Inside the investment portfolio of a millennial homeowner

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  • Chase Hudgens is a 30-year-old business-development rep at IBM who contributes about $500 a month to his 401(k) and over $20,000 a year to two brokerage accounts.
  • He recently paid off a large student-loan balance and bought a home that he expects to appreciate in value by 5% every year.
  • Hudgens said paying off his debt enabled him to become a homeowner and invest more aggressively.
  • His goal is to become a millionaire by age 35.
  • Start investing today with SoFi »

Chase Hudgens didn’t come to investing easily.

The 30-year-old Georgia native graduated from college in 2012 with about $50,000 in student-loan debt. He had little guidance on how to get out of the hole, let alone how to build wealth.

“I didn’t have a lot of role models,” Hudgens told Business Insider. “I didn’t have a lot of people who knew a lot about finance, including my parents. And I think it’s that way for a lot of people, regardless of race, but definitely for African Americans.”

Hudgens’ parents helped him take out the student loans; they made it clear that getting a college degree was important. But he didn’t fully understand how loans with variable interest rates worked and ended up owing between $600 and $745 every month, he said.

“For me, a lot of things that I learned, I just learned by trial and error,” Hudgens said.

In 2014 he started an MBA program at the University of Dallas while working as a sales representative at State Farm, where he began contributing to a 401(k).

“I tried to take some steps when I was in graduate school to educate myself,” he said. “I didn’t want to be financially illiterate.”

Hudgens tried to avoid high-interest debt, like credit cards and auto loans, and took a hard look at how much he was spending on food and rent. He was also able to defer his student loans for a while, he said.

“As I started working and realizing I was going to have to come out of debt somehow, I opened up a brokerage account” to explore stock trading using bonuses he earned at work, he said. When Hudgens didn’t have cash to invest, he used paper trading to practice buying and selling stocks without risking any money.

‘I just knew I had to eliminate that debt’

After graduating from the MBA program, in 2017, Hudgens returned home to Georgia, sold his car, started a business-development job at IBM, and lived rent-free with his parents for about two years. These lifestyle changes freed up cash, allowing him to continue paying off his student loans, save, and invest at the same time.

By the fall of 2019, Hudgens was seriously considering becoming a homeowner, but was eager to stamp out his student loans before making such a huge investment.

“When you’re in debt — and this will vary by person, obviously — but for me, if you’re paying $700 a month and you’re in debt, you can’t build wealth, you can’t buy a house, which is one of the biggest ways to build wealth consistently, as opposed to other asset classes,”  Hudgens said. “You can’t do that when you have debt.”

He paid off the remaining loans, totaling about $15,000, using money from his 401(k) at his previous job. The early withdrawal was penalized, but he offset the tax blow by selling other investments at a loss.

“A 401(k) wasn’t really something that I was ashamed of digging into or I didn’t even think twice about,” Hudgens said. “I just knew I had to eliminate that debt.”

In early 2020, before the COVID-19 pandemic hit US shores, Hudgens bought a home in Woodstock, Georgia, after extensive research and diligent saving. Now he’s focused on growing his investment portfolio.

His portfolio is mostly growth stocks

Broadly, Hudgens’ investment strategy is to consistently buy and hold growth stocks — shares of a company expected to gain value at an above-average rate — and large growth mutual funds and trade when necessary to maximize returns.

Most financial experts advise against individual stock picking to try and beat or time the market. It requires time and skill the average investor doesn’t possess. But Hudgens is confident in his abilities and has a high risk tolerance. He also keeps a six-month cash emergency fund on hand to balance out his aggressive investment strategy and doesn’t invest any money he’ll need in the near future.

“Even though I have an MBA, my undergraduate degree is in history and I’m really big on research,” Hudgens said. “I think that none of us know for certain what will happen, but if you do your research a lot of times that can help you with your confidence and that can help you with your decision-making.”

As for real estate, he’s expecting his home value to appreciate about 5% or more each year, and he’ll consider selling after he’s lived there for at least two years.

401(k): $11,651

Hudgens said he plans to add at least $10,000 to his 401(k) at IBM, where he currently works, every year.

He contributes $237.50 per paycheck, and the company makes an annual matching contribution to his account, usually in December, he said. 

The entire 401(k) balance is invested in the Fidelity Growth Discovery Fund Class K (FGDKX), a mutual fund made up of mostly large domestic and foreign growth stocks.

Fidelity trading account: $21,408

Hudgens also has a trading account at Fidelity, where he typically follows trends and holds US stocks for less than a year. He said he invests in companies that he and other millennials love. As of early September, he holds stock in 22 companies through this account, including Urban Outfitters, Cheesecake Factory, Zumiez, and Delta Air Lines.

“I feel that all of these companies are beaten down and can return to 52-week highs or beyond,” he said. Hudgens plans to add $20,000 a year to this account, and he’s on track to do so in 2020.

“When you’re investing in stocks, you have to be willing to invest money that you are willing to lose. There’s no guarantee that it will go up, but you can use free resources, you can use charts, you can do your research and see year-over-year growth,” he said.

Robinhood trading account: $1,170

Earlier in the pandemic, Hudgens “joined my generation” and opened an account with Robinhood, the no-fee trading app that exploded in popularity among first-time investors this year.

“I take advantage of fractional shares and averaging with this account,” Hudgens said. “The plan is to not sell these investments, although I will adjust if needed.” He plans to add $300 a month to this account over the next five years.

Fractional shares allow him to invest in around 20 high-priced companies, including many tech darlings, such as Amazon, Facebook, Microsoft, Apple, Netflix, and Google.

Real estate: $119,480 equity

Hudgens purchased his home — a newly constructed townhouse — in Woodstock, Georgia, for $389,900 with a 3% down payment. To find the perfect home, a place where he would feel comfortable and earn a good return, he researched local school systems, crime rates, historic home values, and other census data.

As of September 8, the home was worth $495,000, according to a Zillow estimate. With an outstanding mortgage amount of $375,520, Hudgens’ equity is estimated to be $119,480.

He expects the home value to increase about 5% every year and plans to live there for at least two years before considering a sale so that he can avoid taxes on any capital gains.

The goal: Become a millionaire

Hudgens would like to become a millionaire by the time he turns 35.

“I’m not so stuck on the calculations as I am the steps and the behaviors,” he said. “Millionaires have certain traits and behaviors, and I’m trying to do those things.”

In addition to buying appreciating real estate (he’s looking at acquiring more property, possibly in another state) and investing in the stock market, Hudgens is relying on tried-and-true personal-finance tactics, such as consistently saving a percentage of his income and avoiding high-interest debt, to achieve his goal.

“With those behaviors, I don’t see how it would not happen,” he said. “Especially if I’m looking at the last year, being able to pay off a loan that was $50,000, being able to come up with a down payment on a $400,000 home, and have six months [of expenses] saved, things like that. If I’m able to continue to save money at that rate and put it in high-growth stocks and invest in real estate, I think that I’m well on my way.”

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