Finance professionals offer investment advice during the coronavirus crisis

The economic shock of the coronavirus pandemic has caused unprecedented conflict.

More than 22 million Americans have lost their jobs, markets are turbulent and Americans, stressed by all this uncertainty, are left with many unanswered questions.

Two of CNBC’s Financial Advisor Council members — Lazetta Rainey Braxton, co-CEO of 2050 Wealth Partners, and Carolyn McClanahan, certified financial planner and founder of Life Planning Partners — along with Josh Brown, CEO of Ritholtz Wealth Management, listened to the viewers and answered their questions on CNBC’s “Markets in Turmoil” on Monday night.

Here’s how these experts answered viewers’ most pressing concerns.

How do investors determine their asset allocation and level of risk?

According to McClanahan, two factors should determine portfolio allocation. The first is, how long do you have before you need to use your money? If you need your money short-term, meaning you’re approaching retirement age or just retired, McClanahan says investors should be consecutive and reduce their risk.

Young investors who can handle market fluctuations should be more aggressive with their allocations.

Braxton says now is a good time to determine your risk tolerance. Investors had a wide range of reactions to this market. Some might be indifferent to roller coasters right now, while others fear they won’t be able to make it through their retirement years. Braxton said to use your reactions as a way to gauge your tolerance, then couple that with your schedule and goals.

While there is software available to help ease investor fears, the No. 1 test an investor must pass to understand their risk tolerance is the sleep test, according to Braxton. Can you sleep at night? If not, you may need to adjust your investment allocation.

But risk tolerance is not static; this too changes with your age and goals. McClanahan suggests investors always keep track of how much they could lose, especially when markets rally. Being aware of how much you could lose, especially during the rally, will prepare you for a market drop.

How should I manage my investments in my 401(k)?

McClanahan’s first piece of advice to 401(k) investors is to make sure fees are low. If not, talk to your employer about reducing them.

Next, make sure you are diverse. McClanahan acknowledges that this can be difficult for investors who don’t have a lot of money invested in their 401(k) and are likely on a lifecycle fund. As you put more money into your 401(k), you’ll need to figure out which asset allocation is right for you.

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How do I determine how much cash benefit I should have?

There are many advantages to being a professional investor, but according to Brown, there are advantages to being an individual investor. Unlike the pros, individuals don’t have to respond to quarterly income reports. “As an individual investor, I’m only answering to myself, because it’s decades away.”

For young investors, volatility is the source of future returns. Money should be saved in savings accounts where it will be most liquid. Young investors should take as much risk as they can tolerate. However, older investors may want to sit on more cash, as they will likely need to start withdrawing soon. “Risk depends on what you can afford to lose, and young people have a long window of time. They can take more risk and ideally in the long run it will make them a lot of money.”

McClanahan reminded investors that when they invest in stocks, they invest in companies. Every year some companies fail, she says, but most succeed, and unlike the 2008 crash, this stock market crash was triggered by a global pandemic. Just because a company’s stock price fell doesn’t mean the company was in bad shape, she says.

What should I do if I need to take out a loan or withdraw from my 401(k)?

According to Braxton, the first thing everyone should do before taking out a loan is figure out exactly how much money they need to live on. You don’t want to withdraw more than you need, because not only are you the borrower in this case, but you are also the lender. The next thing you’ll need to do is check with your employer how much you can withdraw and what the interest rate on repayments will be.

The recently passed CARES Act now allows you to borrow up to $100,000 (the previous loan limit was $50,000) from your 401(k) and delay repayment for up to a year. After you borrow, you’ll usually have to repay the loan within five years, depending on the terms of your 401(k) plan. Under the CARES Act, loan payments due in 2020 can be delayed for up to one year from the time you take out the loan. However, if you cannot repay the loan within the time frame specified in your plan, your outstanding balance will be taxed as a withdrawal and you will also have to pay a 10% early withdrawal penalty.

What are you saying to investors to reassure them right now?

Many investors are worried about what the future holds. Braxton reassures its clients by showing them a slide of market performance over the past century. Over the past century there have been crashes, but each time the economy rebounds and the stock market grows. “If you survived 2008, you can get away with it,” she says.

Despite all the volatility, however, McClanahan still sees a silver lining: The coronavirus pandemic has exposed many weaknesses in our markets, she says, adding that the post-coronavirus recovery offers us the opportunity to build stronger and more fair.

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Disclosure: NBCUniversal and Comcast Ventures are investors in Tassels.