Investing for newbies: A D-FW investor explains how to get started in the market

Markets are in the throes of head-spinning volatility, making it more difficult than usual for investors to make sound savings and investment decisions – especially as retirement looms large for those over the age of 50.

April is National Financial Literacy Month, and the timing couldn’t be more opportune to discuss money matters. Even though the S&P 500 Index and the Nasdaq soared improbably to fresh records as Iran war fears throttled markets, financial jitters are as acute as they’ve ever been – particularly here in the Lone Star State.

According to BlackRock data, a third of Texas voters have no retirement savings, while 57% are more concerned about running out of money in retirement than they are dying. A widening gyre of whipsawed stocks and bonds – combined with tumult in the global economy – is ratcheting up insecurities about money. Little wonder why regulators recently made Texas one of dozens of states to require personal financial literacy at the high school level.

Enter folks like Jim Chassen, a D-FW resident, veteran investor and financial consultant with an MBA from University of Texas who has advised ultra high net worth individuals, endowments and foundations. Chassen has assembled a few helpful tips for people thinking about getting into the market – which closed at an improbable record this week

“Investing in the greatest wealth creation device in human history, the U.S. stock market, is the smarter way to go in my opinion,” Chassen tells The Dallas Morning News.

“It is bumpy but if you hang on, do not panic sell and contribute on a regular basis it is possible to have an easier life and give yourself a good shot at realizing your long-term goals.”

Q: What a good blueprint for an investing novice?

A: “My executive summary is: Make and maintain a budget and take control of your financial life and job. Pay off your credit card each month. Stay valuable and take steps to avoid long gaps in employment. Invest smartly.”

Q: What’s a good first step?

A: “Track all your income and categories of expenses. It is called a budget. When you total your budget, how much is left over, including a reserve for unexpected expenses? Are you saving for things like a home, advanced education, or retirement?  Do you want to be?”

Q: Consumers are charging purchases at record levels. So how should people use credit cards?

A: “Credit card balance should equal zero. Use it and pay it off each month. Keeping a credit card balance is most likely the worst investment you can make. It is an investment, because you are forgoing a guaranteed est. 20% a year return on all that money you are paying in interest. Credit card debt impacts things like interest rates on mortgages, cars, and in some cases, your viability of employment.”

Q: The stagnant jobs market has made a lot of people nervous. What’s the best way to navigate it?

A: “If you make yourself valuable, you can hopefully avoid any serious, long-term unemployment. People lose their jobs and their income for a variety of reasons. Some by their own actions, many for causes entirely out of their control. Fear of long-term unemployment leads many to think it is a firm rule that you should save six months’ living expenses before you think about investing. It is smart to carry some extra cash to pay off smaller unexpected expenses for life’s problems and its fun opportunities. Beyond that, you can and should be investing.”

Q: What’s a low-cost, low risk investment for newbies?

A: “Finally, the fun part. To start, open an account with a deep discount broker like Vanguard, E-Trade or Fidelity among others. Deposit funds in a money market (cash) fund and invest in SPY, an Exchange Traded Fund (ETF), which is an investment in the 500 largest US companies. Or VTI, which is in the top 1000. The important thing is to start, or if you already have some investment assets, look at your own situation.

“A proper portfolio should be diversified to include some income assets like bonds or REITs [real estate investment trusts] and stocks that focus on small companies or companies based overseas. Scott Burns ‘Couch Potato Portfolio’ is a great learning tool to understand investments better.

“Yes, you can use a professional advisor but make sure you are getting advice value for the advice. It is critically important to keep overall costs and expenses low because every dollar you spend is decreasing your terminal value. From here, I recommend sending money on a regular basis into your investment account. Have your employer send 5% (or more) of your net paycheck directly to this account with instructions to buy additional shares in a specific investment asset and benefit from dollar cost averaging – buying more ‘on sale’.  Additionally, and I hope I don’t have to say this; you should max out any 401(k) contribution that your employer will match. That really is ‘free money’ and if left alone has a long time to grow tax free.

Q: Any last words?

A: “The best time to plant a tree was 50 years ago. The second best time is today.”