In this episode of Motley Fool Answers, Alison Southwick is joined by Motley Fool personal finance expert Robert Brokamp and Motley Fool analyst Jason Moser to go through the mailbag to answer listeners' questions. They start with a discussion of the stimulus package. Then they answer listeners' questions about refinancing, why index funds make a great foundation, diversifying your portfolio through multiple accounts, using cash to invest versus paying off a mortgage, and many more interesting questions.

They also make some great suggestions on how to spend time if you're locked down at home.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

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This video was recorded on March 27, 2020.

Alison Southwick: This is Motley Fool Answers, I'm Alison Southwick, and I'm joined, as always, by Robert Brokamp, Personal Finance Expert here at The Motley Fool. I said Brobert before, oh, well.

Robert Brokamp: That's alright, people won't remember.

Southwick: Okay, so it's the March mailbag. And with the help of Motley Fool analyst, Jason Moser, we're going to answer all your questions about the current market, what's in JMos bucket, all that kind of good stuff, all that and more on this week's episode of Motley Fool Answers.

Well, before we get to the mailbag, why don't we chat a little bit about the week and then I can get your thoughts, does that sound good, Jason and Bro?

Jason Moser: Sounds like a plan.

Southwick: Alright. Well, the big news this morning, and by the way this morning is Friday, is that the U.S. has surpassed China in the number of confirmed coronavirus cases. I think we are at about 85,000; does that sound about right.

Brokamp: We're into 90,000s now.

Southwick: Oh, wow! Okay, so that's my research from this morning, so things are ticking up pretty fast. The New York Times estimates that at least a 160 million people nationwide have been ordered to stay home. And when it comes to the stock market, well, it kept ticking up this last week, pinned on the hopes of the stimulus bill. Then news came on Thursday that 3.3 million people had filed for jobless claims, which is roughly about a bajillion percent more than the previous worst week ever of about 695,000 claims. That was back in 1982.

So, again, now it's Friday. And I believe the stimulus bill is still plugging along, is that right, Bro?

Brokamp: Yes, the House has passed it and the President will sign it. So, by the time you are listening to this episode, it will be law.

Southwick: Alright. And at this exact moment on a Friday, a random Friday afternoon, the market is down about 2%. Is that right, JMo?

Moser: Yeah, I think 2.3% last we looked.

Southwick: In other news. I'm on day four of my sourdough starter, and it seems to be bubbling along nicely, so there's that. The bad news is that everyone is baking now and you can't buy flour to save your life. So, how are you guys doing, how are you feeling?

Brokamp: There's going to be a shortage of eggs too soon.

Southwick: Eggs, why eggs?

Brokamp: The same thing, people are baking so much.

Southwick: Oh, and then we're all going to get so chubby.

Moser: See, I guess I'm lucky, I just don't have that itch to bake. I just don't know, it's not my thing, and so therefore I'm not stuck in the kitchen, eating a bunch of baked goods.

Southwick: So, that's the hot market take from JMo. Stay out of the kitchen.

Moser: You want to stay fit, just stop baking.

Southwick: Yeah, there you go. So, yeah, Jason, how are you feeling after this week; as an investor, not as a consumer of baked goods?

Moser: [laughs] I mean as an investor, you know, I'm feeling pretty good about things. I posted a note to our members and the services that I run, the Augmented Reality service and the Future of Entertainment, and the note was based on this stimulus package that Congress has been debating and now has passed. And I think, I mean, there's always going to be political bickering when it comes to things like this, it's too much money, it's not enough money, to put things in context this $2 trillion package; you know 2019 GDP domestically here was $21.5 trillion, just to give you an idea of how those numbers match up.

So, frankly I think that number, that $2 trillion number, is going to go up in time, because I think this is probably a little more of a protracted battle then maybe some think it might be. There's not really a clear finish line. I think we got to get used to the fact that we're going to be dealing with COVID-19 in some way, shape or form in our lives for a while here. So, the health and the economic impacts will be significant and I think they'll last for a while.

With that said, it is encouraging to see our government come forward in a bipartisan fashion to get aid to the folks that need it most, to the businesses that need it most. And hopefully, I mean the devil's in the details, hopefully this all does get into the right hands, and I'm sure some of it won't, and we can learn from that and hopefully do better next time. But as an investor, I'm very encouraged that we've seen our representatives in DC finally get together and make something happen.

Southwick: Yeah. Bro, I don't know about you, but when I saw those jobless claims numbers, I was literally speechless. Maybe I shouldn't have been surprised, but wow, that was insane. What do you think?

Brokamp: Yeah, no, it's incredible, and it's most definitely going to get worse. James Bullard, who's the President of the St. Louis Fed, told Bloomberg News and he said, unemployment could hit 30% over the next couple of months, which reached 10% during the Great Recession and 25% during the Great Depression. So, it'd give you an idea, that's the highest unemployment rate we would have seen perhaps in our nation's history, certainly over the last century. So, it's significant. So, when I see those numbers, I just have huge sympathy and empathy for all of those people, all those businesses that who knows if they'll be able to reopen once we solve this virus problem. So, that's the way I feel.

I would certainly encourage everyone to dig into the details of this aid package, because there is a lot of aid for people, there's increased unemployment benefits, a lot of ways to defer payments. People don't have to pay their student loans now, at least, their Federal student loans for a few months. So, there are a lot of ways that the government, as well as bigger corporations are trying to help people. So, if you are in a financial pinch, definitely look at what resources are available to you.

Southwick: Alright. Well, should we head on to the mailbag now?

Moser: Why not?!

Brokamp: Let's do it.

Southwick: Alright. So, let's head to the first question, it comes from Jerry. "To the Gardner brothers and The Motley Fool analysts ... " that's you guys " ... you have convinced me that investing in index funds, either domestically or internationally, is guaranteeing mediocre returns. Two examples from your own newsletter support my case. One, had I invested in just Amazon, Microsoft and Apple over the last 20 years, I would have soundly beaten the S&P 500. Two, going forward, I believe that investing in just one stock, MercadoLibre, will significantly outperform any Latin American ETF or Global ex U.S. index fund. If you agree, why does Motley Fool Answers still stick to promoting index funds? So, anti-Rule Breaker." Oh, Bro, this one is coming at you.

Brokamp: [laughs] Well, so, I would first of all say, that I think, we, at The Motley Fool, just about everyone involved thinks that index funds are a great start for most people. In fact, if you go to our Stock Advisor service, there's a Stock Advisor guide to Fool's success, step No. 4, even includes the line, "We think index funds should be the foundation of your portfolio." So, to the extent that we do recommend index funds, it's generally for people who are newer to investing, and then you can start branching out to individual stocks.

I will point out that he also said, you know, "Had I invested in Amazon, Microsoft and Apple the last 20 years, I would have soundly beaten the S&P 500." Yes, if you can pick the stocks beforehand that are going to outperform the S&P 500, that is a great investment strategy. If only. I will point out, by the way, he's right about those three stocks, but for Microsoft, and if you look back 20 years, starting in March of 2000 and invested in Microsoft, for the next 18 years, you were underperforming the S&P 500, it wasn't until April of 2018 that it started to outpace the S&P 500. So, for most of the time, it actually wasn't beating the S&P 500.

But the point being, it's very difficult to know beforehand which those stocks are going to be. If you look into our services, and we've looked at this as a company, there's sort of a pareto principle with our return. So, 80% of the returns are provided by 20% of the stocks. I wrote up an article for Stock Advisor a month ago, so this is before the biggest drops that we've seen recently, but even when I looked at it then, almost 30% of Stock Advisor's recommendations have lost money, and almost 12% had been down 50%.

So, while I do agree that once you become a more experienced, sophisticated investor, you can move away from index funds, but thinking that you can put your portfolio in a handful of stocks and beat the S&P 500 is pretty risky.

Southwick: Yeah. Alright, let's move on to the next question from anonymous. "Heard you discuss refinancing with Chris on MarketFoolery." Jason is this coming directly at you here, it must be?

Moser: I think so. Yeah, I think so.

Southwick: "But what typically happens with home prices? Good idea to wait to buy, do you think? Also, you said we should all have 20 to 30 or so stocks in our accounts. What if you have more than one account? I have a personal brokerage account and a separate IRA account, should I shoot for 20 to 30, overall, across both accounts or 20 to 30 in each account. Keep calm and Fool on!"

Moser: Yes, very good question. And so, let's tackle the home question first, because there is some interesting data here. Now, certainly with the interest rate environment that we have today, it's absolutely time to at least inquire about refinancing, if you own your home. I'm in the middle of enquiring about that as well, trying to see if I can get to a point where it actually makes sense. And I'm encouraged with what I'm hearing from our lenders. So, definitely look at that, that's an easy way to cut that payment and put a little bit more cash in your pocket at a time when a lot of people could really use it.

If you look at the actual behavior out there today, total mortgage application volume fell almost 30% here just last week, according to the Mortgage Bankers Association. And purchase applications fell even more dramatically in states hit the hardest by COVID-19 today, so you're looking at New York where it's down 35%; California, where it's down 23%, 17%, in Washington state. So, there is clearly a decline there in that mortgage volume. And we saw companies like Zillow here just recently put on hold their home-buying program, which is a new part of the business they recently introduced where they're actually buying homes and then reselling them. They've put that program on hold right now given the situation. And you know most companies are trying to conserve capital and make sure that they can weather the storm, because we don't know, really, how long it's going to last or how much of an impact, economically speaking, it's going to be.

Now, Zillow also recently performed a study here, and I got this from an article that came out recently on our Millionacres website, Maury Backman published this. Zillow recently did a study on the impact of previous pandemics on housing markets, interestingly enough, and one thing they found in this study is that home prices largely held steady or declines were very modest, in most cases. And that simply was because during those times there were fewer transactions. So, if people aren't desperate to sell, then they're not going to get out there and sell at a loss, they can weather the storm and just wait until times are a little bit better. And so, they don't feel like they have to sell at a loss. And so, I just thought that was an interesting point to note there as well.

I mean, housing, as they always say, it's location, location, location. And so, it does change depending on where you are. And I think that where you are at this point in time, you certainly want to look to see how your area is dealing with this crisis. Clearly, California and New York are two states that are getting hit harder than a lot. But it does seem like in times like these, pandemics in particular, there is data out there that says that housing market can stay fairly resilient because people just, kind of, pull back and wait to weather the storm.

Southwick: Alright. Then the second part of that question was, "Should I shoot for 20 to 30 overall stocks across all accounts or 20 to 30 in each account?" So, when you have different brokerage accounts.

Moser: Yeah, absolutely. I'm in that same boat, I mean I've got a self-directed brokerage account and then I have just a discretionary account. I think you're aiming really, you're looking in the context of your overall portfolio, so all accounts combined. Being well-diversified, 20 to 30 is a great place to start. For some folks, that number is going to be higher. For some folks, that number might be lower; if they're a little bit more confident or if they feel like their risk tolerance is high. But, yeah, I would look at in the context of all of your accounts.

Southwick: Alright. Next question comes from J. "I am in my lower 20s, and I've always been interested in personal finance investing and saving for the future. Growing up, however, my dad has always lived an extremely high consumption lifestyle. He lives in a home worth well in the excess of $1 million has owned dozens of cars including Porsches, Ferraris and Maseratis and wouldn't be surprised if he spends close to $4,000 a month eating out at expensive restaurants. He makes between $500,000 and a $1 million a year, so it seems he is able to maintain this lifestyle. However, with his level of spending, it makes me wonder whether he has built any wealth at all. I've tried starting conversations about finance with him and he never seems interested and doesn't add much to the conversation. I know he'd been previously burned by bad investments and I don't think he really invests anything. Am I right to be concerned about his spending and financial habits and if so, how would you recommend bringing this up with him to make sure he's preparing himself for retirement?"

Alright, Bro, that one's going to you.

Brokamp: It is. And it can be tricky because there are just some people who do not want to talk about their finances, especially with their kids. That said, I do think the current crisis actually could be a way to bring up the conversation, and I think it's always good to lead with what you're doing. Talk about, "Hey, you know, look, things are tough right now. This is happening to my retirement savings, this is what's happened to my portfolio, what's going on with you?" And you might even frame it as a way for advice. That might cause your dad to be more inclined to open up, if you're saying, like, "Hey, dad, what do you think I should do? What's going on with you?"

It's also I think important to frame it as concern for him, because many parents, especially wealthier parents will interpret this as, really, "Why are you spending my inheritance?" So, you definitely want to frame it that way. That said, there's only so much you can do, so if he's not willing to talk about it, you may just have to let it go. From what you've told me, my guess, he's going to be OK, I mean, he does have a $1 million house that he can do a reverse mortgage on or he can downsize. Given how much he's made, he probably is going to receive the maximum social security benefit, which is about $36,000 a year, maybe $40,000 a year, if he waits till late-70, not a lot compared to what he's making, but it'll prevent him from being penniless. But I think just open up the conversation talking about current events, might be the way to get that conversation going.

Southwick: Alright. Next question comes from Morty. "I would appreciate Jason explaining what his stock buckets are and which stocks are in each bucket? What is his methodology for picking the stocks, market capitalization, growth, momentum, dividends? Is he going to create a coronavirus bucket?"

Moser: [laughs] I'm probably not going to create a coronavirus bucket, that might that would be a tough on the message, I think, we're trying to find that happy medium between recognizing the human toll here and also doing our job and making sure we're looking out for our members and our listeners and helping people secure their financial freedom. But the buckets or baskets, as I like to call them, two baskets that I have I have been maintaining here now for a little while. The first one, and this all started initially with just some discussions that Chris Hill and I were having every quarter it seems, when we would do MarketFoolery and we would look at the returns that some of these payments companies were lobbing out there. And we thought, "Well, why don't we own shares of these companies?" And so, it struck me that maybe there would be a payments related basket I could form. So, the war on cash basket was born on July 24th, 2017 and that basket consists of MasterCard, Visa, PayPal and Square all in equal amounts. So, 25% weighting on each position. And the idea is, take the total amount of money that you would want to invest in this sector, split it four ways and invest in these four companies.

And to-date, since that date of inception in July 24th, 2017, the war on cash basket has returned 81% versus the market's 9.6%. So, clearly that baskets worked out very well even throughout this bear market and COVID-19 crisis. And as you can see, with those four companies there, MasterCard, Visa, PayPal, Square, there wasn't one particular angle as far as philosophy, because you've got two dividend payers and you've got two that don't pay dividends. Two were a bit more stable or bigger, lower-risk in MasterCard and Visa. PayPal kind of that mid-risk. And Square being a little bit more of a risky play. But that was the idea behind the basket was to give yourself a nice risk exposure there; cover all ends of the risk spectrum.

And so, after the war on cash basket, it struck me that another very attractive market opportunity is healthcare. And healthcare is another space where we have a lot of different ways we can invest. I had identified some companies that I do like in the space and so I came up with the healthcare and wealth-care basket, that date of inception was February 9th, 2018. And to-date the returns of that basket, the basket is up 144.4% versus the market's 2.4%.

Now, I will say, one caveat here on that on that number. Teladoc Health is one of the components of this basket and that stock has performed extremely well since February 2018, it's up +400% versus the others, but you've got UnitedHealth Group, IDEXX Laboratories, Teladoc Health and Masimo. And, yes, IDEXX Laboratories is animal health; we cannot neglect our furry friends particularly in these trying times, they're serving as a point-of-support for a lot of us, as the owner of three dogs it just struck me that every time I went to the vet, IDEXX was getting some of my money, so then why not own some shares of IDEXX and get some of that money back. And thus far, it has all worked out very well.

And the basket approach is simply meant to identify big, attractive market opportunities and then invest in those market opportunities, instead of trying to just pick one winner from a space, because oftentimes when you find attractive market opportunities, there are a number of companies that will win and in the case of the war on cash basket and the healthcare basket, thus far all eight components of the combined effort there are performing well, outperforming the market, positive returners. So, that's the general idea, is to give you good risk exposure while being able to invest in exciting market opportunities.

Rick Engdahl: Jason, do you think that given Alison's new baking hobby that you need to have a bread basket.

Moser: [laughs] Hey, oh. I'm not sure which one would be easier to message, Rick, a coronavirus basket or a bread basket.

Southwick: I just got done telling a reporter, I'm like, all people are talking about is getting puppies and baking bread, like, that's what the coronavirus is doing to us here in Northern Virginia.

Moser: We're drinking, a lot of drinking.

Engdahl: Well, beer is just liquid bread, anyway, right.

Moser: Liquid bread. Exactly.

Southwick: Were long on yeast, apparently. Alright, next question comes from Tom. "I have 27 years left on a $250,000 mortgage with a current rate of 4%. Should I be paying extra principal or investing the money instead with the goal to pay off the mortgage, won't I have better odds paying it off sooner by investing that money for the long-term?"

Brokamp: Well, as Jason mentioned earlier, folks should be considering refinancing. So, mortgage rates had touched 3.25% a few weeks ago, all-time lows, they're slightly up to 3.5% now. But one rule of thumb about refinancing is that if you can cut your interest rate by 0.5% and you're going to be in the house for several years, it makes sense. You should definitely run your numbers. But the first thing I would look at is refinancing.

I certainly think that the farther you are from retirement, generally, it's better to maintain the mortgage and invest the extra money; with the goal of paying off the mortgage before you retire. I've mentioned before that that's what I had been doing, I'm paying extra payments so that my mortgage is paid off before I retire. The reason I like that idea is, imagine you were retired right now and your portfolio has dropped by 33% and you're concerned about how that's going to eat into your retirement income. Your probably No. 1 concern is going to be, can I pay for my healthcare? And then, No. 2, can I pay for my mortgage? Because that's everyone's biggest expense and that's what everyone's biggest fear, losing their house. But if your mortgage is paid off, you don't have to worry about it. That said, my wife and I are actually going to stop those additional payments to the mortgage, because I think stocks are a better value right now. So, I'm actually going to be doing more investing than I had been in the past.

So, Tom, in your general situation, unless it's extremely important for you to pay off the mortgage soon, I would rather invest the money.

Southwick: Alright. Next question comes from Caroline. "I've heard that it is highly unlikely for this virus or any virus to be transmitted on cash, regardless, if enough people believe it can be carried that way, I would imagine it might cause even more people to abandon cash for credit cards and/or digital payments, no? I'm thinking that while the dollar amount value of transactions may decrease in an economic downturn or even for a few months because of the coronavirus, the number of transactions may increase and therefore our war on cash baskets of stocks may at least stay flat in the coming months or year. This question was prompted by my seeing someone in my local Upper West Side neighborhood bodega this morning insisting on being allowed to pay for a purchase of less than $10 using their digital wallet, credit card is not accepted for purchases less than $10, because there is at least one reported case of corona here and using cash is not safe he argued."

Moser: Okay. Well, I will begin this answer by telling you that I'm not a doctor, I'm not a scientist, although, I do like science a lot and my dad is a doctor, so that doesn't matter either way. [laughs] I have done some research on this, though. And I will say that based on everything I have found that cash, paper money, absolutely can carry the virus and is a higher risk for transmitting that virus versus non-cash transactions. The World Health Organization certainly, they have warned that the virus can be transmitted to customers via bank notes and coins. So, don't think it's just paper money, certainly coins can carry it as well.

China, I think, just went through a process of deep cleaning a lot of potentially infected cash to try to limit the spread of the virus. And ultimately, while pathogens and viruses can live on most surfaces for around 48 hours, there is research out there that shows that paper money can reportedly transport a live flu virus for, get this, up to 17 days, so.

Brokamp: What?

Moser: Yeah, I'm just telling you what the data says. Now, I'm not saying that you're going to get sick by using cash; don't get me wrong. I'm not really a big user of cash anymore, anyway. Like, I just find it more convenient not to use it. As with most things in life today, you just have to sort of -- there is some judgment involved and you just have to just be safe, you know. If you don't need to use cash then why use it? And I'm sure that a lot of merchants, a lot of stores out there are trying to navigate what is a tricky environment as well as the example that Caroline just offered.

Southwick: And considering your war-on basket, you're like, you know what, why not use that MasterCard, Visa, PayPal, Square --

Moser: MasterCard, and Visa, and PayPal, and Square, yeah, and I mean, you know, it's --

Southwick: Definitely reach for that Visa says, Jason Moser, Visa shareholder.

Southwick: I think, coronavirus notwithstanding, I mean, the trend is clear, we are moving away from cash transactions and more toward electronic transactions worldwide.

Southwick: Alright. Next question comes from John. "I know the government allows us to put away money in a Roth IRA or a traditional IRA tax free up to an income level. I believe in 2020, the household AGI has to be less than $206,000. What I'm not sure of is, if your household income is more than $206,000, are you still able to put money into an IRA, just not tax-free, and if so, is it a smart strategy, or is that a bad idea? Since when I take money out, I will end up paying taxes on my $6,000 contribution again?"

Brokamp: Well, I like to think of IRAs as really three types, there's the Roth IRA, whereas, when you put the money in, you don't get a tax break, but it grows tax-free, you take the money out, tax-free as long as you follow all the rules. There's the deductible traditional IRA, whereas, when you put the money in, you get a deduction, it grows tax deferred, but when you take the money out, you then pay taxes. If you make too much money, though, you may not be eligible for either of those, but you can always still contribute to the traditional IRA nondeductible, no deduction, but it still grows tax-deferred and when you take the money out, it's taxed then.

So, just to give you some numbers on which ones people are eligible for. So, the Roth, your eligibility starts to fade when you make a $124,000, if you're single. It's completely eliminated when you're at $139,000; if you're married, a $196,000. It starts to be reduced to $206,000; again, if you're married then it's eliminated completely.

If you are not covered by a retirement plan at work, any contribution to a traditional IRA is always deductible. So, if you don't have a 401(k) or a 403(b) and you're in a high tax bracket, the traditional IRA might make sense. If you are covered by a plan at work and you make a contribution to a traditional IRA, it may or may not be deductible and that is also subject to income limit. So, if you're single, your ability to deduct starts to go down at income level of $65,000; if you're married it's $104,000 it starts to go down.

So, really, the point is, you're always eligible for some type of IRA, it just depends on your income and whether you're covered by a plan at work.

One thing that John said was, he's basically asking, "Should I bother contributing to a nondeductible IRA, if I put in that $6,000, I didn't get a tax break, and then when I take it out, I'm going to have to pay taxes on it again."

That's actually not true. So, any nondeductible contribution you make to a traditional IRA, you're not going to be taxed on it again, that money will come out tax-free, it's the growth that you'll be taxed on. If you do not have significant amount of assets in traditional IRAs and you're not eligible for the Roth, you can make a contribution to the nondeductible traditional IRA and do what's called a backdoor Roth IRA. You basically do an instant conversion. I don't want to go into too many of the details, google it, you'll find plenty of articles, or even just call your discount broker, they'll know how to handle it.

But the bottom-line is, anyone who's working can contribute to an IRA, it just depends on what you're eligible for based on various things. And I think if you're eligible for one and you have the excess money, it's always a good idea to contribute.

Southwick: Alright. Next question comes from Gary. "What are the best defensive stocks in a volatile market? Best aggressive stocks with risk to buy now?"

Moser: So, that's a tough question, just because, there's so many stocks out there and, you know, these are unique times where it doesn't seem like there's necessarily always a correlation. But I do think, in a volatile market if you're looking for stability, something that is not going to go to crazy one way or the other frame your mindset around needs, think about things that people need as potentially ways to invest.

And so, I'm thinking of things like utilities and telecom, things like that, they can be a little less susceptible to these heavy market moves, given that their revenue streams are largely uninterrupted, right. I mean, most people aren't cutting off their power, right? You kind of need power. Most people aren't cutting off their cellphone service, so whether that's Verizon or AT&T. I mean, if you look at this stretch, Verizon, year-to-date down 12.5%; AT&T down 21.5%, compare that to the greater market, that doesn't really seem like it's so bad. And they also pay really healthy dividend yields that they can afford, again, because they're businesses that are providing services that people really do need.

So, I think, if you're looking for stability, think about needs.

If you're thinking about more aggressive stocks, I can give you a couple of ideas. One of the things I love to focus on in times like these, when everybody's kind of in the same boat. Look for the market leaders in their respective spaces, because they're the ones that typically emerge from periods of time like this stronger. They're typically the companies that pick up a little bit more market share, even if they just maintain essentially a flat market share, the fact that competitors are typically smaller -- I mean, we're talking about smaller competitors here, but typically you see either bankruptcies or businesses that lose business and revenue declines and whatnot. You look at the market leaders in their respective spaces, they tend to walk away from stretches like this even stronger.

A couple of companies that come to mind, examples there, think about something like Travel right now, I mean, obviously getting hammered for obvious reasons, I mean people aren't traveling, but when things get better, when the dust does settle, is still going to have this tremendous network of hotels, the biggest network out there. It's going to still be a great business that does a lot of business in the travel industry. So, that's a good example.

And then another one, I think, is Starbucks. Starbucks is a company that is going to be able to weather the storm financially. You know, they're going to come out on the other end even stronger I think given their history, given what they sell. Chris Hill, I think, put it very eloquently today. He said it's a legally addictive product. And you know, anytime you can sell a legally addictive product, you got to look at that as a potential investment opportunity.

And then, I'll just give you a last thing here. Some ideas as far as stocks that I've personally bought myself throughout this stretch here over the past month. Companies that I bought include Autodesk, which is in the AutoCAD software business. I did open my very own position in Starbucks finally, so that I can be invested in Starbucks alongside my daughter's. And Adobe, which is, I think everybody familiar with Adobe the PDF company, but it's so much more. And then also The Trade Desk, which is a programmatic advertising.

And I really do believe that when the dust settles, those are for companies that will emerge even stronger.

Southwick: Alright. Next question comes from Jeff. "I was wondering if it makes sense to discontinue my student loan automatic payment plan that provides an interest rate deduction, to begin sending my monthly payments through the Virginia529 plan? I'm thinking, yes, assuming the interest rate deduction provided by the lender for automatic online payment is small compared to the, I believe, 5.75% savings on Virginia taxes using the 529 plan would provide."

Brokamp: So, Jeff, let's remind the audience what a 529 plan is. When it was originally conceived, you would put the money in, you didn't get a deduction when you put it in, generally, at least on the Federal level, but then the money grew tax-free as long as you used it for qualified higher education expenses. Then a couple years ago they changed the rules so that you could use some of your 529 money for elementary and secondary school expenses. And then just at the end of last year, thanks to The SECURE Act, they now allow people to take out $10,000, lifetime limit, to pay off student loans.

So, Jeff is thinking, if I put money in my Virginia529 plan, something that I also participate in, I get a tax deduction. And that's true of about 30 of the 529 plan, every state has one, 30 of the states offer a deduction on the state return, not Federal, the state return if I put the money in. He basically wants to put the money in and then take the money out quickly to pay off his loans.

As opposed to what he's currently doing, he's on some sort of automatic payment plan, and most of these lenders as well as all kinds of other banks and lenders, will basically reduce your interest rate a little bit if you sign up for some sort of automatic payment plan.

So, my first thing to say is, I think you can do both, you can still stick with the plan, you can put money in the 529 and then take it out, because the money you take out of the 529, doesn't have to go directly to the loan, you can take it out and take it yourself and then write the check, just have it sit in your bank account. And at the end of the year, you'll get a 1099-Q indicating that you took a deduction.

I think we discussed in a previous episode, it's actually rather surprising at how little anyone follows up on whether you actually use the money for qualified higher education expenses or not.

I did call the Virginia529 plan today just to say, like, "Is there any limit on how long I have to leave the money in there?" And the person I spoke with said, "No," so. But you might want to check, everyone has their own plans, every plan has their own rules, so you might want to pay attention to that.

Also, for states that do offer this deduction, they often have what they call, recapture rules. And Virginia has one and many states have this. So, for example, if you donate to the Virginia529, get the tax deduction but then transfer that 529 to another state, it might basically want you to pay back the money you got for taking the deduction.

Some states do this if you use the money for K-12 expenses. The interesting thing here is, using money for student loans, it's so new that states don't have any rules about this yet. I even looked through the 60-page document for Virginia's 529 to see how they treat distributions for school loans, and there's a big disclaimer on the frontpage saying, "We know that there's no rules, but we haven't codified them yet, so stay tuned." So, I would just follow-up on that to make sure that there's not going to be any sort of tax deduction recapture if you use the money to pay off your school loan.

Southwick: Alright. Next question comes from Jerry. "Would you help me understand what investment managers mean when they recommend investing internationally? There are several reasons the term "international" seems confusing. First, if a company incorporates in a nation outside the U.S., is that sufficient grounds to call it an international stock? Does that make an American depositary receipts on the NYSE an international investment? Do managers believe opening a special brokerage account that permits trading on a non-U.S. exchanges is a must?"

"Second, if a stock is only traded on an exchange outside the U.S., not ADRs, is that sufficient to call it an international stock? What if the company makes the majority of its sales from clients in the U.S.? Finally, what if the top ten large cap American multinationals incorporated in the U.S. and traded on U.S. exchanges received the majority of their revenues from clients outside the USA, does that make them international stocks? For example, Microsoft makes more than 50% of its sales outside the U.S."

"Bottom-line it seems that the Vanguard Total Market Index provides plenty of global diversification without the word "international" entering into the calculation."

Moser: Excellent question, and I will begin with Jerry's takeaway there, the bottom-line. I agree with you that, yes, I think that the Vanguard Total Market Index provides plenty of global diversification without the word "international" entering in the calculation, primarily because so much money is made outside of the United States and other international locations.

So, defining international investing has certainly changed throughout the years and as the world gets smaller, thanks to technology, we're all more and more connected. And so, I think international investing is very much just wanting to make sure that you get exposure to the global economy, however you do that, it is a bit of a squishy definition. I think that I personally look at it today as most big companies out there are international in nature, because they make their money all over the world. It didn't always used to be that way, but it certainly is more the norm now, and that's how I view international investing.

I think the Microsoft example is a really good one. I think Microsoft can certainly be viewed as an international investment based on the revenue it generates and the locations it generates it. Starbucks, Apple, Coca-Cola, I mean the examples just go on and on. I think international investing today is much easier than ever before, because we've got companies that are making their money in so many different places.

Southwick: Alright. Next question comes from Sam. "If I sell a stock in my Roth IRA for a profit, are there any issues with rebuying the same stock immediately in my taxable brokerage account? I'd like to lock-in gains in the Roth to free up cash and move a non-dividend paying stock to my other account."

Brokamp: The quick answer is, no, there are no tax consequences to selling anything in your Roth. You don't have to pay capital gains and you can't take a capital loss. So, you go ahead and sell that stock and then you can rebuy it on the outside. And it sounds like what you're doing is asset location, and that is, putting the right investments in the right accounts for maximum tax efficiency and it sounds smart. If you have a dividend-paying stock and you're not yet retired, it's better to keep it in the IRA, use your taxable brokerage account for stocks that don't pay dividends.

Southwick: Alright. Next question comes from Vasu. "Following your advice, in an effort to be able to buy stocks on a discount in the situation like we are experiencing right now because of the coronavirus, each month I put aside a portion of my savings, about 5% to 7%, in a high-yield account to invest in a downturn. My question is, do you have any rules of thumb or strategies for when and how to invest in such a situation? Right now, I have about $7,000 saved up compared to my monthly contribution to my retirement account of $4,500. I primarily invest in a mix of U.S. and international index funds for my retirement savings. Retirement for me is 37 years away. So, when and how do you think I should invest the $7,000?"

Moser: So, my primary rule-of-thumb, and I've learned this from the Great Recession ten years ago, take it slow. No matter what, first-and-foremost, just take it slow. You're not in a race to try to get all of this money invested at once, because as we've seen, the market has moved a lot one way or the other for the last month here, so the opportunities are certainly there.

From there, I think you take the money that you have, a good idea -- and Ron Gross turned me on this idea a while back, is take that money, split it up into four or five tranches, you know, divide that out and say, "Okay, I've got four or five tranches of a $1,000 each and I'm going to put those to work on my given opportunistic timeframes, whether that's every week or when the market falls a certain percentage, whether it's 2%, 3% or 4%, you can determine that line for yourself.

But I think taking it slow and dividing that money out into tranches that you can get to work in there will help you do that.

Southwick: Alright. Next question comes from Matt. "I have very little debt and a six-month emergency fund in place. My wife and I are 30 and make good income, but should still get the full $1,200 per adult and $500 per child in the new stimulus plan. Can I take the $3,400 my family will get and invest it in my traditional IRA or my children's 529 plans and claim that as a deduction?"

Brokamp: The answer is, yes. So, from what I have read, the money that's coming from the stimulus plan will be automatically deposited into your bank account that was listed on your 2019 or 2018 tax returns. So, that money will just magically appear in your bank account and there's no rules against then using that money to put in a 529 or an IRA, the only limits for an IRA is it's $6,000 per year, another $1,000, if you're 50 or older, as long as you make that much money. So, as long as you're working, you can do that 529 there's really virtually no limit. So, go ahead and do that and you can still take the deduction for the 529 if your state offers that or for the traditional, if you meet the limits that I mentioned earlier in the show.

Southwick: Alright. Next question comes from Mary. "Why in the world is the stock market tanking on Monday and then up on Tuesday and then tanking again on Wednesday? There really has been no news, the virus has continued to spread globally and we won't have a vaccine for another 12 to 18 months. I know that a lot of this trading is done algorithmically, but there are still humans providing price inputs. I'm so confused."

Moser: Well, there are humans providing price inputs, but the word that was mentioned their "algorithms," that really is a big part of what's going on here right now. We are seeing a resurgence in high frequency trading and Virtu Financial, which is a publicly traded company out there, one of the largest high-speed trading firms out there actually said, that it expects to post trading income of around $515 million here in the first quarter, which is more than double the amount from the same period last year. And then Thomas Peterffy, who is the Founder [sic] of Interactive Brokers, noted that they have seen, I think, double the trading volume in this time compared with last year as well.

So, certainly high-speed trading is a big part of it. I think it's also worth noting that there are folks that short stocks, obviously, as they go down. When we see shorting at some point, they start covering and that can sometimes cause a little bit of a squeeze which sends the markets back up. So, it's not one particular answer, it certainly is a combination of a lot of things, but we're definitely seeing a resurgence in high-frequency trading these days.

Southwick: Next question comes from Charlie. "I'm a 20-year-old college student who has had the privilege of investing since I was 14." Oh, that's awesome. "When it comes time to finance a house or car, would it be wise not to touch my investments and to let them run. I have a Roth IRA and two taxable investment accounts, one taxable account holds a small mix of ETFs and some index funds, while the other has 40 individual stock picks. Upon graduating, my plan is to gradually build up my emergency savings while still contributing to my investments. Is it unheard of, given my age, to be practically all-in with equities and use these investment vehicles to save for a down payment and other life goals?"

Moser: I personally don't think it's unheard of to use those types of investments to achieve life goals. I mean, I certainly have invested in individual stocks and sold those positions in order to make, actually, a down payment on a house as well. And so, I think that that is definitely one way to look at it. And I like, particularly when you're talking about a house, to me, that is essentially taking money from one investment and you're allocating that money to another investment where the opportunity for you is a little bit better. And in this case, if you're putting a down payment on a house, I mean, yeah, you know, you're investing that money into something that's going to put a roof over your head for the next however many years you plan to stay in that house. So, it's another investment. It's just always worth remembering the tax implications that are involved whenever you do something like that. So, just keep that in mind whenever you do plan to liquidate and allocate that money to another form of investment.

Southwick: Alright. The last question is for Jason. "What is he most excited for on his future visit to Clemson University." Derek wants to know. "Jason, are you going to Clemson."

Moser: Yeah, I was so bummed, man. Derek is a guy on Twitter that he and I have talked back-and-forth about investing and stuff. And I was going to go down to speak with some folks at Clemson, some investors, some students and just talk a little bit about what we do, what I do, and you know, just talk stocks and stuff. But it's a postponement, it's not a cancellation, so I am looking forward to getting back down there. I went to college just an hour or so away from Clemson a while for college. So, for me, it's always nice to get back to South Carolina just because that's where I grew up.

I've got a cousin down there, Austin, she's still down at South Carolina and I don't get to see her very often and I was really excited to get back down there and catch up with her. But again, a postponement, not a cancellation. So, Austin, I'll be down there eventually and we'll go grab some dinner.

Southwick: Alright.

Brokamp: My sister went to Clemson. And back in the day it had a strong agriculture program and they had all their own homemade ice cream and it was crazy cheap and it was outstanding.

Moser: [laughs] I mean, they still have very strong agricultural program there. Clemson is a big school, a good school. I got a lot of friends that have graduated there through the years and so I'm just excited to get back down there and see it.


Southwick: Alright. Well, that covers it for our mailbag, but we can also head to the other mailbag. Okay, I don't know what's going on with the postcards, because again, we're taping this remotely from each of our houses and so there may be a stack of postcards from our listeners waiting at the office, but what I was able to do though is go to iTunes and see all the people who've left reviews for us lately.

So, other than MFFan saying that the host voice is painful, I want to thank Claire in Knoxville, Rebel, Smith, Drew, Jake, What2What, Finn, Dave, Matt, King Hoser, Bunch of Liars, and then a P with a couple of asterisks and an L -- I don't know, people pick hard to pronounce names on iTunes, but that's OK, I want to thank all of you for the reviews, it helps bump us up in the rankings which helps us attract new listeners and that's a good thing, especially now.

So, before we go though, as we've been doing during these troubling times, we've been closing by sharing our one recommendation for the week for our listeners to do or read or whatever to kind of take their mind off of the sadness that surrounds us. [laughs] That makes it sound so dark and sad at our house, I promise you, I'm OK. So, who wants to go first this week with their recommendation?

Brokamp: I'll go, just because I don't have a particular good recommendation, because I was so busy all week, so I'm more eager to hear other people's recommendations. However, I did stumble upon the Twitter account of Patrick Stewart @SirPatStew. And every day he's reading a sonnet with his outstanding English accent. So, highly recommend that.

Southwick: Good stuff, Bro, good stuff. Yes, so I just got done watching on HBO that limited series The Outsider, it was based on a Stephen King book. And so actually read the book a year, year-and-a-half or whatever. Really liked the book. I got to say, the series did the book justice. So, read the book or watch the series. Either way, I think it is super-entertaining, if you have any Stephen King inclinations whatsoever.

Southwick: Alright, Rick, how about you?

Engdahl: You pointed out that I keep picking music things and that's my brand here, but I'm also a photographer. And so, I'm going to recommends some fun with your iPhone or whatever camera you have around the house. And that is to do some, either backyard or indoor photography. So, I'm going to rifle through a couple of tips, things you might not think to do because you're just pointing at your kids or whatever. One is perspective angle, try shooting from on your knees or from lying on the floor, try different angles, see what you can find.

Light, instead of looking at the subject of what you're looking at, look at the way the light is spread across the floor or across the wall or whatever; cool things come out of that. Look for lines and shapes. Look instead of just a tree, look at the bark on the tree or look at the books on your shelf, you know, what kind of patterns are they making; look for that.

Macro, get up close. Take close-up pictures, as close as your camera will focus. Bad weather. Bad weather makes good photos. It's the perfect time to do portraits of your pets and family. Try different locations around the house, either inside or outside. All of these things can feed your Instagram account and all of your socials. Have some fun with your camera, try some different things, do some things you wouldn't normally do, have fun. And you can send those pictures to us by email instead of postcards in the interim, so.

Southwick: Oh, there you go. Well, we have so much luck when we ask people to send us anything that's not a postcard. Bro, how many emails did we get with people giving us their moneysaving piece of advice?

Brokamp: Not many. [laughs]

Southwick: As many as we got sending us our holiday traditions. That's OK.

Brokamp: [laughs] I think we got a few holiday traditions, actually, but --

Southwick: Did we?

Brokamp: Yeah.

Southwick: Okay. Alright. Well, my recommendation is an artist and a writer named Charlie Mackesy. Do you guys know this guy?

Moser: Nope.

Southwick: Okay. So, you can follow him on Instagram. He also has a recent book out called The Boy, the Mole, the Fox and the Horse. And the book is just a lovely series of illustrations and conversations between a boy, a mole, a fox and a horse. And they're all about acceptance and love and every drawing is just like a great big hug, as we all socially distance here.

So, again, you can follow him on Instagram @charliemackesy, and the book is, The Boy, the Mole, the Fox and the Horse. Highly recommended if you need a hug.

Alright. Well, that's the show, but I should probably say a disclaimer, huh, because we did talk stocks, so.

As always, The Motley Fool may have formal recommendations for or against the stocks we talked about today, don't buy or sell stocks based solely on what you heard here.

Jason, thank you so much for joining us this week. We really appreciate it.

Moser: Thank you for having me; it's always a pleasure.

Southwick: Yeah, well, we made it work. We're trying to make it work doing it all remotely. So, I hope our listeners aren't suffering too much as we kind of blunder through this.

Alright, the show is edited socially by Rick Engdahl, I don't know, usually Rick helps me come up with what my adverb is.

Moser: Socially distantly. [laughs]

Southwick: [laughs] Socially distantly by Rick Engdahl, our email is [email protected]. Again, send us those pictures and Christmas traditions and moneysaving tips. For Robert Brokamp, I'm Alison Southwick, stay Foolish, everybody.