“It’s never too early.” With Jason Hartman & Austin Costello

Forcing yourself to invest a little bit each month is better than waiting until you feel like you have “extra cash to invest”. We all know how easy it is to spend cash once we have it. If you are having trouble with starting to save and invest, set up a direct deposit account where […]

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Forcing yourself to invest a little bit each month is better than waiting until you feel like you have “extra cash to invest”. We all know how easy it is to spend cash once we have it. If you are having trouble with starting to save and invest, set up a direct deposit account where a portion of your paycheck automatically goes. You need to start somewhere, and it’s amazing what a small amount contributed monthly can grow to down the road.

As a part of my series about “Investing During The Pandemic”, I had the pleasure of interviewing Austin Costello, CFP®

Austin is the Director of Client Experience, and a financial advisor for InvestRx — an online advisory firm developed specifically to help healthcare professionals plan, save, and invest. He has a passion for education and a talent for breaking down difficult financial concepts. Austin specializes in working with young people who want to take control of their finances.

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?

Itook the long-route into the finance industry. I have always been interested in personal finance, but wound up getting my degree in Civil Engineering and took a job as an engineer.

However, as my friends continued to graduate college and enter the “real world” I noticed that most of them had an astounding lack of knowledge on basic financial and investment principals.

That may sound rude, but here’s the thing: I knew it wasn’t their fault. They had just never been taught about money in a way that made sense.

Upon having that realization, my “strange” fascination with personal finance became a passion, as I desperately wanted to explain the importance of saving and investing to people in my generation.

After that, I left my engineering career and took a job at an independent financial planning practice. I went from assisting with client reviews, to taking on my own clients, to joining InvestRx as the Director of Client Experience.

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?

It’s amazing what happens when you sit down and start talking to people about money. Some people tend to get very trusting and begin to divulge other parts of their life that they think may be of importance.

One retired client I worked with shared with me a written relationship agreement that they had formed with their significant other. It stated that they did not plan to marry or comingle finances, but they would be exclusive to each other physically and otherwise.

I always appreciate a trusting relationship with my clients, but sometimes you just get a little bit too much information.

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

Yes! As a relatively new company, we are working on new projects all the time at InvestRx. We just launched our Financial Roadmap service, which offers an extremely affordable way for someone to get expert advice on their financial concerns.

There are a lot of places to invest online, but our service puts the plan first. Even if you don’t have extra cash to invest, you can use the Roadmap to strategize student loan payments, save for a large purchase, manage your charitable giving, or plan for retirement.

Every Roadmap session starts with a data-gathering worksheet and a 1-hour call with a licensed financial advisor, where we discuss the financial goals that the client wants to address. We then put together a custom report and a video explaining our recommendations to help the client reach their goals.

We’re really proud to offer such a customized and in-depth level of service for $249.

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?

I would have never entered the finance industry if it wasn’t for my Dad. When I was growing up, he would sit me and my brothers down and teach us about the stock market, the importance of saving, and the virtue of delayed gratification.

It’s those qualities that allowed me to see the shortcomings in my peers’ financial education, and gave me the baseline knowledge to do something about it.

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?

I was talking to a friend the other day and he said something along the lines of “It’s crazy. You turn on the news and it seems like the world is coming to an end, and then you walk outside and everything feels normal.” I think that sums up our current situation pretty well.

At this point, we know that there are a handful of things we as individuals can do to help slow the spread of COVID-19. Stay home as much as possible. Keep your distance from other people. Get tested if you have symptoms. Wash your hands frequently. No amount of panic will aid in the fight.

I’ve also found it extremely encouraging to look around at all of the kind-hearted actions that happening as people learn to connect in different ways. Businesses are donating medical supplies, people are singing from their balconies, and friends are interacting with video conferences. Personally, I’ve recently talked to friends that I hadn’t touched base with in years.

I know this situation is very serious, but it’s important to recognize the good that is happening in the world.

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 say that if you can afford to continue investing the same way, you absolutely should. Look at it this way:

Think about what the S&P 500 is. It’s an index of the 500 largest companies in America. When you invest in an S&P500 index fund, you effectively own a fractional share of each of those companies. Now, when the market drops 35% based on coronavirus fears, ask yourself “are these giant companies really worth 35% less than they were 3 months ago?” You’ll probably say “no.”

So, if you had the opportunity to buy a great company at 35% less than it’s actual value, would you do it? You’ll probably say yes. That’s what you’re doing when you invest while the market is down.

You can also look at things from a historical perspective. Over its 90+ year history, the S&P 500 has averaged around 10% per year. Over a period of time that included the great depression, multiple wars, recessions and diseases, the market has always recovered and always managed to reach new highs.

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?

Like you said, we could see an array of recovery trajectories across different sectors, and it’s difficult to say how each will respond. The infusion of government stimulus money adds an additional layer of complexity, as companies that may not have survived are being propped up until things re-open.

Because of this uncertainty, I would not recommend throwing all your chips in one pile. Having a well-diversified portfolio of U.S. equities will put you in a good position to participate in the recovery.

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

Any sector that provides “exciting” or potentially lucrative investment opportunities will also hold a fair amount of risk. However, there are sectors that we can look at and assume, based on historical data, that they are set up for a proportionately large recovery.

US Small cap stocks traditionally outperform the S&P500 over the long run. However, the index lagged in 2019 and was hit harder than large caps during the COVID-19 selloff. There’s good reason for this, as small businesses were hit the hardest by cities shutting down.

However, with the influx of stimulus money and the innovation that has occurred due to social distancing, small companies could be staged for a great comeback once things clear up.

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

To be honest, I’m pretty straight-forward when it comes to investing. I work with mainly younger clients, so the most important thing is that they’re exposed to the stock market. A well-rounded portfolio of mutual funds or ETFs does the trick for the majority of people.

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?

In the end it would depend on their attitude toward risk and if they had other money invested, among other factors, so I would have a few follow-up questions; but for these purposes, I’ll assume that they are completely open to whatever I recommend and this is the only money they plan to have invested.

If they plan to have that money invested for over 5-years, and they don’t have any consumer debt, I would recommend that they create a 100% equity portfolio. It would be heavily weighted toward U.S. Equity (versus international), and well diversified over large, mid-sized, and small companies in various sectors of the market, using mutual funds or ETFs.

The type of account they invest in is also very important. Depending on their tax situation and income, there’s a good chance that I would recommend using a Roth IRA to hold the investments that I mentioned above, so that they could receive tax-free growth in the future.

As I said before, I don’t believe in putting all of your chips in one pile. Over history, having exposure to multiple market segments has allowed for more stable and consistent growth over time.

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?

  1. It’s nearly impossible to time the market, and your emotions are just about the worst indicator of what you should do. That may sound extreme, but we’ve seen it to be true over and over again. We always have the most clients call wanting to sell right before a recovery. We also have a high concentration of people calling and wanting to buy “hot stocks” that they heard about in the news right before a correction. Stick with Warren Buffett’s advice “Be fearful when others are greedy and greedy when others are fearful”
  2. Forcing yourself to invest a little bit each month is better than waiting until you feel like you have “extra cash to invest”. We all know how easy it is to spend cash once we have it. If you are having trouble with starting to save and invest, set up a direct deposit account where a portion of your paycheck automatically goes. You need to start somewhere, and it’s amazing what a small amount contributed monthly can grow to down the road.
  3. It’s never too early to create a financial plan. Not having a plan leads to emotional decision-making and poor investment choices. Many young adults will say things like “oh, I have plenty of time until I retire. I just want to have fun while I still can.” I’m not saying you shouldn’t have fun, but taking a little bit of time now to plan out what it will take to live the life you want to later on will save you an incredible amount of stress down the road. Trust me. I work with a lot of people who had a lot of fun when they were young and now live in a constant state of uncertainty, not knowing how long their money will last.
  4. Buying a house may not be the best choice for you right now. It might be. But it’s not automatically a great investment like many young people think it is. If you have lots of high interest student or consumer debt, or inadequate savings, it may make sense to wait to buy that house until you are in a better financial position.
  5. Your friends will still love you if you don’t go out for drinks every night. I know so many young people who think it’s just impossible to save money. But then I look at their lifestyle and they’re eating out multiple times per week, grabbing coffee & drinks after work, and posting pictures of their new outfits while standing next to their late model car. Okay, that was a lot, but the idea is that so many young people are living above their means. In our social media culture, it’s so easy to compare yourself to other people and think that you need what they have. I choose to follow the adage “Live how most people won’t, so someday you can live like most people can’t”

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

I love the following quote by Lao-Tze: “Watch your thoughts; they become words. Watch your words; they become actions. Watch your actions; they become habits. Watch your habits; they become character. Watch your character; it becomes your destiny.”

Everything is connected and a negative thought can spill out into every part of your life. Change your mental state and you can change the world.

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. 🙂

I’ve always been drawn to the idea of “Social Impact” businesses. The idea is that a business is set up to make a profit, but has a charitable function built in. The idea is that you take whatever industry you are in, find a need within that industry, and find a way to meet that need.

For example, I’d love to get InvestRx to a point where we could partner with the local school system and offer a personal finance education program.

A few other examples of the concept — a real estate development company might commit to developing one low-cost apartment complex in an urban neighborhood. A grocery store chain might run a food bank. A software company might provide a computer center for a local homeless shelter.

I would hope to see a movement where businesses were incentivized to run these social impact branches and promote them to the public. I think people would make the decision to support the companies that offered them, and it could be a win, win for the company and the community.

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

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