Source: Bloomberg
By Charlie Wells

The money is pouring in.

Stimulus, that is: $242 billion sent to 90 million households, with many deposits hitting bank accounts on Wednesday. It’s the largest of the three stimulus rounds, with up to $1,400 sent to each eligible person and child. Still, the income cutoff was lower, meaning millions who previously got checks missed out.

Many Americans will spend this cash on food, shelter and other necessities. Even more will put it into savings. Or they will donate it to those in need.

But what about investing? The vaccine rollout in the U.S. is chugging along (impressive numbers here on our vaccine tracker), the economy is improving and stocks rose to record highs on Wednesday. Some consumers fortunate enough to have their basics covered are thinking about using the money on everything from electric bicycles to stocks.

“The timing of this check hopefully might be aligned with what is a closer light at the end of the tunnel for people,” Elliot Pepper, a financial planner at Northbrook Financial in Baltimore, told us earlier this week.

Longtime readers know we regularly ask advisers for their thoughts on where to invest $10,000 or even $1 million. Why not $1,400? Here’s what they told us:

First off, be smart.

“If you don’t get these little windfalls too often, if this is what encourages you to start a cash reserve that would be a first place I would look at,” said Scott Cole, president of Cole Financial Planning and Wealth Management in Birmingham, Alabama. “It’s probably the least exciting, sexy approach to using a stimulus, but it’s probably the most prudent because hopefully we don’t have another pandemic in our lifetime but we will have something.”

Then, think about shorter-term needs.

What upcoming events or goals do you need to prepare for? If you’re thinking of investing, keep your time horizon in mind, said Chris Struckhoff of Lionheart Capital Management, based in Irvine, California. The closer you are to the goal, the less risk you should take.

For some more conservative picks for his clients, Struckhoff told us he has added small allocations to preferred and convertible bond ETFs to bring in more yield with Treasury yields so low.

Kevin Hegarty, principal at Hegarty Advisors in Garden City, New York, told us that for conservative investors, he likes small-cap value stocks.

You might also want to reconsider your relationship with the question “Should I invest in Bitcoin?”

“People talk about, ‘Should I invest in Bitcoin, should I invest in Tesla,’ and that’s the wrong way to construct the framework around investment decision making,” said Ryan Frailich, founder of Deliberate Finances in New Orleans. “I understand a lot of people want to reach for those things because they’re exciting and in the news.” If you are curious about getting into cryptocurrencies, here are a few things to keep in mind about Bitcoin and others.

And finally, if you can afford to take risk:

Advisers say you could consider a few of these options:

  • A more targeted ETF.
    “If you are bullish on clean energy based on President Biden’s plans, an ETF like the Invesco Solar ETF (TAN) or the iShares Global Clean Energy ETF (ICLN) could be a way to enhance return if your speculation comes to fruition,” said Dave Alison of Palo Alto-based Alison Wealth Management.
  • Value stocks in sectors such as industrials and financials.
    “Once these segments of the market start to move, they become momentum stocks, and they become the replacement for growth stocks,” said Robert Cheney of Palo Alto-based Westridge Wealth Strategies.
  • Some international exposure.
    Matthew Benson, of Chandler, Arizona-based Sonmore Financial, uses the $193.3 billion American Funds EuroPacific Growth Fund (AEPGX) to give clients exposure to international markets. As of Dec. 31, just over 40% of the revenues in the fund’s holdings came from Europe, followed by emerging markets (31.9%).

Some food for thought. But all offered with the massive caveat that nearly everyone we spoke with this week said that if you can’t afford to lose the money, don’t invest it. Save it or use it to catch up financially. — Charlie Wells