Rich Habits Podcast Episode 108: How We're Approaching Volatility in 2025
Release Date: March 10, 2025
Hosts: Austin Hankwitz and Robert Krok
Guest: Garrett Paolella, Managing Partner at NEOS Investments
1. Introduction and Episode Overview
The Rich Habits Podcast, hosted by Austin Hankwitz and Robert Krok, delves into financial literacy, focusing on the habits of the wealthy and providing listeners with strategies to manage and grow their finances effectively. In Episode 108: How We're Approaching Volatility in 2025, released on March 10, 2025, the hosts address the significant market volatility experienced in 2025, a theme they had predicted earlier in the year.
Austin Hankwitz opens the episode by introducing the topic and their guest, Garrett Paolella from NEOS Investments, highlighting Garrett's expertise and NEOS's role in offering income-focused ETFs designed to mitigate market volatility.
2. Understanding Market Volatility in 2025
Robert Krok sets the stage by acknowledging the heightened market volatility observed in 2025, affirming their early predictions about its prominence throughout the year. He emphasizes the importance of dissecting this volatility to provide listeners with actionable insights.
Notable Quote:
“Volatility is here. Be ready for it. Let's take advantage of it.”
— Austin Hankwitz [02:42]
3. Introducing NEOS Investments and Their Strategies
Garrett Paolella provides an in-depth overview of NEOS Investments, explaining their mission to deliver risk-mitigated and yield-enhancing solutions across various asset classes, including equities, fixed income, crypto, and real estate. He introduces key NEOS products like SPYI, QQQI, IWMI, and BTCI, designed to generate consistent income while managing risk.
SPYI Explained:
- Exposure: S&P 500 index
- Strategy: Monthly covered call option overlay to generate income
- Yield: Targets a 10-12% annualized distribution
- Benefit: Harnesses market volatility to create income, similar to earning rental income from real estate.
Notable Quote:
“Volatility can also be an asset class and really an advantage in your portfolio.”
— Garrett Paolella [03:58]
4. Portfolio Construction Amid Volatility
Austin Hankwitz and Robert Krok stress the critical role of portfolio construction in navigating volatile markets. They advocate for diversification, emphasizing the importance of allocating the majority of investments to robust index funds and ETFs rather than trending momentum stocks, which are often more volatile.
Key Points:
- Importance of diversifying investments to shield against market swings.
- Preference for long-established index funds over speculative trades.
- Emphasis on rules-based portfolio construction to align with personal financial goals.
Notable Quote:
“The vast majority of your portfolio invested into outstanding index funds and ETFs that we believe in and have a long track record.”
— Austin Hankwitz [06:07]
5. Psychological Aspects of Investing During Volatility
The conversation shifts to the psychological challenges investors face during turbulent times. Austin and Robert highlight the emotional strain of witnessing significant portfolio fluctuations, especially for those with substantial investments.
Garrett Paolella offers strategies to maintain composure:
- Trust Your Plan: Stick to a long-term investment strategy despite short-term market movements.
- Stay Diversified: Avoid letting external noise influence core investment decisions.
- Avoid Knee-Jerk Reactions: Emphasizes the futility of market timing based on headlines or short-term trends.
Notable Quote:
“Don't risk the farm on it and stick with it because I think you'll see... long-term compounding interest is the best way to build wealth over time.”
— Garrett Paolella [09:53]
6. Hedging Volatility with NEOS Products
The discussion delves deeper into how NEOS's ETFs like SPYI and QQQH are tailored to mitigate volatility:
-
SPYI: Generates consistent income through a covered call strategy, reducing downside exposure while maintaining equity participation.
-
QQQH: A hedged version of QQQI, offering downside protection by integrating a put option strategy, thereby cushioning market drawdowns.
Performance Insights:
- QQQH outperformed QQQI and the underlying Nasdaq by effectively hedging against a 3% market downturn, resulting in only a 1% decline compared to a 3% drop in the Nasdaq ([13:52]).
Notable Quote:
“Once you get a reversion back to the mean and the market starts marching higher again, you participate again with those equities.”
— Garrett Paolella [13:52]
7. NEOS Investments' New Product Launches
Garrett shares updates on NEOS's latest product offerings designed to cater to diverse investor needs:
-
IYRI: A real estate high-income ETF providing exposure to diversified U.S. real estate with a targeted 10-12% yield, outperforming traditional REITs like VNQ.
-
TLTI: A 20+ year treasury bond fund with enhanced income, catering to investors seeking longer-duration fixed income solutions.
-
Upcoming Products: Plans to introduce an S&P 500 hedged equity income product and expand into commodities and Bitcoin-focused ETFs.
Notable Quote:
“We really want investors to espouse their views... feel comfortable with what they want to be allocated to but also generate tax-efficient monthly income.”
— Garrett Paolella [22:02]
8. Listener Questions and Host Responses
The hosts engage with listeners' questions, offering personalized financial advice. Two notable questions addressed include:
-
Teresa's Concern About Cryptocurrency:
- Teresa's Point: Skepticism about cryptocurrency's practicality for daily transactions.
- Hosts' Response: Emphasize diversification, acknowledge crypto as a significant asset class with growth potential, and encourage research and informed investment despite varying opinions.
Notable Quote:
“Having 1, 3, maybe 5% of your net worth tied to this asset class via Bitcoin is a good idea.”
— Austin Hankwitz [43:54] -
Michael's Bonus Allocation Dilemma:
- Michael's Situation: Debating whether to invest his $12,000 annual bonus or allocate part of it for personal rewards.
- Hosts' Advice: Recommend balancing investments with personal rewards to maintain motivation and avoid burnout. Suggest allocating half the bonus to investments and the other half to personal enjoyment or meaningful purchases.
Notable Quote:
“You have to have balance there. Otherwise, what is the point?”
— Robert Krok [47:20]
9. Conclusion and Final Thoughts
As the episode wraps up, Austin and Robert reiterate the importance of staying invested, maintaining a diversified portfolio, and approaching market volatility with informed strategies. They encourage listeners to leverage NEOS's products to mitigate risks and capitalize on market opportunities.
Final Takeaways:
- Portfolio Construction: Diversification and strategic allocation are paramount.
- Patience and Plan Adherence: Long-term focus outweighs short-term market fluctuations.
- Continuous Education: Staying informed and adaptable ensures financial resilience.
Notable Quote:
“Create the plan, execute the plan, stick with the plan, all of the above.”
— Robert Krok [35:04]
10. Additional Resources and Community Engagement
The episode concludes with promotions for episode sponsors Public.com and Roy, and invitations to join the Rich Habits Network, offering a free trial for access to live streams, educational content, and a supportive community.
Call to Action:
“Join us in the Rich Habits Network completely for free. Seven day free trial. Like we'll see you there.”
— Austin Hankwitz [56:XX]
Overall, Episode 108 provides listeners with a comprehensive understanding of navigating market volatility through strategic portfolio construction, diversification, and leveraging specialized investment products. Garrett Paolella's insights into NEOS Investments' offerings offer actionable strategies to mitigate risks and generate consistent income, aligning with the podcast's mission to empower listeners to take control of their financial futures.