Where Should I Put My Money Now?

Ryan: With recent volatility in the stock market, many investors are left wondering where do I put my money now? But we can reporting extensively on that very topic on here at Kiplinger's. And I will be chatting with executive editor Anne Smith about it during our main segment. On today's show, we will discuss protocols for tipping during the holiday season and wrap up with some financial PR pitches that were just a bit outside. That's all coming up on this episode of Your Money's Worth, stick around.

• Episode Length: 00:25:35
• Links and resources mentioned in this episode
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Ryan: I'm Ryan Ermey. I'm a staff writer here at Kiplinger's Personal Finance magazine joined by my co-host, my partner in crime, senior editor Sandy Block. How are you doing Sandy?

Sandy: I am good, Ryan, great to be here.

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Ryan: We are recording on a Thursday here we heading to long weekend you got new plans?

Sandy: No, I am going to visit my father and use the extra day off to do some stuff at home.

Ryan: I'm headed up to a mutual fund conference, which is just about as exciting as it sounds, but actually it's kind of exciting because it is one of these that always has like a big A-list performer during the lunch. Let me ask you, if you were to be at a lunch filled with men in suits who will you want to see perform?

Sandy: I will want Bruce Springsteen, because I think all those men in suits secretly have their own air guitar.

Ryan: You know I was like a jersey person. I should probably want Bruce Springsteen myself, but I don't know. Maybe Lauryn Hill like someone who's like a big mess at shows could be even better. Last time I went to see her she turned up four hours late for her set.

Sandy: Well there's been in suits, but not like that.

Ryan: Not at all. Our first segment here is about holiday tipping, it was the back page story on the December issue of Kiplinger's. And of course the two of us always read every word printed in the Kiplinger's Personal Finance magazine. But I don't remember. Do you remember the rules for every bit of these holiday tipping?

Sandy: No, I should. Although some days I feel like I wrote every word in Kiplinger's Personal Finance magazine. But not this one.

Ryan: So we're going to go back and forth here I think people are probably curious the holidays are coming up. How they should take care of the people who take care of them all year round. So the purpose of speeding things up there's a couple that we ourselves don't actually deal with that would be a child care provider, and a personal caregiver for the child care provider. We suggest at least one week pay plus a small gift from your child so that's quite nice.

Ryan: And for a personal caregiver, one week's pay to one month's pay. But let's start here with one that we both definitely have, which is a regular hair stylist, a barber.

Sandy: Yeah that's an interesting one here cos I actually I just got my hair done last night. Am guessing maybe you pay like, I don't know, say you normally give 20% maybe you give 40% at the holidays.

Ryan: Yes I don't know I have a regular guy, my guy Mohammed. He's fantastic. He's got a barbershop with six chairs where he's the only guy ever in there. And I tip him nicely every time because we are friends. So I don't know If I tip him extra, especially I don't know if he actually celebrates. Let's see what we have here. So it says the cost of one visit, unless you tip well throughout the year. I think I tip well throughout the year.

Sandy: I think I do, too. And I think one visit -- and the other thing is, you know I am a woman and one visit if you are getting coloring, it could be a couple hundred bucks. So I think that's pretty generous. I like to think I tip well throughout. My strategy has been I tip well throughout the year, and if I get my hair down around the holidays I tip a little bit more.

Ryan: Alright so lets go on to the next one. I think this is one for you but not for me and that is your regular dog walker.

Sandy: Yeah, a dog walker is really valuable if you have an active dog and I do. And our dog walker is remarkably cheap. We are very very lucky to have her. We give her a weeks pay.

Ryan: Then you're right on the money -- one day's pay to one week's pay. So on the generous side, but you're doing that one right.

Ryan: Do you still get a print newspaper, Sandy?

Sandy: Yes, I do because I am old.

Ryan: So then you take care of the newspaper delivery personally?

Sandy: Well I do but they make it -- every year we get an envelope in our newspaper addressed to our delivery person, specifically for the tip. I find that just a little aggressive. On the other hand, I know it's a hard job. The newspaper delivery person use to get up very early so, I usually send them about twenty bucks.

Ryan: You know you're right on the money again -- $10 to $30 dollars. And if you tip regularly throughout the year just give a few dollars it says.

Ryan: The trash and recycling collectors -- I have yet to tip my trash and recycling collectors. What about you?

Sandy: Me neither and when I read this story I thought you know, those people work really hard and they have a hard job. The problem with that one is how do you do it? It's not like you get an envelope like you do from the newspaper guy.

Ryan: You just like maybe tape an envelope at the top of your trash bin hope they see it. I don't really know I guess probably you have to wait out there, if you know when your garbage is regularly collected. Either way we advise to look up the rules, because it might forbade you from giving them cash, which, first of all, I don't think the guy is going to report you for that. But I guess you can bring them some homemade cookies or something.

Sandy: Yeah I think that's true of a lot of public employees, they are rules about how much they can accept. I know that's an issue for teachers too if you want to like benefit your child's teacher they are often times -- so it's always good to ask.

Ryan: So a cleaning person. Do yo have a cleaning person?

Sandy: No, but I would like to have a cleaning person. And if I did have a cleaning person I would certainly tip her or him during the holidays. Maybe the cost of the visit.

Ryan: You're on the money again. I am beginning to think that you secretly read all these. I wish I had a cleaning person myself or I wish I had the motivation to clean my house. But yes the cost of one visit if it's the case that he or she visits weekly or bi-weekly. If you have someone cleaning more often than that like everyday, then you have a maid and it's going to be a whole different thing.

Ryan: I guess the last one that we have on here is the mail carrier I think that's a pretty standard one and we say a gift worth up to $20. And I know for a fact that you're not allowed to give cash to your mail carrier. So do you usually give a gift card, or do you tip your mail carrier with cookies?

Sandy: I never have. I have the same problem with the trash people. I am not home when the mail is delivered. I do admire and respect the mail person because I think that's a hard job, too. And actually in thinking about it, I wouldn't mind like maybe giving him or her a gift card or something because I do think that's a hard thankless job especially this time of the year.

Ryan: Yeah, no doubt -- and, yeah, exactly I have a mailbox, I think I could probably create some sort of scenario where they see in the mailbox that there's something in there for them. My parents have a mail slot so on that case I don't know is just like regged so like they put the mail in, and then like a gift card slides out.

Sandy: This sounds kind of scary.

Ryan: It's kind of terrifying. And if these ones were like someone's coming to your house and you don't know. It's like just picture someone like looking through the blinds until they come out. And it cost them that sort of gift. The advice for any of these is be generous to the people in your life on the holidays. And I would say, on the side of being more generous I know I try to take care of the people in the front of our building, who in the front of our office building I mean, who let me in to the elevator when I forget my card three times a week, maybe not that often but quite often. I take care of people and do it in a way that's not going to put pressure on their jobs and be generous.

Sandy: I think Ryan both you and I have worked in a service industry, we both weigh the tables and I know my experience doing that has made me a very good tipper, because I know how hard that job is and often times underpaid.

Ryan: No doubt about it.

Ryan: When we come back, we will be talking about certain markets with executive editor Anne Smith will answer the question where should you put your money now?

Ryan: Alright, we are here talking about certain markets with executive editor Anne Smith and thank you so much for coming on.

Anne: Am so happy to be here, Ryan.

Ryan: We know that you're taking a break you've been working exhaustively on the 2019 market outwork for the upcoming magazine issue. And we know that the boom market is the longest one ever at this point. Where do we stand?

Anne: Well, that's a good question. We think the boom market is still alive, but the investors have to start thinking about it a little differently. Like say a beer market and a boom markets suit.

Anne: In other words, that means that we think the economy is growing, corporate earnings are growing, but not as fast as they were. Corporate earnings are what drives start prices of course. So the market tends to look beyond good or bad and look it better or worse, so that deceleration is a little bit of a worry.

Ryan: This is something that you've covered that I have covered that our colleague Tom Petruno covered. It really feels like investors are starting to get a little bit nervous. When it comes to stock market. If people are thinking about playing defense or batten down the hatches how should they go about investing that way?

Anne: Here is what I will like to tell people: You have to remember and repeat it to yourself often, that the market doesn't control you. You control it. Or at least you control your interaction with it. That means that if you follow a few simple rules you can remain in control no matter what the markets doing. That starts with having a diversified portfolio investment mix that's appropriate for your age and your stage in life. And you need to keep that mix re-balanced for so many years in the boom market, it paid to let your winners ride. But people who had 60% say invested in stocks that the start of the boom market had 80% at the peek that we saw in September. So it's really time to start trimming those positions, trim your winners and add to your laggards. In this case that means bonds. And also for the first time in years, people can start thinking of cash as an asset class.

Anne: Yields has been rising you can get good yields on CDs, money markets, short time bond funds. It's important to have some exposure to cash, because if there is in fact a market downturn, you have to have some dry powder.

Ryan: So if it's someone like me who is a little bit younger, who has a longer time horizon and who is pretty tolerant to risk -- I probably don't need to make huge adjustments to my asset allocation, right?

Anne: Well, you might tweak it here or there, but what a younger investor has to keep doing is dollar cost averaging. A lot of people do that in their 401(k)s, that's buying a set amount at regular intervals. When you do that, it ensures that you buy more shares when prices are lower. When the market declines and you're putting the same amount of money and every month you buy more, when stocks are down. That ensures you'll have a lower average price over the course of your investing life.

Anne: But it also takes the emotion out of investing. You don't trip yourself up by trying to time the market.

Ryan: Right, it gets you into that buy low sell high mode rather than emotional investors it seems, tend to sell once things have gone down and buy when they have gone up.

Anne: Right, always.

Ryan: If I understand stocks and am someone who is interested in trading stocks, maybe it might make sense for me to get defensive by buying into defensive section. Is that something that we've been talking about here?

Anne: We have been talking about it and it does make sense if you're really worried about the market defensive sectors like utilities and consumer staples tend to outperform in market down terms. That said, we are positive on the market for 2019, and we think people are going to see gains. And these stocks have their own issues. Utilities tend to lag when interest rates are rising as they are now and consumer staples have a host of competitive challenges. So it just goes to say you always need to be careful you need to have an array of holding, so diversified mix of holdings and you have to be very choosy. For instance we think now in general is the time to focus on very high quality stocks.

Ryan: What do you mean by high quality? These are companies with robust cash flow.

Anne: Yes, a lot of cash on the balance sheet, low debt that's important when interest rates are rising and also consistent profit margins. We heard in third quarter earnings calls a lot of companies were talking about their higher input cost, higher labor cost, higher raw materials cost, the cost of tariffs. So you want to look for companies that have a history of consistent profit margins not going to get squeezed by those cost. And you want a lot of cash so they can pay dividends and increase dividends and you want load at because interest rates are rising.

Ryan: A lot of times we talk about dividends as a sort of way to burst the returns even if you're in sort of a shaky market. It's interesting that you talk about quality, because I wrote that story it means a few months back now but about mutual funds, that tend to lose less, when markets go down and a lot of them were either funds that focus on dividends, funds that focus on high quality company's or funds that focus on value stocks. Are these ways that you see that investors can add maybe, you're not going to add something that is necessarily going to go up when the markets going down. But a way to sought of add some balanced, a way to sought of add a vein of steel for your portfolio.

Anne: We think value stock are worth the look here, because they have lagged for years. Value stocks are stocks that see at bargain prices on various matrix compare to earning say or book value or other measures. This boom market has been all about the fast growing company's but I think value might be a comeback play here and it does have defensive characteristics, because value oriented companies often pay pretty generous dividends. They tend to outperform in down market because let's face it, if your already trading at a bargain price you don't have this far to fall.

Ryan: The last thing I sort of wanted to ask you about . . . here we are coming, we are recording this pretty much after the midterm elections. It's going to be going out a little bit later, but it's still something that is going to be on people's minds here. Is there an aspect of an outlook for investing that is affected by the way that the midterm election went?

Anne: Well the market is affected by policy considerations and there are some that might come into play, now that we know the results of the midterm elections. For instance, it's highly likely that Democrats and Republicans will come together on an infrastructure spending bill and that would be good news for construction stocks, industrial stocks in general. That's one of the very few and rare areas of agreement.

Anne: On the flip side, another area of agreement might be putting pressure on pharmaceutical stocks because I think both dems and republicans might look into price controls on drug prices or at least putting a lead on those prices. And that could pressure pharmaceutical stocks.

Ryan: Health care stocks really I think seem to be sought of long term performing here just as our population ages, something we are sought of interested in the long-term. Right?

Anne: We like health care stocks don't get me wrong. Health care stocks they have a good long term story as you mentioned non demographics curing all kinds of diseases. In the shorter term I think pharma stocks might come under a little bit pressure and on the flip side, it doesn't look like the affordable care act is going to get repealed and so that means that hospital stocks and HMO stocks, particularly those that deal with Medicaid services might do well in the short term.

Ryan: Great. Thank you so much for coming on. Just before you go, if investors are still or a bit nervous if they're not sure what to do with an uncertain market, what should they really be taking away here?

Anne: Well I'll just reiterate, Ryan, and by the way it was a pleasure to be here. That we think the market can go higher in 2019, but we think the gains could be relatively modest as in single digits and come with a lot more volatility.

Ryan: Alright, thanks so much.

Anne: You're welcome.

Ryan: Alright before we go Sandy and I want to have a little bit of fun because as journalists, we get pitched for anything and everything that our lovely PR professionals think that we might be able to get into the magazine. So . . . wild peaches. Sandy, why don't you go first?

Sandy: Well, my latest wild peach which to several people in this building was a suggestion that I interview an expert who can discuss a new tax provision that benefits the equine industry. A horse tax professional. I did not respond, but if I had I'd probably would have told them that we do not publish horse tax letter, although we do publish a lot of excellent newsletters and that is just a little too narrow for our audience.

Ryan: Yes that like remember Mitt Romney have the Olympic dressage horse.

Sandy: Yes he might be interested in the horse tax expert.

Ryan: Well, I mean he probably should be unless you know, you can't get covered their pants down when it comes to paying your horse taxes. What should people take away I guess people with horses probably do have somewhat complicated tax situation. For people who have a complicated tax situation who have and a state situation, they probably should be hiring some form of tax professional. Right.

Sandy: I think if you can afford a horse you probably do have a more complex tax situation than you or I do, Ryan. Actually into the new tax bill a lot of people are going to had easier tax returns. But if you find yourself ina situation where you need help, you're going to want to look for an enrolled agent or a certified public accountant. These are people who have to test or trained or experienced and you don't want to hire a rookie to do your taxes, because taxes are complex. And again if you own a horse or a lot of property or a lot of investments, you probably should get some help.

Ryan: An em broad agent is someone who can advocate for you in front of the IRS. Right?

Sandy: That's right if you get audited and enroll agent or a CPA, can represent you in front of the IRS and you are probably going to want that if you get audited.

Ryan: There are going to be auditing for dodging your horse taxes, especially . . . so my wild peach and I promise to never use anyone's name on here, because I don't want to embarrass anyone. I don't want people to think that I am coming after their company. But this is a pretty great one. It comes from an app. I get paged for million apps. And this one is a revolutionary free artificial intelligence base training platform that flourishes on volatility Sandy. In other for you to trade your crypto currency. So it takes speculation out of trading crypto currency. And uses special algorisms that will tell you whether there are overbooked or oversold. The kickers here been that the guy telling us that this app is a game changer and that he has been buying and selling crypto as part of his daily routine now, is a member of anna hunt dogs. So obviously a growing endorsement. We have a call from the CEO that the so-called experts have been hicking speculative and incorrect calls on bit coin and other cryptos for too long.

Ryan: The thing is any app -- I am not picking on crypto -- any tool that tells you that it's going to be able to tell you which way an investment is going to move with any sort of regularity . . . it simply doesn't exist or else these people including the guy on the Anna hunt mighty dogs would be extra ordinary rich and they wouldn't be selling an app.

Sandy: This is always the question I ask when I get these pictures about how a few adopt this training scheme. You can beat the market and be incredibly rich. If you know how to do that, why are you selling an app for $14.95 when you can just be at home minting money.

Ryan: I mean now that . . . a very much smacks of the people who are going to tell you how to flip houses like, for seven easy payments of $250, I'll teach you how to make millions flipping houses. Then why aren't you just making millions for the houses.

Ryan: Here is our advise on crypto currency and hopefully somewhere down the line, we will get someone in here to talk more expertly about it than I can. But essentially it's an extremely volatile, extremely speculative investing at the moment. We don't think it's completely baseless, we think that a lot of the technology that comes with it is going to be the bases of a lot of important tech investment going forward when you talk about that block chain.

Ryan: But for now if you're going to make crypto currency part of your portfolio, you shouldn't allocate more access to it than you are willing to lose.

Sandy: That's right and I don't think you should rely on an app to tell you when to trade, into buy and sell.

Ryan: Exactly right.

Ryan: Well, that will just about do it for this episode of Your Money's Worth, for show notes and more great tips on your content on the topics we discussed on today's show. Visit kiplinger.com/links/podcast. You can stay connected with us on Twitter and on Facebook or by e-mailing us at podcast@kiplinger.com.

Ryan: If you like the show please remember to rate, review and subscribe to Your Money's Worth wherever you get your podcast.

Ryan: Thanks for listening.

Links and resources mentioned in this episode

• Who Should You Tip for the Holidays?
• Timely Strategies to Protect Your Portfolio
• Value Vs. Growth Stocks -- Which Will Come Out on Top?
• 5 Steps for Hiring a Tax Pro
• What You Need to Know About Bitcoin