Podcast Episode - Ask Suze Anything

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On this podcast of Ask Suze Anything, Suze shakes things up a bit. Many of your recent questions revolve around the stock market. Today is a little Suze School on what’s going on with the market.

Podcast Transcript:

Suze Orman’s Women and Money podcast is proudly sponsored by credit unions; a safe home for your money, rain or shine. September 10, 2020. Suze O. here and welcome to the Women and Money podcast as well as the men smart enough to listen. Today is Ask Suze Anything and this is where you normally write in, you ask a question, and if chosen, I answer it on the podcast. To do so by the way, you just have to go to the Women and Money app, you downloaded it by going to Apple Apps or Google Play and search for Suze Orman, and it's really just that simple. However, today I'm not going to quite do that and I'm not going to do that because so many of your questions really are all about the same thing right now. Do you know what they're about? I'll give you an example. "Suze, I'm freaking out. Tell me what I should do with the stock market. Should I sell, what should I do?" "Oh, my God, Suze, what's happening here? Is it going to go all the way back down 38%, 40% again? Help me, Suze." So that's what many of you are thinking and I can't blame you. I can't blame you at all because starting last week all the stocks and the markets kept going up and up and up until everything started to go down and down and down. And it was very, very reminiscent of what was happening when the market was crashing when COVID first came out and you saw gains being wiped out, you saw Amazon dropping 100 points here, 100 points there. You saw Tesla losing almost more money or maybe it did more money, it lost 22% in one day than I think it ever did in its history. And so things like that start to freak you out. You saw your money come back, you were on the road to recovery with it, and you just don't want to lose it again and go through this again is what you're thinking in your mind. So you are confused. And while it is true that many of you do not have money in the market and individual stocks per se, you do have money most likely in your retirement accounts, because almost all of you have a 401k, a 403b, a TSP, a Roth IRA, a traditional IRA. Unless you've used that money to get-by because of COVID and what's gone on here, but still, from what I can tell from the emails, so many of you still have money in your retirement accounts and I don't want you to make mistakes with that money. What kind of mistakes could you be making? Well, very big ones, actually. You could all of a sudden be freaked out and say to your employer if you're lucky enough to still be working, and you decide I'm not putting any more money in my retirement account, I don't care. And a lot of you will be tempted to do that because many retirement accounts today have stopped matching your contribution. You know where you put in a dollar and they give you 50 cents? So, it was like an automatic 50% return on your money up to about 6% of your base pay. Many corporations have stopped matching so in your head, you're thinking, you know what? They don't match my contribution anymore, I'm not going to be losing out on that. I just, I don't want to be part of this market, I'm afraid, I don't like it, and you stopped contributing. For many of you, that could be a serious mistake. Or then, there are some of you who have money in the market. You still have 10 or 20 years until you're going to retire and you've just had it and you call up and you tell everybody, sell, I'm out, and you don't care about selling because the money happens to be in a retirement account, you can sell everything and not have any tax ramifications. So, you just go 100% to cash. And then there are those of you who just go, oh, God, this is the best time to buy. I'm just going to look at all these stocks, these really speculative stocks that are out there, and I'm just going to figure out a way to buy them in my retirement accounts. And you go from being invested, and the Standard and Poor's 500 Index Fund or the Vanguard Total Stock Market Index Fund or ETFs, by the way, either one of those that you may own in your retirement accounts and you liquidate all of that, again, no tax ramifications. So, you liquidate everything to take advantage of the decline in Tesla, Amazon, Netflix, all of these stocks that have gone down, Zoom, Shopify, and so on, and so forth. That would be a seriously big mistake as well. So, what's really important here is that we have a strategy and we have a way to think about, really intelligently, think about what is going on here. And the first way to think about it is nobody has a clue. Nobody. You can watch CNBC all day long. You can watch Jim Cramer, Fast Money, all of it. And one day, somebody will come on and say buy, buy, buy. The other day, somebody will come on and say, sell, sell, sell. In one day you'll have the top hedge fund managers out there, all disagreeing with what should be done. You cannot find consensus at all about what to do at this point in time and the truth of the matter is, nobody's agreed on what to do since the virus hit. Nobody. So when you don't know what to do, I think you always do a little bit of everything because you don't know, will the technology stocks or the COVID stocks, as they call them, will they rebound and go straight back up again? Maybe yes, maybe no. Will other stocks now that really haven't had much movement, will they start to move because, you know, they were totally overlooked with these markets going up? You know, the Costco's and the DuPonts and the Bristol Myers and those stocks that nobody was talking about. The Verizon's and stocks like that that offer you a good value. And some of them, you know, offer you a dividend and some diversification. But none of you have wanted to buy any of those stocks because those weren't the ones going up. But maybe now those are the ones that may start to be going up. And when I say diversification, I'm talking about where you have different types of stock, meaning in different areas. Like you have those that invest in homes, and in retail, and 5G, and things like that. So you have stocks in every possible area so that if in fact, you know, one area doesn't go up, the other one will. And that's called having a diversified portfolio. Now, I understand, I get it that many of you are like, Suze, all I want to do is buy the Standard and Poor's 500 Index Fund like you've told me to do over all this time, or the Vanguard Total Stock Market Index fund or ETF, everybody, that you've told me to do overall this time. But some of you may have more money and you want to do other things than just an index fund. So, what is the strategy that I think should be employed right here and right now? First, I just want to say this and I mentioned it maybe a week or two ago. In fact, I've been mentioning it forever that if you need your money within one, really two or three years, truthfully, I've been saying just one, but it really is one, two, or three years, this is not money that belongs in the stock market, and this is money that, as hard as it is to come out, especially when the market is going up and up and up because nothing is harder than leaving money on the table. You know, it's hard to do that. I mean, even in my own account, I'll tell you, I sold Amazon at about $2900 or $3k a share. I thought I had made a tremendous amount of money in it because I bought it way long ago and quite a lot cheaper and then I was so happy because I made so much money. But then I watched it go from $3k to $3100, to $3200, and it kept going up and all I could do, even Suze Orman, all I could do was tabulate how much money I would have made if I had held onto the stock. So if Suze Orman has fallen into that trap, trust me, I bet you have as well. But at least it doesn't really get to me. I just kind of do and I'm like, all right, all right, there's another strategy out there, I'll figure out something. Again, it's really difficult to sell especially if the market keeps going up and up, and then all of a sudden the market goes down significantly. Then, you are absolutely freaked and you don't know what to do and then you end up selling there. So, for those of you, again, who have one, especially one or two, but three years until you need this money, I'm telling you, I would not be in this market because there's a very good probability that it will go up and it could come right back down again. And if you need money, really, just take it while you have it. Who cares? Who cares? You see what you have, you know what you're going to get to keep, you then become more secure and when you become more secure you have then met the goal of money, which is for you to be secure and you don't have to ride this roller coaster. So, can you just think about that? Now, for those of you out there who have five, ten, preferably ten, years or longer until you're going to retire or you need this money, when these markets go up, depending on the tax situation that you may be in, and if you're in a retirement account, it really doesn't matter. You might just want to raise a little cash on stocks that are really, really top-heavy. You might really want to liquidate stocks that have gone up significantly from where you have purchased them. And I don't think it's a bad idea to raise about 10 or 15% cash in your accounts so that if this market happens to tank again as it did, you could go in and buy things at a lower price. You could take advantage of some of these stocks that went down considerably, like Tesla. Seriously, I know it's still an expensive stock, but there's no way in the future Tesla's not going to be OK, no way. And so you could have taken advantage of that. But you need cash to be able to do so, to take advantage of stocks such as Zoom that got hit but yesterday it went up pretty big. It went up I think about 11% in one day, but still, there are certain stocks that really will in the future be solid stocks that will continue to make you money, but you need money to be able to get into those stocks, so that's just something that you might want to think about. How do you diversify? So, for those of you, if you're just starting or you want just a base like the base of a pyramid, there is nothing wrong. And in fact, it's really my suggestion that you put a nice little sum of money unless you're really a sophisticated investor, which most of you are not, into the Standard and Poor's 500 Index Fund or ETF or the Vanguard Total Stock Market Fund or ETF. Then you have a broad diversification of all kinds of different stocks. My favorite is the Vanguard Total Stock Market Index ETF or fund, the symbol for the ETF is VTI. I like the broader diversification in that than the Standard and Poor's 500 Index. So you start there, and then if you have extra money, you want to make sure that you have cash and you keep cash and you look at all the money that you have and you want at least 10 or 15% of that money, the investable money that you invest, in cash in case we take another downturn. Then, after that, you might want to look at using some money to start to buy individual stocks at firms such as Fidelity or Schwab or places that you can buy one or two shares of a stock, three shares of a stock, and not have to pay a commission if you do so online. And then you can start to diversify and follow individual companies, you could buy Apple, you could buy Amazon, you could buy these different kinds of stocks and in all different kinds of areas. You could buy, you know, Campbells Soup, you could buy, you know, Walmart, you could buy DuPont, you could buy all these different companies. And I'm not saying those are the ones you should buy. You know, you can also get speculative, and maybe you buy Zoom or you buy Coupa software or you buy stocks like that, which I kind of like a lot. And so you take advantage of that. And I know for a lot of you you may just be turning this off because you go, no, I'm never going to buy individual stocks. It wouldn't kill you to start educating yourselves and just experimenting on what it's like to buy stocks as long as you have your bases covered. And what are those bases? Obviously, you have to have a least an eight-month to a one-year emergency fund. I want you out of credit card debt. I really want you to be on time with your student loan payments but you know you have a solid job and maybe they'll be paid off in 10 years. I want you to be solid with what you're doing. And so, if you are on track for everything the way you want it to be, then you have to start looking at your investable money. And it doesn't all have to go into every month an index fund. So again, your foundation is the index fund that gives you diversification. Then, you want cash in that account in case the markets go down. And then if you have other money, that's kind of just, you know, money that it's OK, you can speculate with a little because you have 10 years or more. Then you start buying one share, two shares, whatever it is of companies that you like. Now, how do you find those companies? Well, believe it or not, it wouldn't kill you to start watching CNBC. It wouldn't kill you to watch Fast Money at about 5pm EST on CNBC and to watch Mad Money with Jim Cramer at 6pm. Wouldn't kill you to listen to the Motley Fool's or, you know, maybe get one of their newsletters. They're expensive, but maybe get one of their newsletters and just follow what they say. But I think it's really important you try to do these things on your own. Now, obviously, if you have a significant amount of money, you have $200k, $100k, whatever is significant to you and it scares you to do this, OK, maybe you want to find a financial advisor that can help you. But I really want to say this again, if you want to find the best financial advisor in the world, look in the mirror and there's nothing wrong with you taking a sum of money that you feel comfortable with that you want to start with, $5k, $10k, whatever it may be, and start to invest it on your own. Now, obviously, again, if you have millions of dollars, OK, you can use a financial advisor, hundreds of thousands of dollars, you can use a financial advisor if you want, but there's also nothing wrong with you managing a portion of that what you feel comfortable with just so you can really get a feel for investing. So again, you could start with $2k, $5k, $10k, whatever amount of money makes sense to you. So I want you to think about doing this and I'm very serious because the more you get involved with your money and you see how things start to work and you get a feel of when to sell and that you shouldn't have sold and everything. I'm telling you, you'll become more powerful with your money and then you'll know really what to do. The one thing that I don't want you to do right now is I do not want you, if you have time on your side and you are diversified and you have at least five, 10 years or longer until you need this money. And again, especially if you're in an index fund and you are dollar-cost averaging every month into that fund or into the stocks or whatever it is that you're buying. I do not want you to sell here. Do not make the mistake that was made way back when where you sold, the markets went down 38%, you didn't get back in, then the markets went all the way back up. Then you decided all right, I've had it, and you got back in maybe a week ago or two weeks ago, and then it started to crash. And then you decided I've had it, I've lost enough and I'm selling. Please don't make that mistake again. You never should have been lump-sum investing where you have $10k or $50k and you put it all in the market at one time. Remember, I want you to dollar cost average, especially at times like this. So, when the market goes down, your dollars buy more shares, when the market goes up, your dollars buy less shares. But overall, you are averaging your dollars or the cost of your dollars on what you are buying over time, and you will be fine. So, I don't want you to make that mistake. I also want you to have a grip that if you have been dollar-cost averaging or you did invest months ago in certain stocks or whatever, you probably at this point in time, if you invested in the COVID stocks, the Amazons, the Zooms, the all of those while the markets may have gone down, you still haven't lost money, you've just lost some of your profits. So, be very, very careful and always keep track of are you losing your money or are you losing the money that you could have made if you sold? So just keep track of where you are because so many of you are writing me and you're depressed because if you had sold, you would have made so much money and then I write you back and I say, well, what did you buy at? You bought something at, you know, $80 a share and before you knew it, it was at $200 or $300 a share, and that's happened in these past few months, believe it or not. And so then the markets turn around and now it went from, let's just say $200 a share down to, $150 and you are freaked. You still made a lot of money, you're still up considerably from where you bought, so I think it's always important, number one, that you keep track are you up from where you purchased it, not are you down from where the stock or the fund was at? It's also extremely important that if you have money outside of a retirement account and you have made good money on this money over the years, or in a very short period of time, that you think about the tax ramifications of it. Because if you have something that's gone from, let's just say, $50 to $200 in three months and now you sell it, that's a $150 gain, but that's going to be taxed to you as ordinary income. So, depending on your tax bracket, how many shares you had, your income, you may lose a good portion of that - 35%, 40%, 50% even with state and federal income tax of that gain. Even, and by the way, a short term gain is when you own something for one year or less. A long term gain, which is then a capital gain and taxed at a far lower tax rate, is all the things that you have owned for more than one year. So, when you have money invested in a retirement account, there you might want to speculate more than outside of a retirement account because their no tax ramifications if you buy or sell. But outside of a retirement account, you better think twice before you sell, because why? You're going to possibly lose a big percentage of that to taxes. But these are all things that you need to figure out before you do something. Got that, everybody? Overall, I want you to stay calm. These markets will probably go up and down like we've always said that they would do. Nothing's different there. And if you just keep dollar-cost averaging and stay diversified and have cash on hand, if you want to invest outside of index funds or in addition to index funds, in addition to the cash that you have, then when the markets go down, you take advantage of some of these great stocks that really you might want to own. Why not? So, I don't know if this is helping you or if this is confusing you more, but the main message of today's podcast is, do not make the mistake and come totally out of the stock market where you sell everything. If you have at least five, 10, 15 years, longer, whatever, that you need this money. And also do not make the mistake where you don't come out of the stock market, especially if you need this money within one year. All right, let's see, what else can I tell you today? Well, I can tell you that on September 8, KT and I celebrated our 11th wedding anniversary, even though we've been together now for 20 years. It was 10 years ago that we got married in South Africa, but it always gets us so confused is this our 10th anniversary, or is this our 11th? So, since we always like to be together as long as we possibly can, we decided we would just say it's our 11th and we had a great, great time. And again, I'm just so lucky to have KT in my life, as you all know. Also, to the approximately 7k of you who completed The Eight Qualities of a Wealthy Woman course, you liked it, I'm so glad you liked it. And again, that's a course that happens to be, you know, on our app that, really, is a great course to teach you a lot about emotions and what it takes to really be somebody who has wealth, and wealth is far more than money. Also, I'm so appreciative that my book that came out February 25, has once again hit the Wall Street Journal bestseller list, which was a shock to me. The Ultimate Retirement Guide for 50+, and the reviews on Amazon, there are about 1200 of them now, are over the top. So, a lot of activity has been happening again on that book. If you're interested in buying that book, don't buy it on Amazon where you're going to have to pay $17 to do so. Just go to www.SuzeOrman.com/WomenAndMoney and you can get it there, the hardback version of it for $10 and that includes shipping. So, I mentioned that because again because a lot of the emails are Suze, where do we go to get your book? We're watching it on the PBS special that is playing, we're all interested in it. Especially if you're 50 and over you should absolutely be reading that book. And so that's the best way, truthfully, for you to buy it. I know it doesn't count for any list, and it's not as impressive, it doesn't move me up on the Amazon rankings and things like that, but I don't know, saving $7 I think is a big deal on a $17 purchase. So, that's why we did it. All right, my friends, I hope this has helped you. It will be very interesting to see today what happens in the stock market, but just keep the course, keep dollar-cost averaging, keep diversified, keep some cash, and just stick with it. All right, I'll be talking to you on Sunday. See you then. Hi, I'm Sarah, and I'm Robert, and we're back here to tell you that Alloya's member credit unions are so proud to have brought you this episode. You know, Robert, credit unions live by a people helping people philosophy. Absolutely, Sarah. And that means when you bank with a credit union, you can trust that they have your best interest at heart. The fact is, regardless of circumstance, a credit union will have your back and keep your money safe, that's the credit union promise. Go to www.MyCreditUnion.gov to find a credit union that fits your needs. That's MyCreditUnion.gov. In providing answers neither Suze Orman Media nor Suze Orman is acting as a Certified Financial Planner, advisor, a Certified Financial Analyst, an economist, CPA, accountant, or lawyer. Neither Suze Orman Media nor Suze Orman makes any recommendations as to any specific securities or investments. All content is for informational and general purposes only and does not constitute financial, accounting or legal advice. You should consult your own tax, legal and financial advisors regarding your particular situation. Neither Suze Orman Media nor Suze Orman accepts any responsibility for any loss, which may arise from accessing or reliance on the information in this podcast and to the fullest extent permitted by law, we exclude all liability for loss or damages, direct or indirect, arising from use of the information.

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