“Start early and stay long.” With Jason Hartman & Chase Lawson

I’m not a big fan of investing too heavily in one sector and believe the best approach is to stay diversified across all sectors. With that being said, if I were to suggest sectors to consider investing in, I would include technology, healthcare, and financials. As a part of my series about “Investing During The […]

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I’m not a big fan of investing too heavily in one sector and believe the best approach is to stay diversified across all sectors. With that being said, if I were to suggest sectors to consider investing in, I would include technology, healthcare, and financials.

As a part of my series about “Investing During The Pandemic”, I had the pleasure of interviewing Chase Lawson.

Chase is a personal finance expert and enthusiast and is the author of the bestselling personal finance book Financial Freedom: Breaking the Chains to Independence and Creating Massive Wealth. He has a passion for helping the everyday American take control of their own finances and believes that personal finance doesn’t have to be complicated. He graduated from Clemson University with degrees in Accounting and Financial Management and currently resides in Austin, Texas.

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?

Certainly. My interest in finance started at a very young age. I have always seemed to have a knack for numbers and was always a fan of my math classes in school. When I was young, my mother, who taught part-time at a local technical college, brought home a Clemson application she had gotten from a college fair being held at the school. She knew I loved Clemson already from going to some sporting events there, but she didn’t know I’d actually sit in my room and fill it out. I was only about seven years old at the time, and so I didn’t even know what things like “class rank” and “GPA” were, but when I was looking through some of the majors offered, I decided then that I wanted to study Accounting, since I could use my love of numbers.

I’m not sure if it’s the way my brain is wired or what, but numbers and money just make a lot of sense to me — a lot of things are just common sense to me that may not be to others. I was raised well, and my parents instilled good values in me from an early age and allowed my passion to flourish. My stepdad helped me start investing at a very early age, and when I was around fourteen years old, I invested in certificates of deposit (CDs) and savings bonds. I’ve always been very disciplined and have saved most of what I made, as I am very focused on the long-term and know that if you let your money sit and grow earlier, you’ll be able to do more with it later. I’ve continued to apply this knowledge and mindset and continue to learn and grow even more in the field, and today, I help countless others get started on the right track.

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?

People tend to think that those in the personal finance world have always been perfect with their finances and have never struggled with them. However, that is not always the case, and I am living proof of that. I personally overcame over $23,000 in credit card debt. This wasn’t due to trying to live a lavish lifestyle or splurging on major purchases either. I had a zero percent introductory rate on purchases with a new credit card and had hoped to pay it all off prior to that introductory period expiring. I did not make as much money as planned with my job and had invested a lot of the money I had saved up in the market and did not want to pull it out. Thankfully, I was able to pay the credit card off in full within 11 months.

That experience shows that debt can impact anybody at any time. It plays no favorites. It is important to be mindful of credit card offers and to always have enough liquid reserves to pay for your purchases in a worst-case scenario. Only invest the money you do not need for the short-term in the market. Finally, every bad situation can be recovered. I now own two homes and am in the best financial position I’ve ever been in, just a few years removed from that bad experience.

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

I am currently turning my book into an audio book, to help reach a broader demographic, as I know that many people today prefer that medium over print text. In addition, I’ve recently started a YouTube channel to create mini lessons on personal finance topics. This will allow me to be dynamic and evolve with the changing times and take feedback from others on the topics they want to learn more about. This all ultimately derives from my overarching goal, which is to reach the broadest audience possible and make personal finance simple and easy to understand.

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 am grateful to my mother and stepfather. As I mentioned before, they raised me with some strong personal values and helped me to live a good childhood. They have always been there for me as needed and I know I can still count on them if I ever need help with anything. My stepfather took me to a Clemson football game when I was young, and that moment really shaped my future. I ended up attending Clemson, which opened a lot of doors for me that perhaps wouldn’t have been opened otherwise.

In addition, we moved around a good bit when I was growing up and I lived in a different state for each year of middle school. While that is a tough age to have to move to a new place, attend a new school and make new friends, it allowed me to have an even more diverse friend group and experience other cultures and ways of living. I learned a lot of life lessons from these new experiences and once again, I probably wouldn’t be where I am today without that having taken place. It allowed to become more adventurous and be open to trying new things.

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?

This whole coronavirus pandemic has certainly been a lot to try to handle, regardless of who you are and what you do. It can be easy, while at home under quarantine, to become anxious and fearful. Many people may have lost their jobs or been furloughed or are worried about the long-term stability of their jobs. For those who are safe in their jobs, they too may suffer due to potential drawbacks in the economy. For example, if they earn commissions or bonuses, companies may not be able to pay out as much as usual or it may be tougher to make sales to earn the commissions. In addition, any future raises may be on hold for the time being. Finally, it can be easy to become lonely at home, without interacting much with the outside world.

For those people who are feeling anxious, or have families and loved ones feeling the pain, my advice is simple. First, understand that this too shall pass. It is uncertain when this will all go away, but it will eventually, and we will be stronger from it. In addition, the most important thing that anybody has is their health. Jobs may come and go, but as long as you and your loved ones are healthy, that’s the most important thing. Stay inside and we will get through this sooner and stay safer. Finally, if you’re worried about your investments, they too will recover in due time, as history has indicated.

If you can, try and call family and loved ones so that you aren’t lonely. Utilize Zoom and other video conferencing platforms to maintain face time with loved ones. There are a lot of tools out there for you, just take advantage of them and lean on others as needed.

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 tell them to keep doing what they’ve been doing. It can be hard to stay disciplined in uncertain times and too many people rely on their emotions and end up getting out and in at the wrong times. Dollar cost averaging is the way to go with long-term investing. It is a simple system to follow, it helps avoid emotional decisions, and has been proven to win over trying to time the market. We are in a bear market, but that is the perfect time to invest. In fact, in the 12 months following a bear market, the S&P 500 has increased on average 47%. Prices are at a steep discount, so your $500 investment will go farther. You implemented your dollar cost averaging strategy for a reason, so don’t back off now. Nobody knows what will happen with the market, so you cannot try to time it. Stay disciplined and your efforts will pay off.

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?

Once again, I would suggest investors to keep with the strategies they’ve been implementing before. Recessions and bear markets aren’t the time to try to switch things up. I always advocate investors to stay diversified, as that will minimize the risk of certain sectors underperforming. Some sectors will come out stronger, while others will stay weak for a while, but it is just as possible for these trends to reverse in a future year. Look towards index funds like those that track the S&P 500 so that you’re more fully diversified. If you have extra “play money” that you want to experiment with putting in a particular sector or two, feel free to, but just know that this can be riskier and there’s a chance you could lose your whole investment. Unless you’re more experienced in investing and have adequate time to research the underlying factors of certain sectors, it can be risky to put too many eggs in one sector’s basket.

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

Going back to my prior point, I’m not a big fan of investing too heavily in one sector and believe the best approach is to stay diversified across all sectors. With that being said, if I were to suggest sectors to consider investing in, I would include technology, healthcare, and financials.

First off, technology continues to innovate and will likely continue to do so for decades to come. Our advancement in technology in the past few decades has exceeded that of our entire human history prior to that point, and so technology continues to be on an exponential trajectory. Companies like Facebook, Apple, Google, Netflix and more continue to stay popular, regardless of what is happening in the broader market, and they have the cash to weather the storms of situations like coronavirus.

Healthcare is a big one, as it’s obviously a huge need with coronavirus going on right now. In addition, we have an aging population and rapid advances in life sciences and biotech, so the health industry should continue to thrive for decades to come. Regardless of what is going on in the economy and the stock market, people still need to see doctors and still need drugs, so this industry is more of a “safer” play.

Finally, the financial services sector could be a good investment, as with the aging population and the baby boom generation starting to get older, we should see a large transfer of wealth as baby boomers pass away and transfer their savings to their kids, which will benefit banks, brokerage firms and insurance companies.

These three industries should perform relatively well for years to come and could be a good addition to your diversified, long-term portfolio.

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

I tend to stay on the safer side if you can’t already tell. It’s what’s worked best in providing good returns with low risk. While some may advocate to consider speculating in currency or precious metals or even alternative currency, such as bitcoin, I would avoid these entirely. You should never invest in something you don’t know enough about to explain to others. The only thing I would say people should look more to is having some money in safer securities like bonds that can weather storms better than stocks, especially as you near retirement. In addition, real estate will always be a need and with the growing rental market with sites such as Airbnb, this could provide a chance at even further returns. Since 2012, the average home price in the U.S. has increased 5% yearly, and interest rates are among the lowest they’ve ever been currently. With real estate, you do not need a lot of money to get in, so you essentially invest on margin and your return has a potential to be much larger than your interest rate, both with price appreciation (especially if in a hotter real estate market) and monthly rental income.

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 and foremost, I would advise them to investigate retirement plan options. If they do not already have a 401(k) through their employer and if their employer offers a match on dollars contributed to the 401(k), first start there, as that is free money and is often 50–100% immediate ROI (return on investment). That comes directly out of your paycheck, so you can’t direct that $10,000 from your savings into it, but it still is a smart investment.

Second, if they do not have an IRA set up currently, that would be my next recommendation. The great thing about 401(k)s and IRAs is they provide tax advantages to lessen the tax liability either upon contribution or withdrawal, so if you’re fine having that money sit until you hit retirement age, that represents an additional return on your investment. With an IRA, you can contribute up to $6,000 per year if you’re under 50 years old. With coronavirus, the IRS has extended the deadline to contribute to an IRA for the 2019 tax year until July 15, 2020, so if you haven’t yet filed your taxes for the 2019 tax year, I would suggest putting $6,000 in an IRA for 2019 and using the other $4,000 to put in for your 2020 contribution. You can contribute the remaining $2,000 for 2020 until April 15, 2021.

As far as what investments to make with that money, I would suggest a Vanguard index fund, since Vanguard has low fees and strong performance, both which will lead to more money when you decide to pull it out. The three funds I would recommend looking into include VTSAX (Vanguard Total Stock Market Index Fund Admiral Shares), VWUSX (Vanguard U.S. Growth Fund Investor Shares) or one of Vanguard’s Target Retirement Funds.

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?

That’s a great question! If I had to give my top 5, it would be as follows:

  1. Start early and stay long — There is a saying when it comes to investing that “time in the market” beats “timing the market”. This is 110% true. You don’t have to be rich to invest. There are several platforms that will allow you to invest with as little as $5. The sooner you start, the more income potential you have. Nobody can accurately time the market, as it requires being right twice — when you buy and when you sell. What ends up happening with investors who try to time the market, is they wait to invest because they think we will end up in a recession soon and then we end up having a couple more years of a bull market and they missed out on those returns, as their money was just sitting on the sidelines losing value. Peter Lynch of Fidelity Investments conducted a study showing market returns of someone who invested $1,000 a year for 30 years. Had you invested at the worst time each year, your returns would have been 10.6% as compared to one who invested at the best time each year, whose returns would have been 11.7%. This is a very small difference and since nobody knows the exact right time to buy, it’s smarter to just not even think about it, and just keep investing each month, rather than risking missing out.
  2. Buy what you know or can explain to others — Too many people will sadly buy the hype when they hear of the latest trend in investing. My rule? If your neighbor, brother, and plumber are all telling you to invest in something, do the opposite. Unless one of them is an expert in the field and that is their primary job, don’t put too much faith in their recommendations. Prime example of this: bitcoin. Bitcoin, along with other cryptocurrencies, surged in popularity in late 2017, and bitcoin got as high as nearly $20,000. It currently sells for less than $8,000. Rather than doing what the 99% are doing, do what the 1% do. In addition, if you don’t understand what you’re investing in, you’re entering that investment blindly, which is not a good thing to do with your money.
  3. Invest what you’re comfortable losing — Whenever you make any investment, have the mindset that you may lose it entirely. That serves many purposes. First, it keeps you from investing with money you need for the short-term and makes sure that you have enough in checking and savings to cover your daily expenses. Second, it allows you to avoid emotions. If you tell yourself you’re okay in the chance you lose it all entirely, the psychology will keep you from panic selling whenever markets are down. And third, it ensures you don’t invest too much at a single point in time. Markets can be volatile, and the smart investor rides through the volatility and keeps a long-term focus on their investments.
  4. Move investments from stocks to bonds as you get closer to retirement — When you’re younger, you can be riskier, since you have a longer time horizon. As you get closer to retirement, however, you need more stability with that money. A good rule to use when investing is to use your age to determine how much to keep in bonds as opposed to stocks. For example, if you’re 25 years old, you should have about 25% of your investments in bonds and the other 75% in stocks. If you’re 50, you should have about a 50/50 mix. And if you’re 75, you should have about 75% in bonds and 25% in stocks.
  5. Take advantage of your 401(k) — Last, but not least, if your employer offers a 401(k) with a match, take advantage of this! This is the easiest way to make money safely and securely, plus it comes with tax advantages.

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

There are a lot of great life lessons, but one that comes to mind is from Denis Waitley: “Life is inherently risky. There is only one big risk you should avoid at all costs, and that is the risk of doing nothing.” This has a lot of relevance and meaning to my life and I believe it is a great lesson to apply in anybody’s life. There will be risks in everything you do. Every decision you make has consequences, both good and bad, and every choice comes with an opportunity cost. It doesn’t make sense to dwell on the “could’ve/should’ve/would’ve”s in life. Just go, make a choice, and be happy with what you accomplish.

I’ve made some tough choices in my life, such as running my own business and moving to Austin, Texas without knowing anybody there. But those experiences helped shape my life and who I am, so I am thankful that I did those things. Rather than wasting time dwelling on your options, just listen to your heart and make the choice you think best in the moment. It won’t always work out as planned, but just live a life with no regrets and use each opportunity as a chance to learn. When it comes to investing, this same lesson applies. Investing is risky, but rather than waiting forever, just start today. You may make some bad investments in your lifetime, but what’s important is that you get started. You can’t make money if your money sits on the sidelines doing nothing. And when you buy and sell investments, the price will inevitably go below what you bought it at and above what you sold it at at one point or another, but as long as you follow a disciplined approach with investing, you can’t look back with regrets.

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 first thing I would do is to require every person to take some sort of personal finance course as part of both high school and postsecondary curriculum. Personal finance is so important, yet too many people lack knowledge of even the basics. Approximately 57% of Americans have less than $1,000 in savings and 39% have no savings whatsoever. Further, the average American owes $5,700 in credit card debt and there is currently approximately $1.6 trillion in student loan debt in America.

People get into these situations and do not know how to get out of them, because they’ve never been taught about budgeting, saving and investing. Money should not be difficult to talk about and personal finance isn’t complicated. When you’re at a young age, you’re better able to remember what you’re taught and can truly maximize a long-term horizon to apply these lessons. We’d be in a much better position as a country and society if we started teaching these lessons earlier, before students entered college and took on debt. It can truly help people make smarter decisions with their money and try and reduce the inequality we have as a society.

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

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