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- [00:01]
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- [01:00]
Austin Hankwitz
Hey everyone and welcome back to the Rich Habits Podcast brought to you by Public.com, a top 10 business podcast on Spotify. My name is Austin Hankwitz and I'm joined by my co host Robert Krok. Robert is a seasoned entrepreneur in his 50s with lifetime revenues of over 300 million and I'm an entrepreneur in my late 20s with a background in finance and economics. Since quitting my full time job in corporate finance a few years ago, I've built a seven figure media business and actively advise some of the most well known fintech companies around the world. As the show name might suggest, every episode we talk about Rich Habits as they relate to business, finance and mindset. However, we try and bring you two unique perspectives, one from an industry veteran, which is Robert, and the other myself, someone who's still in the process of building wealth and figuring it all out. So Robert, what are we going to be talking about in today's episode?
- [01:51]
Robert Krok
In today's episode of the Rich Habits Podcast, we're having a very timely conversation. At the very beginning of the year we told you all that volatility was going to be one of the primary themes for 2025 and as we can all see, that's very much been the case so far. So we're really very excited to welcome back to the show Garrett Paolella, Managing Partner at Neos Investments. Not only has Neos been a longtime supporter of the show, but they also make some of the most exciting income focused ETFs in the industry. So today we're going to break all this volatility down. We're Going to get nitty gritty on all this stuff so you guys can all understand where the markets are, what you should do and how it affects your daily lives.
- [02:36]
Garrett Paolella
Excited to be on the show and congrats on all the recent success of the episodes. It's been great to watch all the other shows. So happy to be here today.
- [02:43]
Austin Hankwitz
So for everyone listening, Garrett is one of the managing partners at NEOS Investments. They've got billions of dollars in assets under management via spyi, qqqi, iwmi, btci. Right. They've got all these income producing funds that are tax efficient, pay you every single month and it's really cool. So we're going to be talking about like what's going on in the markets. Why is the NASDAQ in correction territory? What's going on with the S&P 500? All of our portfolios are going crazy one day Trump's talking about tariffs which is causing everyone to go nuts. Elon's doing something, therefore Tesla stocks going crazy. Like there's a lot of volatility. And we told you guys about this. We said, hey, we're going to head into 2025. The easy money has been made. Volatility is here. Be ready for it. Let's take advant of it. And I can't wait to learn more about how we can begin and continue to use some of these NEOS funds to offset some of that volatility in our portfolios. So Garrett, why don't we just jump into things for those listeners who might not be as familiar with Nio's funds as Robert and I are and some of our other listeners could be walk through what is Nio's funds, what is spyi for example, and what kind of investor should consider having that ETF in their portfolio.
- [03:58]
Garrett Paolella
So NEOS Investments is a global asset manager that's really focusing on delivering risk mitigated and yield enhancing solutions for portfolios. How do I use where I want to be invested, whether it's equities or fixed income or crypto or real estate and how do I layer on a tax efficient income component to those core building blocks? We have over 10 products in the marketplace today and so if we think about one of those core products, SPYI Austin, as you had mentioned, right, the S&P 500 high income ETF NEOs here, we're looking to really harness that volatility, right? So the risk that people are talking about in the markets, that volatility can also be an asset class and really an advantage in your portfolio doesn't always have to be looked at as from a negative perspective. And so if you think about spyi, it's giving you exposure to the S&P 500. So we'll own all 500 plus companies within that index. And then on a monthly basis, we're really instituting an option overlay that's called a covered call. And so you're selling a call option against those equities you own, which allows you to generate income off of volatility. So volatility is really the pricing mechanism for generating income in the options market. And so you look at Spyi, it's giving you that exposure to the S&P 500, targeting a 10 to 12% annualized distribution on a tax efficient basis. It is really giving people the ability to own an equity allocation, for instance, you know, but deriving a high degree of tax efficient income and harnessing that volatility as a benefit to your portfolio.
- [05:34]
Austin Hankwitz
And so just to kind of break that down a little bit further, you know, I had about $100,000 invested into Spyi last October. And because SPYI pays investors about 1% per month or that, you know, 12ish percent per year, I was collecting about $1,000 a month in just passive incomes deposited into my brokerage account. Because of the covered call option strategy that you and your team automatically do when it comes to your ETFs. And that's for SP, QQQI and all the other things that you offer to investors.
- [06:07]
Garrett Paolella
That's correct, yes.
- [06:09]
Robert Krok
I love it. But I want to ask, I want to back the train up a little bit and ask the question, have you seen this kind of volatility in the markets before?
- [06:18]
Garrett Paolella
Although I might not look like it, I've been around quite some time as well and managed these types of products and strategies through the great financial crisis, through plenty of markets, through actually Trump's last term. And so as we think about him just being in the Oval Office at the moment and what's kind of going on outside of interest rates being at a much higher level than his previous term. Right. His rhetoric and the way that the administration carries themselves on America first in aggression, there's ways that you're going to expect these down 2, 3, 4, 5 or down 10% market opportunities. And I think for that is, yes, a lot of experience here as neos, myself, all the rest of our team here has decades of years of experience running these strategies through all different types of market cycles. But I think that's why your podcast education around investing in portfolio construction is really important in finding ways that you don't have to be concerned about that so much at night. You don't have to sit there day trading. You can think about how do I position my overall portfolio for my goals. We're not going to see this volatility probably subside at all this year. Obviously there's a big push in the administration to get out there for its first hundred days. But outside of that, right, there's still always going to be the stance of unknown behavioral events coming out, shocking the markets, you know, and ultimately making investors think, oh, did I do something wrong in my portfolio? Should I have done something? Maybe I should have took a little bit more off the table, but I was waiting for the next leg up to do that. I think that's here to stay and certainly continue for the foreseeable future.
- [07:47]
Austin Hankwitz
We definitely agree with you. And I think something you touched on was portfolio construction. And I just want to remind everyone how important that is. It sounds like, oh cool, portfolio construction, I'll just go buy stuff. But I think what's really important about that term, portfolio construction as we especially now, now head into a volatile 2025, is despite the S&P 500 on the day, we record this as March 5, 2025 only being about 4 and a half to 5% off all time highs. You've got names like Nvidia and Palantir and other these big crowded momentum trades, 20, 30, 40% off their all time highs. And so I just want to really reiterate and emphasize how important it is when it comes to portfolio construction to have the vast majority of your portfolio invested into outstanding index funds and ETFs that we believe in and have a long track record of rules based sort of inclusion and exclusion, specifically The S&P 500 versus a crowded momentum trade or you know, what are these crazy things that you might, you know, read about or your barber might tell you or you know, Aunt Amy might tell you about. So I just really wanted to emphasize that. Something else I want to learn a little bit more from Garrett about is like the psychological side of the equation here, right? Robert is a big mindset guy, as am I, and we take pride in really encouraging people to zoom out. Dollar cost average, have a strategy when it comes to investing, but it's easier said than done, right? There's a wall of worry that's coming that I think a lot of people are trying to overcome themselves in their portfolios, you know, because when you're starting out, Robert, someone might be starting out with A couple thousand or, you know, 10 or 20,000. And so when you have a 10% correction, that's a couple hundred bucks, maybe a thousand or two total. But when you have hundreds of thousands of dollars invested and you experience a 10% correction, that is tens of thousands of dol. Losing on paper. And so Garrett, can you maybe spend some time talking about the psychological and maybe some tactical stuff that people can do to just stay focused when it comes to investing? As someone who's been, you know, in so many market cycles.
- [09:53]
Garrett Paolella
Yeah. So I think one of the big thesis here at Neos and always in my investment career has been taking a more rules based or quantitative approach behind that. And I think it's trust your plan. So even if you're not quantitatively driven and you develop that plan, that estate plan, what your ultimate goals or your needs are for yourself and your portfolio, that should always be your guiding principle. You gotta try to stay outside of the noise of all my buddies, all my friends are invested in Nvidia on Amy told me to buy Nvidia. Well, yes, if you want to take a small amount of your portfolio that you're willing to take a lot of risk in just to be a part of the cocktail conversation, you can do that. But don't let that really steer you away from your core needs because your needs could be very different than somebody else's. You might want to be retiring slightly earlier and they're willing to risk it all. We think about it, structurally, it's really making sure that you stick to that plan, come up with that long term vision, and then have more fun in your investing by tactically adding little things that you feel can incrementally add, but keeps you in the game and keeps you excited about learning about companies, learning about new innovative emerging asset classes like crypto and things where, yeah, those can be a meaningful impact. But at the end of the day, don't risk the farm on it and stick with it because I think you'll see from what you're learning on your podcast or going back to even a lot of Warren Buffett strategy and a lot of other smart minds, long term compounding interest is the best way to build wealth over time. And so you don't need to swing for the fences if you can consistently stay invested into the market, not miss the swings. Right. Market timing, as you'll see in tons of research, actually doesn't usually pan out. You're missing moves in the market to try to time a pullback to time this dollar cost average. Right. Just Have a good long term plan, dollar cost average in and own what is nice and diversified and then have fun edges with your portfolio testing out, you know, new things or what other people are suggesting after you do your research.
- [11:49]
Robert Krok
I love this and I am all about, and I know Austin is, it's a big part of our message. We're all about actively managing our money and understanding you have to be adaptable to market cycles and market conditions. But in my opinion, and you just nailed it. Long term focus and trusting the plan is the key to success and really building wealth. Too many people think in weeks and months when they're looking at their investment strategies and they should be looking at years and decades because at the end of the day, the old adage, and it's always kind of funny when we think about markets like right now is the best performing portfolios are usually from dead people and people that lost their password because people are so reactive to headline news, whether it's correct or not or if it's clickbait. And they're just so. They have so many knee jerk reactions because they're functioning from a position of emotion and not from having a solid plan. And that is one of the biggest parts of Austin and I's message as a team is getting people to understand when in doubt, zoom out. I'll repeat that as many times as it takes a year to get people to not have knee jerk reactions because I think it is ultimately the best strategy. I look at so many portfolios that people ask me to look at to help and the people that have performed the best over the last 20 or 30 years are the people that did the least. Find good companies, find good funds, stick to it, have a plan and just let compound interest do its job. So that brings me to my next question. We're so conditioned to think that volatility is exclusively a bad thing, and I totally disagree with this. So how can volatile times in the market potentially be beneficial for your funds and your investors? Because you know, they always say that when there's blood in the streets, even if it's your own, it's a buying opportunity. So walk our listeners through it and how it's relevant to the performance of your products.
- [13:52]
Garrett Paolella
That opportunity to leverage volatility and create income. If you're thinking about SPYI as a first basis and thinking about that comparative to the S&P 500, right, you see the S&P 500 down, say 2% over a given month and our product is looking to really distribute 1% a month of income so if we've generated the 1% a month of income, right. We would be down 1% versus the S&P down 2. But you've gotten paid your 1%. And so if you really think about the product overall, sometimes I like to discuss it as a real estate investment. The price of your real estate might fluctuate up and down given market conditions, but your rental income is going to continue to come in. It's a very similar way of thinking about a lot of our products is that the monthly income, regardless of a lot of the market action, whether you're in equities or fixed income or Bitcoin, right, that will fluctuate, but you're getting paid to wait and you're getting paid that money on a monthly basis regardless of how the underlying index has performed. So then once you get a reversion back to the mean and the market starts marching higher again, right. You participate again with those equities, but it's really around generating more of a consistent and reliable monthly income source. So that regardless of what market cycle you're finding yourself in, you know that you're still able to be living and getting that monthly distribution. So I think that's more associated with SPYI when you want to think about people concerned about volatility or reducing risks in their portfolio. Right. We have a product like Nusi that had recently changed its ticker from Nusi Nusi to qqqh. So it was a little bit easier for everyone to understand that, oh, I have qqqi, the higher income version. And I have qqqh, which is actually a hedged version. So it's buying some downside protection to ensure that in market corrections and drawdowns, you actually have some principal protection in your portfolio, you know. And so for QQQH's income, right, you're generating around 8 to 9% because some of that income is being utilized to buy that portfolio protection. But if you think about the months where the NASDAQ is down, right? So maybe instead of using a scenario where it was down 2% and we generated 1% of income, we're talking about maybe kind of more year to date. What's happened over the first kind of two months of 2025, NASDAQ being down roughly 3%, the new QQQH is really down around 1%. Right? So you've had an outperformance to the drawdown in equities or looking at a longer term basis those times when you can hedge out, some of that drawdown allows you to actually outperform the index even on the up side. So what do I mean by that? If you think about kind of a trailing one year basis for QQQH right now, you'd see that the Nasdaq's up roughly around 12 and a half percent and QQQH is up around 17.5%. And that's really because we've been able to hedge out some of those risks associated with December of 2024 or the start of this year and how tech has slightly underperformed given of course the volatility and concerns. So again, back to that portfolio construction. Really what is helpful in your views, your estate planning goals and focusing on the longer term investments. And if volatility concerns you, pick investments that can mitigate that volatility either a little bit, if we think about qqqi and a 1% outperformance on the downside, or something hedged like a qqqh that actually builds in some portfolio protection and hedge if the market's going to go to.
- [17:27]
Austin Hankwitz
Now, before we jump into our next question for Garrett, let's take a moment to hear from this episode's sponsor, public.com if you are serious about investing, which I think every single one of you who are listening to an episode of a podcast about volatility probably are, you need to know about public.com because on public you can invest in everything. Stocks, options, bonds and cryptocurrency. You can even earn some of the highest yields in the industry, like their 6% or higher yield bond account right now.
- [17:54]
Robert Krok
Now Public is a FINRA registered SIPC insured platform that takes your investments as seriously as you do. So fund your account in five minutes or less@public.com rich habits and get up to $10,000 when you transfer your old portfolio. That's public.com rich habits paid for by Public Investing. And full disclosure is in the podcast description.
- [18:20]
Austin Hankwitz
I really like this conversation because I think it's, it gives us an opportunity to sort of dig deeper into like what people can do during times of volatility, right? One, you can just like do nothing and it can continue to dollar cost average. That's a great strategy in itself. Two, you can try and time the markets by like selling everything and then like waiting for it to go lower. But then like Gary, you know, we just talked about like you can't really do that very easily. So it's like I can't predict the future. Neither can you. And then there's this third thing which is hedging the Downside, which means that you're beginning to allocate capital. Instead of all of your net new capital going into like, you know, buying these ETFs and index funds, maybe you're adding a little bit of capital to things like gold or real estate or things that are like, you know, hedges against downside risk, historically speaking. And what's cool about QQQH is you've built in to the ETF itself via a put option strategy, a hedge inside of the product, which means that you will still be invested in the nasdaq. Therefore, if the NASDAQ goes down, like QQQH will also go down because its underlying, you know, index is the holdings of the nasdaq. But because we've sort of put in this hedge, this put option strategy, we're not going to go down as much. And so like as I look at right now on Morningstar, the year to date performance of QQQ, right, just the NASDAQ is negative 3%. But the year to date performance of QQQH, which is your hedged ETF, is only down 1%. So you're still down because like the underlying index is down, but you're not down nearly as much as if someone just had exposure to the nasdaq.
- [20:01]
Garrett Paolella
Yeah, that was a great example. An explanation. I think this comes back to we talked earlier, right? Portfolio construction. And so what is your comfort level within your portfolio? Every individual is different, different. And so as you think about the risks that you're willing to take or the upside that you want to get, this is a great way to be able to espouse your views in your portfolio needs. So you could have an allocation of Q. Q. Q. I that's going to give you a lot more of the NASDAQ risk and higher income. And you can allocate a portion to qqqh, which is going to protect more of your downside. You get a little less income, but you can maybe for you sleep at night better knowing that you have some portfolio protection. If you wake up Tomorrow, market's down 3% and you're like, that completely disrupts my day, makes me want to not go to work, not to do other things. I'm so worried about the portfolio. Well then maybe you're one that should allocate more towards a QQQ or like you said, a gold or real estate where you're diversifying those risk assets, still generating income and having a long term plan, but you don't have to watch it day to day. So it keeps you Invested. I think that's one of the biggest things that Robert said too is like you got to stay invested in the market. And so if you need to take a little less risk to stay invested in the market and not just punt, Right, that's a better strategy over the long haul to compound your retirement and wealth and passive income than it is to take the high flyers, more risk allocated and then try to go to cash and time the market perfectly.
- [21:27]
Robert Krok
And I think for me the biggest takeaway from this episode that I hope everyone watching and listening gets is that there are more than two options. You don't either have to do nothing or sell it all and sit on the sideline. There are lots of alternatives that we're breaking down today to help people stay risk on. But pull back a little bit, embrace for the volatility because I think that was an incredible explanation of the hedged equity income of what you guys are doing. So are you thinking about doing this and implementing this strategy into other indices as well?
- [22:03]
Garrett Paolella
We are. We really want investors to espouse their views. So although you look at our products and we have 10 across all asset classes, we also want them to choose their risk tolerance within those asset classes. So we do have AN S&P 500 hedged equity income product that's going to come out, you know, hopefully within the next month or so. We've looked at other products where, you know, we do have a Bitcoin, right, that's generating high income. Well, what about downshifting some of that risk, you know, within that category as well. So as we think about other ways to allow investors to pick their risk tolerances and the asset allocation that they're looking for in those buckets of equities or fixed income or crypto, we want to let them choose those. And so yes, we'll definitely look to continue to expand this so that people can, you know, feel comfortable with what they want to be allocated to but also generate this, you know, tax efficient monthly income for passive income needs and compounding.
- [22:56]
Austin Hankwitz
I just looked it up Robert, and so episode 100 or 2020 market predictions was on January 13, so about two months ago from the recording of this episode and I just looked up sort of our notes here and in that I said nusi, it's going to be how I plan to offset some of this volatility which has now turned into qqqh they just like renamed the ticker. So like we try to bring you guys the, the sauce here before you see the outperformance, before you really need it. It's what we take pride in in the show. We love bringing you guys cool new ideas, introducing you to the industry experts like, like Garrett here, who so graciously joined us to, you know, break down these different strategies and different ways that you all can continue to navigate what is probably going to be a volatile four years under a Trump administration. But do it from a place of confidence.
- [23:45]
Robert Krok
Yeah, I love it. And like I always say, you don't have to be first to an emerging sector. You don't have to be first to an index fund or an ETF or a stock or a crypto. You just have to be ahead of the masses and understand what you're investing in. And that is one of our life's work, is teaching and educating people on how to make these moves and how to be ahead of the curve so they can optimize their financial strategies.
- [24:09]
Austin Hankwitz
So unfortunately for us, Robert, this episode will come out the Monday after the Trump administration had their, like, White House crypto event. So we don't know what's going to be disclosed or talked about there. So we're just kind of keep that in mind as we answer these questions. Both myself, Robert and Garrett here. So Garrett, what are your thoughts on a bitcoin reserve? You guys have beat btci. You're thinking about like adding a hedged bitcoin thing. So, like, how are you guys thinking about adding allocation of this asset class and allowing retail investors to keep some allocation and exposure while also providing some income? Because I know BTCI is paying a 29% distribution rate right now.
- [24:50]
Garrett Paolella
Yeah. So BTCI will range between that 25 to 30%, but give you exposure to the majority of bitcoins moves. And so I think as we think about just a crypto reserve or future products, that. Right. Future products for us is always around helping investors choose their views. Right. Expose their views, their risk tolerances. And so we just like to be that solutions provider. And so if we can think about downshifting your risk or taking that risk and generating income in ways or even enhancing it. Right. You know, empower investors to be able to choose what it is that they need, which is honestly the greatest part of ETFs as a whole is just that innovation is constantly happening and letting people choose in a tax efficient way what they want. Thinking about the crypto reserve, I mean, listen, more power to the government to try to find ways to dig us out of a significant debt hole. Right. So if we think that, right. Cryptocurrencies and emerging, you know, allocations or emerging sectors are coming. Right. Supportive of that, allow people to be able to be empowered with, you know, different investment choices. And I think as long as you disclose risks, you know, out to them appropriately, that's what our government should be more focused on than reining in and holding back investors from accessing different type of investment choices. So it's interesting to see, I mean, overall, I think this is not a shock to investors. Right. Trump was very pro crypto through the end of, you know, his running for election. As soon as he got elected, he put in a cabinet that was very pro crypto. So to see this come to fruition and continue to, to forge forward doesn't surprise me. But certainly embrace it for the fact that it does help us as product issuers create more optionality, pun intended for investors. And that's what I think we get excited about, to be able to support the needs of investors and new innovations along the way. And having the White House be supportive to emerging asset classes, you know, sure allows us to help bring more product to market.
- [26:49]
Austin Hankwitz
Now, before we ask Garrett our final question, let's take a moment to hear from this episode's sponsor, Roy Roy. Roy is the best way to track and grow your net worth all in one place. If you are tired of apps that miss different accounts or disconnect from your different platforms and brokers, Roy will not do that. They track everything. Stocks, cash, crypto, bonds, and even company equity in real time, collectibles. Literally. Whatever you have, Roy can help you track its value, helping you have better visibility into your network. Worth.
- [27:20]
Robert Krok
That's right. Roy is not just for tracking. You can trade across your existing accounts and even copy trades from top investors like Nancy Pelosi and Michael Burry with just one click. And now Roy has an AI Financial advisor. That's not just any AI. This thing actually understands your portfolio. It analyzes your investments, finds opportunities, and answers market questions tailored for you. Users last year found an extra $1463 on average. So if you're serious about building wealth, download Roy right now. Get r o I.app or search Roy in the App Store.
- [28:01]
Austin Hankwitz
Again, their app is pronounced Roy, but it is spelled R O. I like return on investment. So go check out Roy. It's a great way to track your net worth and your finances in general. All right, let's now jump back to our interview with Gary It.
- [28:14]
Robert Krok
So I love that. And let's unpack it a little bit further. You guys are always coming out with new products to meet every investor's needs. And that's what we love about what you guys do. So why don't you give us a quick rapid fire on any of the new products that you're excited about and just a brief explanation of what they are.
- [28:33]
Garrett Paolella
Sure. So recently we launched our real estate high income ETF iyri. So it gives you exposure to diversified US real estate across all spectrums, but is looking to generate roughly 10 to 12% in yield. So if you're thinking about being allocated to REITs then that's at 3ish percent. You know in the current market environment this is going to give you that 10 to 12. You know, thinking about QQQH we love it. That's not a new product but obviously a new brand of the ticker. Excited about that because of just where the market conditions have really been at the moment and the increase of volatility lets people sleep more at night and a lot of conversations from investors around that problem product. We did add a 20 plus year treasury bond fund with enhanced income and so folks that are looking to take longer duration in their portfolios within the fixed income space would still want a government allocation. TLTI is that fund which has been really interesting as we start to see is the Fed going to continue to, although slowly still cut rates over a longer period of time and kind of lock in those multi generational rates that we haven't seen in a while. And and I did briefly mention we got The S&P 500 hedged equity income products coming out to market looking at some more things within the commodity space and Bitcoin. So hopefully those will be a little bit more to talk about as times come.
- [29:52]
Austin Hankwitz
Well, I do want to double click though on this Iyri fund because I made a TikTok video recently explaining to people a couple different places they can park their money during times of volatility if it's a commodity or if it's gold, like whatever. But one of those things that I had talked about was the Vanguard Real estate index fund ETF VNQ and VNQ is up 7% year to date compared to the NASDAQ being down 3% and the S&P being down 1%. So let's call it a 10% swing in real estate versus like technology stocks. So like you guys just introduced IYRI which I'm assuming is very similar to VNQ. What are you seeing in the real estate markets right now that that are positive? Why are we seeing such a positive return so far in the last just two and a half months? Of 2025 in real estate.
- [30:44]
Garrett Paolella
Yes. Certainly an ease of secondary interest rates. Right. So thinking that the Fed hasn't cut another fed funds rate, but just looking at what the 10 year has done just in the last even week or two weeks here.
- [30:57]
Austin Hankwitz
Right.
- [30:58]
Garrett Paolella
Is that a significant reduction on secondary interest rate rates, mortgage rates, those types of things? And obviously because of real estate. Right. That easing of the debt lending and the leverage that real estate traditionally has on it is definitely a function of price appreciation for real estate investments that are very heavily debt overlaid with mortgages and different structures. So I think this comes back to the portfolio construction again that we've been speaking about is like another way to make sure you're diversified across your portfolio and not taking all your bets within tech, you know, and AI, if you're concerned about what that volatility could be. And so IYRI is allowing you to really get exposure to that US real estate market. But think about dampening the volatility even more and generating that kind of consistent monthly distributions that it's able to produce above and beyond just that income oriented allocation that you normally get by owning, you know, U.S. real estate or REITs, you know, in the public market.
- [31:54]
Austin Hankwitz
I appreciate that breakdown, Garrett. I'm looking at it right now. Mortgage rates are down to 6.19%, which is the lowest they've been since October of last, last year. So to your point, as you know, the 10 year continues to tick, lower mortgage rates will likely go down as well, which increases valuations for real estate. And I know when you guys launched iyri, we talked about it on the show as something to look into and you guys are outperforming both the S and P and the NASDAQ with this fund. So definitely something that I will keep on my watch list and add to over time. So I appreciate that breakdown and just for a reminder for everyone too, because I know a lot of people may have been, you know, just started investing in October, November, December, January of this year for the very first time. And they're like, whoa, wait a second, why are my stocks down? You know, why is my portfolio in the red? What's going on? Volatility is the price we pay to invest. That's how I want you guys to think about it. You will not be able to get the, I mean for the last two years, 20, 25% returns without also weathering the storm of a contraction, call it 5, 10, 15% in the markets. I think it's the statistic, Robert, from Goldman Sachs that says 68% of all bull market years dating back to the inception of The S&P 500 contained at least one 10% or more contraction. Now we're talking about contractions. We're not talking about recessions or, you know, a great financial crisis. We're just talking about the ebbs and flows of the market. And I really hope this episode can kind of, ooh, saw a lot of people into realizing that, that you know, the market is a pendulum. It swings way to the upside and way to the downside, but over time it continues to tick higher. And I want to encourage everyone to just take a deep breath. We're trying to give you as many ideas here as we possibly can to have some hedges in your portfolio or have a little bit of income to perhaps offset the price of volatility that you're experiencing. Because like everyone else, we're navigating these markets in real time as well with the experience that Robert and I and Garrett of course have, which in this case is decades.
- [34:04]
Garrett Paolella
Yeah. So Austin, I think that's a great point. Right. And what we've talked about a lot in this episode is something you guys started with dollar cost average, right? You see those 5 to 10% corrections? Look at that. Back to history and probably looking at that Goldman Sachs example, great buying opportunity. So focus on continuing the dollar cost average. Try to make sure that you're thinking about the risks that you build in that portfolio construction or your long term plans and stick with those, you know, and make sure that whatever you are investing in, you're willing to weather A down 5A down 10%. Because those are healthy, right? Those are healthy ways to make sure that the market can continue to trend higher and companies can continue to grow their earnings. That carries everything. If you just had a straight up market, it would defy all laws of financial balance sheet statements. And so naturally at some points you got to have some type of fluctuation. But think about those things as advantages because I don't think anyone has ever been upset buying a dip in the market when they look back at their portfolio after at least 12 months, if not certainly any longer period of the that.
- [35:05]
Robert Krok
Yeah. So for me, the biggest takeaways from today are portfolio construction, patience, stick to the plan and diversity. I think those are the key takeaways everyone should be thinking about as they exit this broadcast and really take notes on because it's really all about just understanding what is happening in the markets. How do you navigate the murky waters when there's a lot of volatility and come out the other side even a bigger winner. So I love it. I think this was a great episode. Very, very fun to have you on. Garrett, as always, very enlightening and we appreciate you spending the time with us.
- [35:42]
Garrett Paolella
Yeah, thanks guys for having me. Just honored to be here and appreciate the opportunity.
- [35:47]
Austin Hankwitz
Thanks so much, Garrett. Robert, we've been talking about volatility now since, what was it, the 13th of January. It was one of our major themes for the year. I think it's going to continue. Earnings growth is decelerating a little bit from Wall Street's perspective. It's called the Great Unwind, as I'm seeing in some headlines. And, and just there's a lot of fear and anxiety and movement in people's portfolios that they weren't expecting. We love to share ideas with you and we love to bring you all the best of the best, but sometimes those aren't always good news. And volatility is something that has not been good news, but we're happy to have called it per se. And we're trying to give you guys the best possible ways to offset some of that volatility if it's with income or if it's different, different ETFs or asset classes or whatever you can do. Because at the end of the day, the most important thing is to stay invested and continue to grow your wealth over a long period of time. And to think about years and decades, not days and weeks.
- [36:45]
Robert Krok
That is right. Create the plan, execute the plan, stick with the plan, all of the above. Because people just want to have so much emotion and have these knee jerk reactions. And we're not going to allow it here at the Rich Habits podcast because we're here to help you make money no matter what the market conditions are. And that is what I love to do every single day for each and every one of you.
- [37:07]
Austin Hankwitz
So now, Robert, let's jump into the Q A section of this episode. So our first question, or just maybe a comment in general here, comes from Teresa via Instagram dms. Teresa says I still hold fast that cryptocurrency is fake money. I can't pay my rent with cryptocurrency, I can't buy my groceries or feed my kids with crypto, and I can't pay my electric bill with crypto either. I've listened to your podcast from day one and I really wish you guys would stop hyping up cryptocurrency until we can use it to actually live. Please just stop talking about it. And Teresa's Reply here was actually to our Instagram story, which was a screenshot of Donald Trump talking about their strategic crypto reserve or something like that on Truth Social. And so we had thought it was a good idea to share it with you all. Robert, let me take a first stab at this this because I know you've got your own thoughts on all this stuff and I might be coming from a much more conservative perspective when it comes to investing. And cryptocurrency is very far out there for a lot of people and including myself. So Teresa and everyone else, let me just like state two things. The first thing is I love the idea of being diversified as well as being invested into asset classes that are not correlated to the stock market. I think that's a very important diversification measure that a lot of investors try and uphold when they're building a portfolio. Of course you want exposure to profitable publicly traded companies, but maybe you also want exposure to real estate or maybe commodities like gold or maybe like fine wines and whiskeys or artwork. Right? Building a investment portfolio can mean a lot of different things. And in my experience, since I think it was the summer of 2017, I added Bitcoin and have been actively adding Bitcoin to my own diversified investment portfolio. Now we can have all the arguments in the world about its utility or other, you know, crazy meme coins and altcoins and all the scams that are out there. I'm not disagreeing with that. But what I am doing is I really, really believe now especially that it is a multi trillion dollar asset class and that we have ETFs around it and even the President of the United States States is flirting with the idea of having a strategic reserve of it. That having 1, 3, maybe 5% of your net worth tied to this asset class via Bitcoin is a good idea. And then something else I just want to quickly touch on is like a lot of people again, about a half a dozen were like, oh my gosh, you're talking about Trump. I'm unfollowing you. I'm not listening to your podcast anymore. I don't want to be a part of this. That is totally your right to do. And and we wish you all the best. All we're trying to do is navigate a market environment no matter who is president. Just like we did under President Joe Biden, we will also do under President Trump and whoever turns out to be the next president, we are always trying to figure out what the markets are doing, how whoever is sitting in power is impacting them if it's a CHIPS act like under Biden, or if it's with tariffs under Trump or a strategic crypto reserve, like, we don't know. We're just trying to actively keep you guys updated with what's going on and help you navigate the market's volatility under whoever administration in real time.
- [40:22]
Robert Krok
I love that answer and I love this question because it drives me crazy. I think the people that have these type of responses that they're unfollowing us because we mentioned Trump or shared something from Trump. Please understand this. In Austin, you nailed it. We don't care who's president. We don't care who's governor. We don't care what's happening with any of it. We are here to educate and guide people on how to make money, no matter what the economic or political conditions are. End of story, full stop. That is it. We are here to help. We don't care. We are not political, we're not religious. We are here to help guide you so you make the most money and live the best life. That is it. So when it comes to Teresa's question about cryptocurrency, it drives me nuts. I can right now take my debit card card. I can enter it in, I can connect it to a crypto account. I can put a thousand dollars in that crypto account. I can buy bitcoin for a thousand dollars. Bitcoin, let's say, goes up to $4,000. I can then cash out the $4,000 right back into my bank account and buy groceries, pay for my kids, pay for rent, pay for my car payment. I can do whatever I want with cryptocurrency, just like I can with the stock market. It easy to use cryptocurrency like a dollar bill or a debit card card? Not yet, but it's getting there. But at the end of the day, when it comes to being a good investment structure in a good sector, I think it's phenomenal. We've seen higher gains with Bitcoin over the last five years over any other asset class on earth. So I've personally cashed out millions of dollars from Bitcoin alone in the last seven, eight years. So if that's not real and you consider that fake, I'm sorry. I think what you should do is more research and have a better understanding of what you are investing in. Because at the end of the day, we're not going to ever stop talking about cryptocurrency. We're not hyping it up. We are educating our job and our goal in life with this podcast and our community is to help educate people on all things business, mindset and finance to help them grow and retire with dignity.
- [42:32]
Garrett Paolella
I love all that.
- [42:33]
Austin Hankwitz
And the only addition I'll make is I am religious, but I don't talk about it on the podcast. I don't think anyone cares that I believe in God. So politics, religion, whatever, like, it doesn't matter. We're not trying to push that onto anybody. But we are trying to help you all navigate the day to day headlines and encourage you to have exposure to asset classes that have, historically speaking now, for the last decade, been uncorrelated and have outperformed the S&P 500. Just like if, like Robert, there was a. A crazy champagne that was just the best champagne in the world. You could be sober and hate drinking and not believe in it at all, but I would still encourage you to somehow own a bottle of the champagne because it tends to go up over time. Right? Like that's the same thing. It's like you might not have to believe in this stuff, but at the end of the day, having 1, 3, 5, percent of your net worth invested or even exposed even to this asset class is a good idea. And that's what we're just trying to share with people. So Teresa and the other dozen of you that had a negative comment to share, it's all good. We respect that. We love this country. It's a free country. We encourage you to do whatever is best for your mental health, your financial wellbeing, everything in between. Like, we're rooting for you regardless if it's our podcast or someone else. But just know that we're not coming at you from some crazy political agenda like, like, we're just trying to help y'all make money.
- [43:54]
Robert Krok
I love it.
- [43:54]
Austin Hankwitz
All right, now let's jump into a real question coming from Michael. Michael says, hey, guys, I'm an avid listener of your podcast and I love the straightforward approach you guys share. I have a question as to what to do with my annual bonus of about $12,000 before taxes. It's going to get paid out at the end of March. I'm 32 years old. I make 125,000 a year in between my Roth IRA and Roth 401K, which is invested into the S&P 500 in the NASDAQ and my bridge account. I have $155,000 invested to build my base. I also have a $20,000 emergency fund and an $1,800 a month mortgage at a 3% interest rate. I don't have a car payment or any other debt. So here's my predicament. Do I just do the responsible thing and put all $12,000 of my bonus into my investments? Do I splurge on something a little bit? How much of this should I use for fun money? Would love to get your perspectives. Robert, you want to answer this one?
- [44:50]
Robert Krok
Yeah, I love it. And this kind of goes back to one of your themes, Austin, and that is you're 32 years old. You're crushing it. You're doing great. You've got your base built, you're really, really doing well. I think you should look at splurging on something. What better time than now to reward yourself for all your hard work, all of your educational stuff that you've learned, and really set yourself up from a literacy perspective with respect to your finances. So, yeah, my opinion is it might be time to go ahead and splurge. Spend all of it, spend part of it, but reward yourself. You've done an incredible job. You're so far ahead of the curve. Curve. And I love hearing stories like this. So thanks for sending this question.
- [45:29]
Austin Hankwitz
Michael, you have done a Wonderful job. You're 32 years old. You've built your base, you've got $155,000 invested. You have a fully funded emergency fund, you have a low rate mortgage, you have no car payment. Like you're crushing it right now. The world is your financial oyster, essentially. If I were you, I would feel as if you've been working hard, you're doing these things right, and have likely been for several years. Years. Maybe at the expense of a vacation, maybe at the expense of a car you really wish you could drive. Maybe at the expense of something in your home that you just think is a crazy idea. Like a $4,000 espresso machine, right? Like, I don't know what, like, makes you tick, but I do know that you can get burnt out doing this sort of frugality stuff really easily if you don't reward yourself along the way. And I would imagine, considering how well you've done financially here at such a young age, you might be approaching what could feel like a burnout situation. So to Robert's point, I'm in total agreement. Take half of it. Take, call it 6,000, 5,000, $4,000, and take that dream vacation, go on that really cool experience, or maybe go buy that thing that just, like, never makes sense for you. But you know what? Maybe you're super into coffee. You want to get this espresso machine or maybe it's like a hot tub. Like I don't know what you're into, but there's something I'm sure you've kept in your notes app for a couple years now that's like if I ever had the money, I would buy this because it would really make me happ. That I think is what you should spend half this money on and yeah, maybe the other half of it. Yeah, throw it in your bridge account, use it to max out your Roth ira. Like whatever you want to do. You already know the protocol. You're very smart when it comes to money. But I do think splurging on something's a good idea, especially if it's going to keep you motivated for the next 12, 18, 24, 36 months to stay with it financially.
- [47:20]
Robert Krok
Yeah, I want to unpack this a little further because I love this question about splurging because I feel I'm going to use a reference of one of my dear friends. Friends. He is unmarried, no kids, has millions of dollars. And when I went to his house the last time I was around in Ohio, this was probably four years ago, he had really old furniture, he had a terrible 15 year old TV, he had a beat up truck, all of these things. And I looked at him and I said what are you doing? You have millions of dollars, you have nothing to do with it. Why don't you splurge? You've been talking about buying a nice boat. Get rid of your crappy boat. Boat. Get a real boat. Upgrade your TV. Least it'll cost you 3, $400. So when you're watching TV at night at least you can enjoy it. So you have to remember we're never going to be educating to just save, save, save, invest, invest, invest and not enjoy life. You have to have balance there. Otherwise what is the point? So I love this, I love this question and just always try to find a balance so you're not just building your wealth for the future and not enjoying the price.
- [48:27]
Austin Hankwitz
And my last point here is when you do think through what that item or experience, specifically item I guess that you want to splurge on is think about the cost per use, right? Cost per use. So for example, I spent like 2000 ish dollars buying a state of the art beautiful LG 4K QLED TV. That's like 60 inches. I'm in love with it. I love it, I love it for movies, it's amazing and I'm cool with that. Because I'm going to have it for like the next five or six years. I use my TV probably three to five times a week. I'll sit down. Like, just last night I was watching Love is Blind with my girlfriend. So it's like, think about cost per use. I'm okay with spending that much, knowing I'll only spend it every four to five, six years, but I'll use it all the time. So don't, like, go buy something silly that you're never gonna use. Another example of this is I just, you know, bought a $4,000 couch. I've never had a nice couch. My last two couches were Facebook Marketplace couches. So now I'm like investing into what I want to be. Like an elevated new experience for my daily life is like, I sit on the couch all day long. I need to have something good. So think about it. Like that perspective, cost per use. I think that's a very responsible way to think about splurging.
- [49:37]
Robert Krok
I love it, love it, love it. One of my big expenses is mattresses. I do not skimp on my mattress. I want to make sure that when I fall asleep that I feel like I'm at the best resort on earth. So you'll never see me skimp on a mattress.
- [49:52]
Austin Hankwitz
So our next question comes from Meta inside of our Instagram DMs. She says, I'm 32 years old, I'm married with a baby on the way, and I've paid off all my student loan debt of $1,000. And my husband has about $25,000 left of student loan debt himself. Now we have roughly 185,000 sitting in a high yield savings account, earning about 4% because we thought that we'd be buying a house soon. However, New York City is becoming too expensive and we're considering moving to a different state in the next five years, give or take, depending on our child care situation. Since all of our family does live in New York City now. My husband has 17,000 in a 401k. I've got 50,000 in a Roth IRA as well as 30,000 in my bridge account and 45,000 vested in a city pension plan from work. We're currently renting a one bedroom apartment in New York City for $2,300. And with maternity leave coming up, we anticipate a huge pay cut this year since I make double my husband's salary. What should we do with the cash sitting in this high yield savings account? I'm afraid to, like, invest it short term and have the markets go crazy and lose some as well as consider my taxes and all that fun stuff that comes with investing. So I'm trying to figure out what to do. Do we set ourselves up for retirement more by investing this in a long term account? What do we do here? So Robert, I want to take a first stab at this one.
- [51:10]
Robert Krok
I love where you guys are at and I think it's fantastic at your age how you're looking at money and what you're doing. But I do think you're on the right track. Having that much money in a high yield savings account, whether the markets are turbulent or not, I think is just too much much. I would rather see maybe 50 in the high yield savings account, get the other $135,000 working in the markets, especially at your young age, because then it is working towards your retirement. Getting it into some of the index funds that we talk about, getting good balance, getting more diversity for the long term. Because are we going to see volatility for the rest of 2025? Probably, maybe we'll see some downturn through this year and into 2026. Maybe, maybe. But over time you need this money making more than 4% and you need it active in the market. So I think you're on the right track. I'd get a bunch of that money out and get it activated and then go from there. I think that would be the best plan long term for you, especially because you have a 30 year investment time horizon ahead of you and plenty of time to weather any storms in the market.
- [52:18]
Austin Hankwitz
So it seems like Meta here has a bout between her and her husband. A hundred ish thousand invested toward their retirement accounts and their bridge account and then they've got this 185 that I'm sure they've been saving aggressively for as a down payment on, you know, 801 million, one and a half million dollar piece of property in New York City, which makes a lot of sense. If I were you, I would probably want to one, not make any money moves until after your baby has arrived. I pray for a happy, healthy baby, but who knows what could happen? So making sure that you have some of that financial flexibility in case a medical bill that is unexpected comes for something crazy. Right? Let's hope it doesn't happen. But no one can predict the future. So I would want to make sure that like, you know, you're neck high in cash when it comes to making sure that this baby is delivered properly and all is well. The medical bills come, you pay them, you're off to the races now, now. And then I'd say with what you have left over, you mentioned you'd be making a lot less because of the maternity leave. I would also probably consider using this money to supplement your lifestyle while you're home with your baby. I don't know if that's going to be three months or four months or five months or six months, but you should not go into like debt or credit card debt or anything like that to supplement your lifestyle while you're on maternity leave. Like, use this money. That's what is. It's four. And then once you're back working and your husband's working and, you know, maybe the family's helping with the baby, right? It's like it's not really, you know, things are back to normal, quote, unquote. Now it's time to make the decision of like, one, do we really want to stay in New York for the next five years? And if that's the case, like 2,300amonth sounds pretty reasonable for an apartment in New York, depending on like how your situation is there. So maybe you stick it out for a couple years, years and continue to save some money for a big down payment or a decent sized down payment if you end up moving somewhere else in the country with lower taxes and a lower cost of living. But in my opinion, if you do plan to stay in New York for at least five years and you don't plan to buy for the next five years, putting this money to work in the markets by investing into the S&P 500 and like, you know, VTI, Voo, things like that that are just going to be long. Standing up into the right for a long period of time is a really, really great way to make sure your money's growing for you, assuming you're not going to spend it for the next five years. And you also, like, have this long term vision of what owning real estate could look like in your late 30s and maybe early 40s and like really flourishing as a family somewhere else in the country that might give you more than, you know, a small backyard and whatever comes with buying in New York. I don't like New York City, Robert. It's cold, old and it's expensive.
- [55:06]
Robert Krok
Yeah, I don't like New York either. I like to visit. The commerce part of it is great. We've had some really fun times there. But yeah, I just don't think I would ever want to live in a market where parking is tough and you don't get a yard and there's just not a lot of room and really, really high cost of living because a lot of times the increase in wages doesn't meet what the increase in living costs. So it's kind of difficult. Difficult. But love the question. You guys are doing great. And Austin, I think your takeaway was perfect.
- [55:37]
Austin Hankwitz
Meta Michael and Teresa, thank you so much for asking a question or just providing your feedback. Teresa via Instagram DMS feedback is always welcomed. Questions are always welcomed. I mean, Rich Habits Podcast on Instagram is where you can ask us these things as well as emailing us at Rich Habits podcast gmail.com and then also inside the Rich Habits Network. Now remember Robert, what's really fun right now is anyone, I don't want to like emphasize this, anyone can go and start a seven day free trial inside of the Rich Habits Network completely for free, right? So like we've already had, I don't know, 30, 40, 50 people do this trial in the last like three weeks. So it's been really, really cool to see that so many people are like actually utilizing this. But seven day free trial, like put in your credit card info but you can cancel it, it won't charge you. Like, like set a reminder on your phone if you have hate it. No hard feelings, but that'll give you the time to join a live stream at least once. Watch some of the video content, ask some questions, get acclimated and see if being a part of this community is right for you. So there's a link in the show notes below to give the Rich Habits Network a free trial. Like what do you have to lose? Seriously? Go join one of these free Zoom call live streams. It'll be so much fun. Watch a replay. Like there's nothing to lose if you just set a reminder on your phone and cancel if you hate it that much much. So join us in the Rich Habits Network completely for free. Seven day free trial. Like we'll see you there.
- [57:03]
Robert Krok
The Rich Habits Network is definitely one of the coolest things I've ever built and been involved with with you, Austin and Christian. So really, really incredible. And for anyone that's looking to step up their game in finance or business or mindset, I think it is the best money they could spend. So I definitely love the free trial.
- [57:21]
Austin Hankwitz
As always, thank you all so much for tuning into this week's episode of the Rich Habits Podcast and we hope you have a great rest of your week.