale.” Historically, the market has been able to rebound from those low points and go on to all time highs.

succulent_love931 karma

Thanks Steve!

HCRWealthAdvisors1 karma

You're welcome! Thanks for participating in the conversation.

LukeVolts1 karma

Is it true that there's a second wave of COVID coming?

HCRWealthAdvisors3 karma

I am not a doctor. So I cannot speculate on whether or not there is a “second wave” of COVID-19 coming. I do see where there are a number of states experiencing greater numbers of cases being reported but I don’t know if this constitutes a second wave or a continuation of what we have been experiencing.

BlazinKen1 karma

I have cash from selling my home (10-15k). What would be some good options to begin investing to have my money work for me during this time?

HCRWealthAdvisors1 karma

For clients new to the stock market, we would encourage investing gradually in stages now to prevent poor timing. No one can time perfectly. Asset valuations are high in the wake of Fed and Gov. stimulus, there is a lot of speculation, lots of optimism around reopening the economy, yet virus cases are rising in many places.

BranCo861 karma

Hey Steve, thanks for doing this. If your employer doesn’t match a 401K and you’ve never put money in the market before, is an IRA or a Roth IRA a smarter first step?

HCRWealthAdvisors1 karma

For clients that have the ability to invest in a company-sponsored 401(k) or similar plan, we typically recommend that our clients take advantage of that opportunity regardless of whether their employer provides a match.  If a client only has $6,000 or less annually to invest for retirement (the current IRA maximum for those under 50), then it is more of an open question whether to choose the 401(k) plan or an IRA. In either case the client would be able to take advantage of the tax deferred growth available in a traditional retirement account.  

The viability of a Traditional IRA vs. a Roth IRA is a function of income. The threshold question to consider is whether one’s tax rate is higher now than in retirement. If so, the more the Traditional IRA makes sense. Also, with high enough income, a person would be phased out of Roth IRA contributions all together.  However, even if income is too high for a Roth now, one should consult with their employer to determine whether or not the company retirement plan allows for Roth contributions.

monie_931 karma

Hi Steve! What are some of the best resources you recommend for someone with a novice understanding of the financial market to learn/get the best information about the current state of the economy?

HCRWealthAdvisors2 karma

There are many books and resources out there.  It can overwhelming and hard to tell what is good or not.  One that I can suggest is A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing by Burton G. Malkiel.  I would also suggest just simply taking a look at any titles that look interesting to you.

monie_931 karma

great, thanks! ive heard of A Random Walk

HCRWealthAdvisors1 karma

You're welcome! Thanks for participating in the conversation.

SeanBubb1 karma

Should I keep cash in a savings account instead of a money market? Thanks Steve!

HCRWealthAdvisors3 karma

If a client had cash that they will need in the next 12-18 months, we would recommend keeping the cash in a savings account.  I would look to find a high yield savings account for these funds as they are offering more competitive interest rates.

Vaman_Frost1 karma

Should I invest in the stock market? Are securities temporarily at a low or are these permanent?

HCRWealthAdvisors2 karma

For clients new to the stock market, we would encourage investing gradually in stages now to prevent poor timing. No one can time perfectly. Asset valuations are high in the wake of Fed and Gov. stimulus, there is a lot of speculation, lots of optimism around reopening the economy, yet virus cases are rising in many places.

ActionStacktion1 karma

In light of market volatility due to the Coronavirus, is it better to invest cash in a lump sum or dollar cost average into the market?

HCRWealthAdvisors2 karma

Generally, investing cash in a lump sum will outperform dollar cost averaging, especially over longer periods of time. However, in times of increased market volatility, dollar cost averaging presents the opportunity to buy assets as their prices are falling. In this instance, dollar cost averaging can outperform. Dollar cost averaging can also help dampen the volatility in a portfolio during times of extreme market volatility.

Clear-Wash48121 karma

Does the recent market volatility in response to the coronavirus favor investing in ETF’s vs. mutual funds?

HCRWealthAdvisors1 karma

Market volatility should not guide your decision making process when it comes to choosing between ETF’s vs. mutual funds. Each investment vehicle has its own set of pros and cons that should be considered.

big_insomnia1 karma

Has the recent spike in volatility as a result of the coronavirus caused any liquidity issues with fixed income ETF’s?

HCRWealthAdvisors1 karma

There is an inherent liquidity mismatch between fixed income ETF products and their respective underlying securities. However, at the depths of the market selloff in March, many major bond ETF’s were providing liquidity for investors as the liquidity for the ETF’s underlying securities was vanishing. The fixed income ETF’s provided the liquidity investors wanted, but at a price, as many of these major ETF’s were trading with at least a 5% discount to their net asset values.

ziggy_miami1 karma

where would you put new money to work now? and why?

HCRWealthAdvisors1 karma

I would invest gradually in stages to prevent poor timing. No one can time perfectly. Asset valuations are high in the wake of Fed and Gov. stimulus, there is a lot of speculation, lots of optimism around reopening the economy, yet virus cases are rising in many places. It’s likely there will be a second wave of infection with no formal lockdown but consumers may refuse to go out and spend, particularly after extended unemployment runs out. We are likely early in this bear market/recession.

thomasrick231 karma

I’m saving the maximum amount in my 401(k). Should I stop or save less for a while?

HCRWealthAdvisors1 karma

As a general rule, people should keep saving if they can. Retirement accounts allow for the benefit of dollar cost averaging into the market year round. These accounts will not have required distributions until you are age 72, and therefore have an extremely long investment horizon. In addition, retirement accounts are limited in the amount you can contribute each year, so forgoing a year can be detrimental to your long term plan.

rayjones31 karma

Hey Steve, it’s me again. I need to live on a fixed income and I can’t afford to take much risk. What can I do to generate yield now?

HCRWealthAdvisors1 karma

Consider doing your best to be patient and wait for better opportunities. However, the asset classes we like best for generating yield are short-term high yield bonds, which have more yield than stocks but about half the volatility, and preferred stocks, which can be more volatile due to exposure to banks, but their income is qualified. We also like short-term real estate lending like first trust deeds for bridge lending. There is some illiquidity here now, but we expect that to return to normal eventually.

stb121stb1 karma

Is it true that the general valuations or P/E ratios of companies were lower pre-Covid than today? If so, what does that mean?

HCRWealthAdvisors1 karma

Yes, it is true that P/E valuations are higher today than they were pre-Covid. As you are aware the P stands for the price of the stock and the E stands for the earnings of the company. When we consider companies and their forward projected earnings, the vast majority have gone down, and many very significantly. Even if the price were to remain unchanged, this would cause the ratio to increase. From a fundamental analysis standpoint, this means that the price you are paying for the stock today is more expensive than it was pre-Covid.