“Always have an exit plan; Establish Guardrail Rules” With Jason Hartman & Ken Rupert

always have an exit plan. Before investing, establish “Guardrail Rules.” Guardrails don’t stop you from crashing; they stop you from going over the cliff. That is the concept of Guardrail Rules. It doesn’t mean you will never suffer a loss, be it on paper or in the wallet, but it does mean that you will […]

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always have an exit plan. Before investing, establish “Guardrail Rules.” Guardrails don’t stop you from crashing; they stop you from going over the cliff. That is the concept of Guardrail Rules. It doesn’t mean you will never suffer a loss, be it on paper or in the wallet, but it does mean that you will not suffer a catastrophic loss. Complacency caught me napping when I first started investing. I bought a stock and never looked at it again. I had several thousand shares of the stock and the company suffered a devastating fire at it main plant and the company went bankrupt. I lost tens of thousands of dollars. Had I established a stop-loss guardrail rule, I would have been able to salvage some of my capital. I was blindsided and got caught in the “it will come back” trap.

Asa part of my series about “Investing During The Pandemic”, I had the pleasure of interviewing Ken Rupert.

Ken Rupert is an author, an educator, a strategist, and someone who lives by the principles and strategies he teaches in his Financial Self-Defense Training course. He provides strategic financial coaching for individuals through his Financial Self-Defense training sessions and offers Financial Self-Defense seminars for small and medium size businesses. He is the author of the Financial Black Belt Academy’s Financial Self-Defense Training Guide, a 2nd Degree Financial Black Belt and the owner and founder of the Financial Black Belt Academy.

Thank you for doing this with us! Before we dig in, our readers would like to learn a bit more about you. Can you tell us the “backstory” about what brought you to the finance industry?

In2001, my wife and I welcomed our first (and only) child into the world. The birth of a child is always a life changing event, but my wife and I went from being new parents to being caregivers for a child with special needs. Our son was born with a rare genetic disorder known as Soto’s Syndrome, complicated by a birth trauma that resulted in Cerebral Palsy. It didn’t take long before we realized that he would need some level of intervention for the rest of his life. As the reality of our situation set in, I realized that I would no longer be saving for our retirement, I would be saving for my son’s care forty years after our deaths. How do you plan for an economy that is not yet known for needs that are yet to be determined? This reality drove me to learn everything I could about investing and personal money management. As a martial artist, I have worked my way through the ranks to 1st Degree Black Belt. As a self-made millionaire, I understand the financial principles, strategies, and goals that turn an income into wealth. These two worlds seemed to fit together perfectly and my Financial Self-Defense process was born. Today, I teach others the financial principles, strategies, and goals of the Financial Black Belt. My goal is to increase the financial acumen of others using the “belt system” of HapKiDo to help them achieve financial stability.

Can you share with our readers the most interesting or amusing story that occurred to you in your career so far? Can you share the lesson or take away you took out of that story?

The most interesting thing that has transpired since beginning this journey of being a personal financial wellness coach happened on April 18, 2019. I went back to my alma mater, Hood College in Frederick, and participated in a pitch competition. Up until that moment, I wasn’t sure if the entrepreneurial idea of Financial Self-Defense would be viable. As the night went on, I was blown away by the level of competition. As my wife, son and I sat in the participant’s seats, I was unsure of the outcome, but my wife was confident I would win. That night, my Financial Self-Defense business model was awarded First Place. That experience literally launched the Financial Black Belt Academy and my personal financial wellness program known as Financial Self-Defense. Earlier that same day, I received word that my Financial Self-Defense Training Guide was published on Amazon. So, April 18th has become a special day for me and my program.

Are you working on any exciting new projects now? How do you think that will help people?

I am working on developing an app that will put the power of the Financial Self-Defense program in the hands of everyone. We are in the early stages and are working out all of the details, but it’s a pretty exciting process. The idea of the program is that as a person becomes proficient in the belt level financial principle, strategy, and goal, he or she is promoted to the next belt level. So, someone who has achieved the level of Financial Orange Belt, which is having an Emergency Fund of 3 to 6 months of expenses, will have to pay off all of his or her consumer or unsecure debt in order to be promoted to Financial Green Belt. The app will track a person’s progress and promote him or her when all belt level curriculum has been met.

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?

So, my greatest helper has to be my wife. One should never underestimate the power of having a spouse that supports you in a dream, even when that dream is not his or hers. I have the privilege of being married to my editor. I love to write. I have written everything from self-help books, to books about God, to poetry, and of course financial strategies. I have 13 published books (2 are out of print) and I would not have one book published if it were not for her ability to edit. Mind you, she doesn’t necessarily enjoy reading my manuscripts, but she supports my writing by editing every manuscript. I can honestly say that she has read every book I have ever written. It is pretty special when someone is committed to your success as much as you are. When she first agreed to edit my books, I would get upset when she suggested I change the way I phrased a thought or a concept. However, after a while I began to see how she was trying to make the book more “readable”. I knew what I was writing, but she wanted the reader to understand it. That helped me to think things through and see my material from the perspective of the reader. I have sold a number of books over the years and I have a great deal of gratitude for the time and energy she has committed to editing my work. On top of this, she is a great mother and caregiver to our disabled son. Her support allows me to spend hours teaching others the principles of Financial Self-Defense, whether I have to travel to a face to face meeting or I have hours of on-line coaching sessions. For her, I am truly grateful.

Let’s shift a bit to what is happening today in the broader world. Many people have become anxious from the dramatic jolts of the news cycle. The fears related to the coronavirus pandemic have understandably heightened a sense of uncertainty and loneliness. From your experience, what are a few ideas that we can use to effectively offer support to our families and loved ones who are feeling anxious? Can you explain?

One of the tools that many businesses have turned to, and I have started to employ in my own coaching practice is online meetings. I used to only coach face to face because I like the personal interaction. But with the current circumstances, I have moved to holding all coaching sessions on Zoom. From a personal perspective, get your family to sign up for Zoom and schedule some time to meet via computer. It’s a great way to stay in touch when you cannot be there face to face. My parents are both in their 80s so I check in on them every couple of days via phone or text message just to make sure they are doing alright. They are not able to use the technology as well as I can so I have not tried to hold a Zoom meeting with them, but I think the key is to check in with them often. From a business perspective, being able to conduct on-line meetings is critical at this juncture. As I indicated before, I prefer face to face meetings. However, being able to hold on-line meetings allow me to see my clients, share my analytic tools, and actually see how they are doing. Sometimes being able to see someone’s face can reveal that person’s level of anxiety. Presenting a calm, knowledgeable, and reassuring tone can help reduce the level of fear and anxiety about the current situation and what is to come in the days ahead.

Ok. Thanks for all that. Let’s now jump to the main core of our interview. As you know the stock market and the economy in general have become extremely volatile and uncertain. Many people “dollar cost average” and put aside a monthly sum into a long term savings plan for retirement, college, or a home purchase. If a loved one or a client came to you and said, “I have been saving and investing $500 every month in an S&P 500 index fund. Over the next few months until the dust settles, should I be doing something else with my money?”, what would you say to them?

I would start by asking questions. I am not one to just give advice or direction without first understanding where the person is with goals, risk tolerance, and his or her collective financial health. If the person has only been investing in the S&P 500 index fund, I would encourage him or her to consider diversifying some of his or her assets in a different direction. I would resist selling off any of the existing investment since there is no reason to make a paper loss a realized loss. However, going forward I would work with the person to develop a new strategy and redirect future contributions towards a sector and industry that has become attractive at the new market lows. If the person has a higher than average risk tolerance, I would introduce the person to alternative investments designed to take advantage of a market rebound. I would also teach how to increase cash flow by introducing options trading. However, if the person has a lower risk tolerance, I would help the individual identify good companies at discount prices. All of this is done through the eyes of my proprietary analytics process. Of course, the first thing I would want to see is the overall financial wellness of the person. As I said, I would start with questions to get a more comprehensive picture of the person’s financial health. The key to a person’s financial success is the measure of his or her financial strategies and goals. If you set the right goals in the current environment and develop and employ the correct strategies for navigating the current environment, you will come out on the other end in much better shape.

Eventually the economy will recover and rebound. Certain sectors, like travel and hospitality might be hurting for a while. But other sectors, like technology and healthcare, might do very well. If someone wanted to prepare today to take advantage of the future recovery, what would you suggest they do?

I use a proprietary analytics process for identifying sectors, industries, and individual stocks that have a higher propensity to excel in a recovery. The key to any recovery is understanding the specific driver of the market correction, bear market, or recession. It is obvious that hospitality and entertainment stocks are going to be the last to recover, but even in the worst types of market conditions, there are performers. I would also say airlines will also be hit hard and find recovery very difficult. The differentiator between traditional financial planning and the Financial Self-Defense process is the former does the investing for the client, the later teaches the individual how to analyze and identify market opportunities in any market condition. I also would advise that anyone seeking to begin or continuing to invest during a vicious bear market to establish investing rules that limit risk. During times of uncertainty, Consumer Staples and Utilities are usually solid performers since everyone needs food and personal care products, running water, and power. Tech, telecommunications, and bio-tech are good recovery industries since 5G is on the doorstep and the current search for a treatment and vaccine are paramount.

Are there sectors that provide exciting and lucrative investment opportunities today, specifically because of the volatility and uncertainty?

This is where you need to think outside the box. I have analyzed everything associated with food distribution and retailers. As an example, I like the Consumer Staples — Food & Staples Retailing sector/industry. I look for stocks that will have increased EPS, revenues, and strong forward guidance due to the current circumstances. With people panic buying, these stocks stand to have improved same store sales. I also like the Information Technology — Semiconductors & Semiconductor Equipment. 5G stocks and the semiconductors required to make 5G work will be a good recovery play. I also believe that Health Care — Pharmaceuticals will be big. However, a word of caution here. Trying to pick the winner in the Health Care — Pharmaceuticals sector/industry will prove to be difficult. Therefore, I would stick with the bigger, more established companies and leave the speculation to the risk takers. I would also keep in mind that Health Care — Pharmaceuticals might fade as soon as the volatility decreases and a treatment/vaccine is identified and the threat is reduced. Now, more so than the specific investment you choose to buy is how you choose to buy it. This is where developing a strategy is important. In Bear Market conditions I tend to lean more towards using an options strategy when seeking to purchase shares of a company. I can’t go into all of the detail here, but using options to eventually purchases shares of stock reduces initial risk, secures winning positions at the strike price, & delays a sure purchase for up to 4 weeks. Once you have performed the technical analysis and identified your target stock, use options to enter the position.

Are there alternative investments that you think more people should look more deeply at?

Yes, however, rather than alternative investments taking on the form of stocks, I look towards derivatives; that is investments that derive their value from other investments. These can be as simple as trading option contracts or as complicated as trading leveraged ETFs. Times of high volatility create times of high opportunity. Volatility is a friend to those who are well versed in option and leveraged ETF trading and is a foe to those who live by the buy and hold mentality. The great thing about volatility is that an investor can use both Calls and Puts to profit. Timing is key so trading options or using leveraged ETFs is not for the faint of heart. And one does not want to cut his or her teeth on options and leveraged ETFs in the middle of a highly volatile time. These things are better learned in bull markets. However, once a person is proficient in options trading and how leveraged investing works, he or she can do quite well in the heart of a bear market.

If a person in their thirties and forties came to you today and said that they have $10,000 that they want to put away today for a long term investment what would you advise them to do with it?

First, I would ask if that person had an emergency fund. If he or she did not have an emergency fund, I would tell him or her to get a money market account and put it there. If he or she had an emergency fund, I would ask that person if he or she has any outstanding debt. The financial condition of a person dictates his or her ability to invest. Investing takes personal discipline, willful commitment, extreme patience, unwavering tenacity, intestinal fortitude, and unrelenting endurance. If a person has problems in the most basic personal financial behaviors, he or she should not be investing. Investing begins with having extra financial resources that are not required at the immediate moment. If obligations, necessities, and commitments require all of a person’s income and then some, the person should use the money to reduce those expenses first. Assuming that the person has his or her personal finances in order and does not have an immediate need of the money, I would recommend that the person put the money in a Roth IRA. Of course there are IRS limits for a person in his or her thirties or forties, but I would start there. Then I would suggest he or she put the rest of the money in a brokerage account. In the Roth IRA, I would help the person identify a good dividend paying stock that is undervalued by teaching him or her how to identify these types of opportunities. In the brokerage account I might suggest finding a strong preferred stock that can be used to generate additional cash to invest. Again, it all depends on the person’s goals, risk tolerance, and his or her collective financial health.

Ok, thank you! Here is a more general finance question. You are a “finance insider”. If you had to advise your adult child about 5 non intuitive essentials for smart investing what would you say? Can you please give a story or an example for each?

First, do your analytics. All the information an investor needs is available today on the web, but knowing where to get the information and understanding what the information means are two different things. Even if a person works with a traditional financial advisor, the person should still know market dynamics and how to analyze the numbers. This is a critical point. Most people wouldn’t hand over the keys to their $30,000 vehicle to a neighbor down the street, but they will hand over tens of thousands of dollars to an unknown fund manager and hope that person makes the right decisions. And in a bear market, all bets are off. Fund managers are notorious for bragging about gains in a bull market, but are quick to say “No one can predict the market” in the throes of a bear market. So, yes, know where to find the numbers, but also understand what the number are saying.

Second, don’t invest in anything you don’t understand. Blind investing has destroyed many portfolios. I have a process for analyzing a person’s 401k that helps that person understand what options are available and how to decide which investments can best meet his or her goals. I teach individuals how to deconstruct the mutual funds within the 401k to identify redundancy and dilution. And the worst investments in a 401k are the targeted date funds. These are nothing more than mutual funds of mutual funds that take advantage of the average employee. However, if after understanding what these products are and how they are invested the investor still wants to invest in these types of products, he or she will at least be making an informed decision.

Third, always have an exit plan. Before investing, establish “Guardrail Rules.” Guardrails don’t stop you from crashing; they stop you from going over the cliff. That is the concept of Guardrail Rules. It doesn’t mean you will never suffer a loss, be it on paper or in the wallet, but it does mean that you will not suffer a catastrophic loss. Complacency caught me napping when I first started investing. I bought a stock and never looked at it again. I had several thousand shares of the stock and the company suffered a devastating fire at it main plant and the company went bankrupt. I lost tens of thousands of dollars. Had I established a stop-loss guardrail rule, I would have been able to salvage some of my capital. I was blindsided and got caught in the “it will come back” trap.

Fourth, neutralize financial threats and seize financial opportunities. These two are directly related. The premise of my Financial Self-Defense program focuses on applying this principle from my martial arts training. In martial arts, the principle is to recognize the threat and neutralize it. Then, seize the opportunity created by stopping the attack. It is a defense / offense concept. My book Financial Black Belt Academy’s Financial Self-Defense Training Guide discusses how this principle is realized. When a person acts in a threatening manner, you must recognize if the threat is directed or could be directed at you. If it is, you must prepare to neutralize it by attacking the attacker when the threat escalates to a physical altercation. Once you neutralize the attack, you strike back to end the attack. How this applies to investing is easy. In December I wrote about a NASDAQ bubble (see article on LinkedIn). I anticipated a bubble popping after the first of the year. In December I moved most of my assets to cash. I saw the threat, recognized it was focused on me, and I neutralized it. Now, I am positioned to capitalize on one of the worst bear markets in recent history and that is what I have been doing.

Finally, be financially creative. There are no limits to how a person can create wealth. I have taken advantage of so many opportunities to create wealth it is hard to give just one example. One of my favorites has to do with my time spent in the practice of numismatics. I used to buy Silver Eagles from the United States Mint. My driver was to have a complete set of uncirculated and proof strike Silver Eagles. In 1995, the United States Mint celebrated the Silver Eagle program by introducing a special five-piece 10th Anniversary Eagle proof set. The 10th Anniversary set was comprised of four Gold Eagles and a special one-ounce proof Silver Eagle bearing the [W] mint mark. The 1995-W would be the first Silver Eagle to bear the W mint mark and would have the lowest mintage for any Silver Eagle ever produced by the U.S. Mint. Knowing that this issue would be limited to 25,000 sets, I paid the $1,000 for the set just to get the special 1995-W Silver Eagle. I sold the gold coins almost immediately for $900 and kept the Silver Eagle at the cost of $100. In 2003 I sold the 1995-W Silver Eagle for $4,000. A coin that cost me $100 was sold for $4,000 in just 8 years. That is financially creative.

Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?

This is an interesting question on which to end our conversation. And I guess if it is not too self-promoting, I would like to use a quote from my book Poetry and Proverbs: Thoughts of a Creative Intellectual. “The level of personal output must be met or exceeded by a greater level of input for equilibrium to be maintained, for every investor knows that when an investment loses 50% of its value, it requires a 100% gain to break even.” As a parent of a special needs child, who is now 19 years old, I know what it means to have an empty physical, intellectual, emotional and spiritual tank. My best days are those days when people pour more into those tanks than my circumstances take out. It also reminds me that there are those around me who need their tanks filled and I can be the one to do that. Life is akin to cash flow. A positive cash flow means more comes in than goes out. In this, life can be a positive experience when a person has more love, more empathy, and more hope flowing into him or her than he or she has being taken out. And as the statement says, when a person losses 50% of his or her positive inflow, he or she will need a 100% gain in order to break even. Life is an exhausting experience for some. Sometimes, things don’t work out the way you would want them to. I know, life as a caregiver to a special needs child is isolating, exhausting, and worrisome. Moments that fill the heart and replenish the soul are few and far between. So if you have what someone else needs, and you have the ability to give it away, do so; without hesitation, without reservation, and without requiring repayment.

You are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger. 🙂

The movement I would most like to inspire is a personal financial wellness renaissance through the use of my Financial Self-Defense program. I would like for people to pursue their individual Financial Black Belts. Anyone standing outside a martial arts training studio doesn’t think, “I know how to throw a punch and kick my legs. I think I will go inside and challenge the 7th Degree Black Belt to a fight.” That person doesn’t think that because, even though he or she might be able to throw a punch and kick his or her leg, he or she instinctively knows that the master is more effective and efficient at neutralizing a threat and seizing an opportunity. Yet people believe that because they can earn an income and pay their bills (even if it’s not on time), they can manage personal finances effectively and efficiently. The problem is, many lack the financial acumen necessary to become prodigious accumulators of wealth. Average people can become extraordinary wealthy if they just knew how to take advantage of the financial opportunities that exist. I would love to inspire the Financial Black Belt designation as a standard for financial planners. The 1st Degree Financial Black Belt is a Net-Worth Millionaire. The 2nd Degree Financial Black Belt is a Financial Assets Millionaire. And so on and so on up to the level of 9th Degree Financial Black Belt. By requiring a financial planner to be a Financial Black Belt, he or she would have to live the process from Financial White Belt to the Black Belt levels. The cool thing about martial arts is that those who train can achieve the rank of Black Belt. I earned my 1st Degree Black Belt in HapKiDo at the age of 55. I will be 57 when I test for my 2nd Degree. Shout out to Global Martial Arts Academy in Hampstead MD and Master Joe Borucki who is my HapKiDo mentor. My point is this. Anyone can BECOME a Financial Black Belt if he or she is willing to TRAIN, just as I was able to become a 1st Degree Black Belt at 55 after 4 years of training. I believe with my whole heart that if you give a man a fish, he eats for a day. If you teach a man to fish, he eats for a lifetime. The fish I offer is Financial Literacy. I don’t want to manage other people’s money. I want to teach them how to manage their own money. My passion is to have hundreds of thousands of Financial Martial Artists neutralizing financial threats and seizing financial opportunities.

Thank you for the interview. We wish you only continued success!

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