← Rich Habits Podcast
Loading summary
Transcript65 lines
- [00:01]
Austin Hankwitz
Go further with the American Express Business Gold Card. Earn 3 times Membership Rewards points on flights and prepaid hotels when you book through amextravel.com whether your destination is a business conference or a client meeting, your purchases will help you earn more points for future trips. Experience more on your travels with Amex Business Gold Terms apply. Learn more@americanexpress.com Business Gold AmEx Business Gold Card Built for business by American Express.
- [00:31]
Robert Krok
This episode is brought to you by State Farm.
- [00:33]
Austin Hankwitz
You might say all kinds of stuff when things go wrong, but these are.
- [00:36]
Robert Krok
The words you really need to remember. Like a good neighbor, State Farm is there.
- [00:41]
Austin Hankwitz
They've got options to fit your unique.
- [00:43]
Robert Krok
Insurance needs, meaning you can talk to your agent to choose the coverage you.
- [00:48]
J.J. Maxwell
Need, have coverage options to protect the.
- [00:50]
Austin Hankwitz
Things you value most, file a claim.
- [00:52]
Robert Krok
Right on the State Farm mobile app, and even reach a real person when you need to talk to someone. Like a good neighbor, State Farm is.
- [00:58]
Austin Hankwitz
The there hey everyone and welcome back to the Rich Habits podcast, a top 10 business podcast on Spotify brought to you by public.com 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 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. Robert, I'm excited for today's episode. What are we going to be talking about?
- [01:51]
J.J. Maxwell
As you all know by now, we're constantly on the hunt to find the best investing tools and resources to share with all of you on a consistent basis. That's why we brought you guests like Jay Jacobs from blackrock, Scott Lynn from Masterworks, and several others over the years. And this week's episode is another one of those instances. Today we have JJ Maxwell and he is the CEO of Double. They are an investing platform that allows retail investors to experience the best of both worlds between active and passive investing. And you know, we touch on this all the time. Double allows anyone to build their own stock index so you want to be heavier in AI, utilities, financials healthcare. You can build your own S&P 500 using your own rules. But in case that seems intimidating, which I'm sure it does, Double has built over 30 of their own back tested strategies for investors to take advantage of and invest into themselves.
- [02:52]
Austin Hankwitz
So like full transparency. I'm scrolling LinkedIn back in like late August, early September of last year, I see someone on my network post about this cool platform called Double. So I'm like, all right, sweet, I'm gonna go check it out. So I check it out. I deposit $5,000 of my own money again back in like September of 2024, and I'm on the hunt for some outsized gains. I'm browsing these 30 plus pre built strategies. There's some like we'll get into them. But I found one that was called Large Market Beaters and I read this description, it says over the past year this collection of stocks has achieved the ultimate goal of beating the market. They're both the largest stock market with market caps over 200 billion. And at that size, the only companies to have outperformed the S&P 500's long average return by at least 2x, which tells me they're over 200 billion in market cap. They're big profitable companies and they're outperforming the S&P 500's you know, 10% projected return by 2x, which means they're doing 20% a year in returns. Sounds awesome, but how does that work for me? So I put $5,000 in my own money. I get automatically invested into 19 different single stocks, some of these names. Now six months later, we're recording this March of 2025. I'm up 42%, 29, 21, so on and so forth. And I just looked at my total return. It is 5.3% compared to the S P 500's total return during the same period of time of 2.7%. So my strategy is up in aggregate. It's awesome. It's kind of weird how it literally has outperformed the s P by 2X here. But again this is like. What's so interesting is because JJ and his double have built this strategy from scratch. And there's other strategies like growth at a fair price or the top 20% club, or growing small caps or Y combinator public companies and like so many more. So if you're a nerd like me and you like to look at historical returns and digest strategies and dissect what works, what doesn't, and back test your own different things and figure it all out. Double has just been this really cool opportunity to do that. So I'll pause on my own experience. I want to make sure, like, you know, full transparency, how I found this platform, how I reached out to JJ and I was like, dude, you're building something really cool. Like come talk about it to our podcast listeners. Like, I wanted to always be the person alongside Robert to say, hey, we found something cool, right? We want you all to know about it. So jj, we think we found something cool with Double here. Introduce yourself and let the people know what you're up to.
- [05:26]
Robert Krok
Thanks so much, Austin and Robert. I'm J.J. maxwell. I'm an engineer, the CEO and co founder at Double. At Double, you touched on some great points there. Examples that really showcase the platform and some of the things we do. What we're trying to do with Double is build the world's best portfolio investing product. And we do that for just a dollar a month. Right now a lot of investors that we talk to feel stuck between broad ETFs and picking individual stocks. It's kind of the classic active versus passive debate that's been going on forever. What should I be doing? We think Double is a unique product that really sits in between those two things of Active and passive and is a nice sweet spot between hand on stock picking and set it and forget it funds. Broadly, Double lets you invest in baskets of stocks. Some of these baskets of stocks are similar things to what you know, like the S&P 500. But with double, you don't just track the S&P 500, you can also customize it. So if you want to be overweight AI or underweight banks, Double lets you do that, in my opinion, pretty non intimidating way with just a few clicks. This isn't a tool for hedge fund traders. It's not a tool for professionals. It's a tool for everyday investors to level up their portfolio. In our opinion. As you mentioned, we offer these thematic baskets as well. So not just the S&P 500, but things like dividend kings, founder mode, large market beaters, and you can also build your own. So I know in your 2025 prediction podcast a few weeks ago you talked about themes that you think are important. These were robotics, I believe there was a nuclear energy one, maybe quantum computing, things like that. Those are all really cool thematic ideas. Me personally, I wouldn't want to put 100% of my wealth into that. I think that would be a scary proposition. But Putting a small percentage 5 percentage against a strategy like that we think that's where Double really shines and what we enable you to do.
- [07:35]
Austin Hankwitz
So how I understand it, just make sure we're on the same page, right. Is like let's say someone has a hundred thousand dollars and they want a lot of that money to be tracking index funds and ETFs. And so you guys have like, you know, the Voos of the world and the total stock market indices on. So they can go put some money in that. But then they could also put maybe a 5% weighting into a founder mode strategy or they could put a 10% weighting into a large market beater strategy like I have. And then they can begin to like, to your point, like portfolio investing. Right. So they're taking a whole different look at their investing strategy, a holistic look as a what is my total portfolio doing versus saying I'm following an index or an ETF or a single stock? It's really interesting. It's like a bucketed approach to investing. It's pretty cool.
- [08:21]
J.J. Maxwell
Where did the idea come from for Double? Because Austin and I, like we alluded to earlier in the episode, we're always trying to find our listeners the best of the best. You know, we're always out there digging and scratching and researching and having all these conversations. So where did this all come from? Let's touch on that for a minute before I go into my next question.
- [08:42]
Robert Krok
The idea with Double really came from my own frustration with the various kind of portfolio tools out there. So a little bit of background. I started a different company in 2016. We sold that in 2021 for $100 million. It was a great exit. I went from having not a lot of money to having a bit more money to invest. And I needed to figure out what to do with it. I went out there, I played with pretty much every brokerage you can here in the U.S. things like Wealthfront, Robo Advisors, things like M1, Fidelity, Schwab. I also talked to some financial advisors and I ended up working with a financial advisor for a little bit of time. Financial advisors, they bundle a lot of different services. They have a to knowledge about the market and investing in general. For me, it became not worth the cost. The 1% a year was a pretty big detractor for me and I wanted to be able to do it myself. One thing financial advisors have though, are very cool tools to do exactly what we built here at Double. These are things like direct indexing, automated tax loss, harvesting dollar cost averaging into and out of strategies. And the advisors just charge that 1% a year for the privilege of using those. And I wanted to bring those to everyday people in an affordable format that I was going to be a user of myself and I was going to build portfolio tools for a lot of other investors to invest like some of those wealthy people can right now through financial advisors. And I would say we actually have a feature that, that I'm personally really proud of which lets you basically migrate between positions over time. So some people call this dollar cost averaging. So in your example, maybe you add 80% in the S&P 520% in founder mode. Maybe founder mode is doing really well. And you're like, okay, I want to go to 30% founder mode. You can come on to double and schedule a change over the next two to three months or whatever time frame you choose to migrate out of Your S&P 500 and into the more risky founder mode. Robert heard you talk about sort of risk on and risk off worlds. And this is a feature I'm really proud of that lets users move between them without having to time the market in the way you do by kind of submitting a trade on a given day.
- [11:01]
J.J. Maxwell
I love this and it leads me to my next question, but let's back up a little bit on that note. Is this a taxable event or through the migration, is it not taxable to the client doing this migration of that 10%? No.
- [11:15]
Robert Krok
So this migration of that magnitude generally would be taxable. Yes. But we look at your portfolio on a tax lot basis because if you buy, let's say you're depositing $1,000 every month from a paycheck you have bought at a lot of different prices of a security and so double, we look at all those different tax slots throughout the history of your account. If it's a gain, we will sell the ones that lead to the least amount of gain, taxable gain for you. And if they're at a loss, that's actually tax loss harvesting in some cases, which is a feature we enable and can use that to offset gains elsewhere in your portfolio.
- [11:56]
J.J. Maxwell
Now is this like an automated first in, last out or is it done in a way where it takes the ones that have the greater gains and then uses them so you diminish the taxes, the long term capital gains the most? Is that what I'm understanding?
- [12:13]
Robert Krok
That's right. It's not just FIFO and it's not just min tax which some brokerages have. It actually takes into account wash sale rules as well. And we look at tax slots individually to Determine which ones to buy and sell as you're doing that migration.
- [12:28]
J.J. Maxwell
I love this because we just had this conversation kind of flushing it all out last night because it does get confusing on, you know, how do you know what was a short term capital gain versus a long term capital gain in your own portfolios? And it's a lot of different tracking that is not automated. So I love this and I'm really fascinated that you guys have really seems like you've thought everything through. Now before we ask JJ our next question, let's hear from this week's sponsor, Public if you're serious about investing, you need to know about public.com. that's where you can invest in everything, stocks, options, bonds and crypto. They even offer some of the highest yields in the industry, like the bond account 6% or higher yield that remains locked in even if the Fed cuts rates. What sets Public apart though is how they give you the tools you need to make informed investment decisions. Their built in AI tool called Alpha doesn't just tell you if an asset is moving, it tells you why the asset is moving. So you can actually understand what's driving your portfolio's performance daily, weekly or monthly and really understand where it's going.
- [13:36]
Austin Hankwitz
Public is a FINRA registered SIPC insured US based company with a customer support team that actually cares. The bottom line is your investments deserve a platform that takes them as seriously as you do. So fund your account in five minutes or less@public.com richhab and get up to $10,000 when you transfer your old portfolio. That is public.com rich habits paid for by Public Investing. Full disclosures in the podcast description. All right, Robert, let's now jump back to our interview with jj.
- [14:08]
J.J. Maxwell
Tell us more about this automation and your tax loss harvesting strategies because I really love what you guys have built. But I also want our audience to understand how you guys are creating the most benefits from this situation. Because one of the phrases that I live on every single day for my audience in our audience with the Rich Habits Network is it's not what you make, it's what you keep. And a lot of people really don't let that sink in enough to understand that you have to take advantage of everything you can to be able to keep more of your everyday dollar and your gains. So walk us through that so the listeners can really understand the magnitude of what you guys have done here.
- [14:52]
Robert Krok
Automation is a core part of Double. As I mentioned before, you come in, you pick strategies, you set targets against them and then basically every day we're going to analyze that portfolio. It doesn't mean we're going to trade every day, but we're going to look at the portfolio and we're going to look at the specific tax slots within that portfolio. And we're going to determine if it makes sense to execute different types of trades for different reasons. Index drops happens. That's when a, when a ETF will like the S and P, every quarter will change some holdings within it. So we look for those. We look for tax loss harvesting opportunities. So tax loss harvesting is broadly when a stock goes down, you sell it, you harvest that loss, you kind of get it what I call a tax credit. It's sort of a something you can use to offset gains elsewhere in your portfolio. So we're automating that process and looking every day and working for you to try and find these opportunities. You take into account transaction costs, we take into account your portfolio drift. And then we also leave it up to you. If you want to do tax loss harvesting, it's disableable within the account. And so we think this offers very powerful tools that are also in your control and you can kind of create the portfolio that mimics how you want to invest.
- [16:15]
Austin Hankwitz
I'm in my account right now. And so we talked about the large market beater strategy. It's the one that I ended up implementing. It's got a minimum investment of 110. I decided to do 5,000 because like, come on now. But 110 is the minimum here. But the expense ratio, it says expense ratio 0.00%. So you guys aren't like, it's a dollar a month and that's how you.
- [16:33]
Robert Krok
Guys are making your AUM component to it. A slight correction. So we have a minimum account. When you first open an account, you need to open with $1,000.
- [16:43]
Austin Hankwitz
Okay. Okay.
- [16:44]
Robert Krok
And then once you have funded at least $1,000, strategies will have lower minimums or can have lower minimums than that.
- [16:51]
Austin Hankwitz
Got it. Okay, sweet. So you fund it with at least a thousand and then you're going in and you're choosing what you want. I'm looking at to your point, there's one called the information technology sector that has an $8,700 minimum investment. But then there's this one over here called the top 20% that's got 150.
- [17:10]
Robert Krok
So it really depends on the smallest holdings within the strategy. So that minimum is set. If you think of a basket of 100 stocks, you have to buy 1% of each. And we can only trade down to generally $5 in a, in a given stock. That's a restriction from our custodian apex. And so that minimum is dictated just by how many stocks and what are the weights within the portfolio.
- [17:36]
Austin Hankwitz
So I'm a super nerd. I absolutely love looking at this stuff. And what I think is really interesting is every single one of your strategies, you provide a back test, you provide the opportunity for people to go in and pick, for example, five years here on large market beaters. I can see if 5 years ago I decided to invest a hundred thousand dollars into this strategy, what the strategy would have performed over the last five years in relation to the S&P 500. So in this instance, your back test shows the one would have turned into 375,000 compared to the S&P's 182,000. And you can do that with every single strategy. You can back test it, you can look and see how it's performed, why it might have performed better or worse. It's really interesting that you guys, you know, share all that information. So now my next question is like, how do you guys come up with these strategies?
- [18:28]
Robert Krok
So they're built using our own tools that are available to any user to build a strategy as well. So if we look at different cuts of the market, large market beaters, right, you start with that, that is a market cap filter and then a performance filter for I think three year return. You can also mix and match those filters. So we have I think about 15 or 20 different filters. These are things like PE ratio, return on invested capital, market cap sector, things like that. So you can get pretty specific and pick for example, the most profitable tech companies. If you wanted to create a screen like that, you could do that in a few clicks within double.
- [19:06]
Austin Hankwitz
You mentioned like you've got these filters and screens. So you're saying that anyone could just go in there and just say, I want to screen for and invest in companies that are profitable and growing by x percent per year or have been paying a dividend for at least five years or don't have debt on their balance sheets and they can just like click on these things and automatically now have exposure to companies that make up those characteristics.
- [19:28]
Robert Krok
That's right. So yeah, our portfolio builder or strategy builder takes a stock screener, which are things that exist out there generally, those stock screeners, the output is a CSV file or something like that. On double, it can be an investable thing. You can say, I want this. And we also let users we call re screen. So if you take the most profitable, high return on capital. You know, mining companies, for example, you can then update your strategy every year by re filtering or every month by re filtering that screen.
- [20:06]
Austin Hankwitz
So essentially what it sounds like is you're giving people the opportunity to build their own S&P 500 strategies. But instead of, you know, having a market cap or like profitability for so long, like S and P Global does with their own, and they rebalance it on a quarterly basis, people can go in and say, hey, I want to invest in companies that have been paying a dividend for so many years. Maybe they have no debt, maybe they've been profitable, maybe they have a market cap is so high, you know, growth, revenue, whatever, and then rebalance it on a monthly basis. Like that is really interesting that you guys have built that. Good for you guys.
- [20:37]
Robert Krok
Yeah. So we call that kind of your own personal stock index and double makes it possible for people to build that and then we handle the automation and sort of the rebalancing of that over time.
- [20:47]
Austin Hankwitz
Robert here's the question. Can we build a Rich Habits Podcast stock index and have it on double?
- [20:53]
J.J. Maxwell
That's what I've been chomping at the bit to say. I'm like, when are we launching the Rich Habits Network stock Index?
- [21:00]
Austin Hankwitz
This episode of the Rich Habits Podcast is brought to you by NEOS investments. NEOs offers ETFs that seek high levels of monthly income with a keen focus on tax efficiency while providing core portfolio exposure across equities, fixed income, real estate, cryptocurrency and cash alternatives like t bills. Their ETFs may be especially interesting for folks looking to generate tax efficient monthly income inside of their investment portfolios.
- [21:27]
J.J. Maxwell
They recently launched an ETF that invests in exchange traded products with direct exposure to Bitcoin while aiming to offer high monthly income. The NEOS Bitcoin High Income ETF. It trades under the ticker symbol BTCI. So if you're looking to add passive income focused ETFs to your portfolio, consider learning more about the NEOs ETFs@neospons.com as with all investments, investors should carefully consider their investment objectives, risks, charges and expenses of NEOS exchange traded funds before investing.
- [22:03]
Austin Hankwitz
To obtain a prospectus containing this and other important information, please visit neosfunds.com Please read the prospectus carefully before you invest. An investment in NEO CTFS involves risk, including possible loss of principle. There is no guarantee that NEO CTFs will make monthly distributions and the amounts may fluctuate from month to month. Bitcoin is relatively new and the market has its own specific risk NEOs ETFs are distributed by 4 Side Fund Services LLC. All right, Robert, let's now jump back to our interview with jj.
- [22:32]
J.J. Maxwell
So who could use double? Who should use double and what types of accounts can invest using double?
- [22:40]
Robert Krok
Yeah, so right now we support individual taxable brokerage accounts, trust accounts and joint accounts. We're in the beta process for retirement accounts, so we've opened a couple of those and retirement accounts. Both a rollover and a just a deposit or coming in. The next few should be weeks. And if you're interested in opening a retirement account with us, please contact us. Support Finance. That's Supportouble Finance and we can get that set up for you. In terms of who is this good for? I'll start with who it's not good for. And it's not good for a day trader or someone who is really, really concerned with specific price movements and specific stocks. If you're trying to capitalize on short term moves in the market, double is not going to be a fit for you if you have a longer outlook and you're thinking in at least months, but hopefully years. We think double is a great place to build this portfolio and it can kind of take whatever, whatever shape you want it to. We can invest in passive low risk things or you can invest in 80% the S&P and 20% active funds. There's lots of different kind of infinite ways to configure your portfolio. We think that's one reason it's so powerful. We offer all major US stocks, some foreign stocks and pretty much all major ETFs as well.
- [24:05]
Austin Hankwitz
So it sounds to me like people need to go check out Double Dot Finance and find the strategy that works best for them. Again, I did the large market beaters. The top 20% club was another one that looked pretty interesting to me. But again, just want to like reiterate how important it is that you guys show the back tested annualized returns. Right. So you like back test and any of these strategies for yourself two, five, ten years into the past and see how it would have performed during those specific market cycles and conditions. So just really want to encourage people to go play around on this and find what works for them. To me, this large Market Beaters is awesome and it has been beating the market right? Year to date I have beat the market and over, you know, since September when I opened up this account, I have doubled the market's return, which is pretty cool.
- [24:51]
Robert Krok
So to interject there a little bit, one thing I'VE learned running this company, past performance is not indicative of future results. So just wanted, my lawyers wanted to make sure I said that.
- [25:04]
Austin Hankwitz
Absolutely could not agree more. Do your own research. Invest at your own risk. Investing involves risk. Past performance does not equal future returns. But we are excited to always be introducing really interesting tools, resources, platforms, people, everything in between to our audience. Because I would argue that our audience, you know, they get past the Elementary 101 of investing and they want something more. They want to learn more, they want to, you know, begin to build their own strategies and have that autonomy over their money. If it's with a bridge account, if it's with a Roth ira, if it's with something else. And it seems like Double can definitely help people do that. So go check out Double. It's going to be linked in the show notes below. And again, I did the large market beaters. Robert, I'm sure is going to do something very similar. And we're super grateful to have you on the show, jj.
- [25:51]
Robert Krok
Jay yeah, thanks so much for having me, guys. Appreciate it.
- [25:55]
J.J. Maxwell
Yeah, great job. This is exciting. Again, it's all about those nuggets that we find for our audience and we learn in real time from experts like you. So that is why we have a specific type of guest. We want to bring in people that can really move the needle, give people new outlooks on how to build wealth and how to make the most with the money that they have as they're building that wealth. So this has been really enjoyable and we really appreciate it.
- [26:21]
Austin Hankwitz
Jj, what an interesting conversation we just had with JJ Maxwell. Really, really cool, right? And just again, like, I want to encourage people to understand I literally randomly found this company on LinkedIn. I was like, I sent it to Robert. I was like, this is kind of cool. I want to try this. He's like, yeah, man, go for it. And we've been talking about it here and there inside of the Rich Habits Network since I put my $5,000 in there and, you know, kind of like a monthly update type thing. But it seems like Double Finance is doing some really interesting stuff. And I just, to me, the secret sauce is the empowerment to create strategies and backtest the performance. I think a lot of people are intimidated by this idea of, oh, if I pick a single stock or if I go do this thing, like, I don't know how it's going to perform. And in this instance, you're not picking a single stock. You're picking a characteristic of a stock. Right? You're only picking companies for example that pay dividends or a profitable company or company growing their profits by X percent per year or anything of that nature. So if you can figure out what characteristics work for you that also enable outsized long term returns, double finance could be a really cool platform to check out.
- [27:28]
J.J. Maxwell
Yeah, I love the conversation and you're living proof that you checked it out. It's performing well. I'm going to get into it this week as well myself. To me it feels like you're getting more control to where if you love this certain sector, you can really niche down within that sector. And that's what I like about it a lot. So I thought it was a really great episode and just learning about it in real time was so fascinating to me and I'm excited to invest it.
- [27:54]
Austin Hankwitz
In my all right Robert, let's now jump into our Q and A section of the episode. As a quick reminder, if you want to ask us a question, you can ask us via Instagram dms@rich habits podcast. Email us at rich habits podcastmail.com or join the Rich Habits Network. We're doing a seven day free trial right now. No strings attached. If you don't like it and you want to leave no hard feelings, no money out of your pocket, check it out. We really think you're going to like it. Now this question comes via Instagram from Yunhun. Yunhun says hi Austin and Robert. Hope you guys are doing well. Super excited for your success. I've been listening to the podcast since late 2023 and what a journey. I have a question regarding investing in a brokerage account. I've been following your guys advice to match my 401k, max out my Roth IRA and automated my monthly ETF investments. But for a lump sum of money you recommended to do a large chunk and DCA into the different ETFs over. Call it a couple months, maybe up to a or two in one of your recent episodes. What I'm concerned about is even as I DCA into reputable ETFs you guys talk about at the end of the day there's going to be a time where I need to realize these gains and I would have to pay taxes on those gains. So do you have any insights on how I can keep more money from my investments in the markets and not pay as much in taxes? Very curious on your take on this. Thanks so much. Congrats Yunhun. If you are paying taxes it means you made a profit. I don't think there's anything wrong with that. I am the biggest Believer in like, I plan to be very wealthy one day and I don't plan to, you know, do tax evasion along the way to get wealthy. Like, I'll pay my fair share and I will grow my wealth just like how you're supposed to do it. I think that that's how everyone should do it. A couple key takeaways. The first thing I want to encourage you to do is to be taking advantage to the nth degree of every tax deferred tax advantage account you can think of. Think HSA, think Roth IRA, think Roth 401K. For me, because I'm an entrepreneur, I have a mega backdoor Roth Solo 401K. It's a mouthful, but I can invest up to $70,000 a year into this account and all the money that I make is going to be tax free. It's amazing. So make sure you're taking advantage of all these different, you know, accounts that are going to allow you to save money on taxes. And the other piece of advice I can give you is to implement a tax loss harvesting strategy. As you guys know, Robert and I, we just talked with JJ Maxwell from Double Double Finance has their own tax loss harvesting strategies. There's another website that Robert and I use called frec. They have their own tax loss harvesting strategies. And all this means is you're essentially selling for a loss in the short term to realize a loss on future gains. So for example, we had $20,000 that Robert and I invested into Freck's platform. And of that 20,000 so far we've realized about $2,000 of tax losses. And what that means is we can now offset $2,000 of gains somewhere else in the future. 100% now our money's gone up, our investments continue to rise. Like we're not like losing out on anything by doing this tax loss harvesting. We're just being better investors and being smarter with how we invest our money. So that's the advice I have. Robert, what do you think about this question when it comes to like trying to avoid paying taxes or any strategies that you have have that can help Yunhun avoid some unnecessary capital gains?
- [31:24]
J.J. Maxwell
Yeah. First I'd want to unpack so many people thinking that there's a way to avoid taxes. You should be glad the tax strategies are there because then you can learn them and learn how to use them to your advantage. So I agree with everything you said and you covered it really well. And the only thing I would add to it probably is to understand the difference between short term capital gains and long term capital gains gains. Because if you're on the fence of selling an investment in the 11th month you've owned it, then you have to make that consideration. If you own it for one more month and it turns into a long term capital gains, that will be lower taxes on the gains you have from that asset. So keep that in mind. But everything Austin said I think is spot on. And then just read up on how to understand and know when you bought an investment to know what range you're in, if it's short term or long term capital gains gains. And the easiest way to remember is if it's been over a year since you purchased it, you're in long term capital gains already and that's where you want to be to minimize your taxes on a winning investment.
- [32:28]
Austin Hankwitz
Our next question comes from Kaylee F. Via email. Again, rich habitspodcastmail.com keep them coming. You guys have sent us over 41,000 emails, so thank you for that. Wow, that's. I just said that. That's crazy. Can you believe that? 41,000 emails these people have sent us.
- [32:44]
J.J. Maxwell
Us. I believe it. Yeah, it's crazy.
- [32:47]
Austin Hankwitz
Okay Kaylee, here's your question. Kaylee says hi Rich Habits team. My spouse, 36 and I, 35 are dedicated to building long term wealth and financial freedom and we'd love your advice on our next big move. Here's a quick snapshot of our finances. Our annual income is 450,000. We have three children. We have 1.2 million in a 401k, 300,000 in a brokerage account, 35,000 in a high yield savings and we are contributing to our children's 529 accounts. Here's the decision we need help with. We have $150,000 of company stock that's vesting in May and we're debating two options. Option one is reinvesting the full amount into a diversified stock portfolio so we can continue growing our wealth passively. And option number two is using a securities backed line of credit credit to partially fund a business purchase and the rest to be financed through an SBA loan to start building passive income streams outside of the stock market. Or is there something else that we should consider or do that you guys think is a better idea? Our goal is to retire early and create sustainable, mostly passive income to support our lifestyle long term. Would love your take on this approach and what makes the most sense for us in your perspective. Robert, I'll let you kick this one. Enough.
- [34:04]
J.J. Maxwell
Yeah, congrats. You guys are in a Great position. You've obviously mastered the hardest part of building wealth and that is making money in the first place. And you've done an incredible job diversifying, having all the right types of accounts. And you're definitely in that place where it's time to level up once again. And I love this idea of going out and buying another business. Hopefully you're looking at buying an established business that already creates profit and a lot of income and sales. And then that way you can just value add and value engineer to make it even better. But if it's a new business that you're going to create, that's awesome as well. And I like your thought here of the one versus the other. I'd like to see you do both. But in this instance I'm always going to lean towards buying the business because I just feel that I can add so much value to a business to be able to create more profit and more sales over time. And I don't mind at all you looking at this securities back line of credit. I think it's a great way to do it. But also the SBA loans are really, really favorable. Just everyone listening, keep in mind SBA loans can be very cumbersome to get, but once you get the hang of the paperwork and you understand how to do it or you have someone help you through it, it can be very favorable terms. So I love where you're at here. I personally would use the money, go do the new business, build that new revenue stream just because it's going to get you to the next level in your portfolios and in your wealth.
- [35:35]
Austin Hankwitz
I think that's a great answer, Robert. Whenever I think about this, like I'm like looking at and thinking about this for the first time, a couple things jump out at me. The first thing is Kaylee and her spouse can completely mess this up and still be just fine because they have 1.2 million in their 401k. Like that is a wonderful nest egg that will encourage and allow anyone to begin to retire with dignity and grace. And you guys are going to be just fine. So like don't get too hung up on, like am I making the right decision? Like you guys have enough money to be good. So first if, like, if this is something that you guys really want to do, you want to go buy a business, finance something. I love the idea of using the securities backed line of credit. I know, for example, this is how Elon Musk bought Twitter. He took all his Tesla stock, borrowed against it and use it to go buy Twitter It's a very common thing that very rich people do. If you have enough, a big enough portfolio, you can borrow against your investment so you never have to sell them. And then you can go buy, buy something else that goes up in value over time. And now you're kind of double dipping. It's really interesting, right? Use the profits of the thing you bought to pay back the debt originally. Now you have a debt free thing and you still have your investments, really, really smart, like wealthy generational wealth type vibes here that I'm getting from you, Kaylee. So I love it. If you can find a business to Robert's point that is already profitable, right? You're not starting something from scratch. You're not starting an ice cream parlor. You're not over here creating a shoe shining company or like whatever. Like there's a business out there, there that already exists that's profiting 100, 200, 300, $400,000 a year. And it's something that you wouldn't feel bad about working on the weekends to make better. You have a sort of like cool opportunity to help with the marketing. Maybe you understand business processes, maybe you understand hiring better. Maybe there's some sort of edge that you all have because you guys are great earners already. You have some sort of edge, you're very smart people to make money like this, this. And you can implement these new strategies into a business to make it better and you feel good about it. I'm all here for it. And then eventually, of course, you can sell the business for more than what you bought it for, while again, never selling your investments to begin with.
- [37:37]
J.J. Maxwell
I love it. And just a quick takeaway for everyone listening, my two favorite platforms to use when I'm looking for businesses to buy is LoopNet and Biz Buy Sell. Those are two great places to start. So if you're considering now purchasing a business to add to your portfolio or to create new side hustle income or whatever you're looking to do, those are two great platforms to use. I've been using them for years and you can really learn a lot just by perusing your area to see what is for sale.
- [38:07]
Austin Hankwitz
Totally agree. So our last question comes from ap. AP says hello. I have a question for consideration. I love the podcast. Thank you all for your insights. After listening to a few episodes, I'm realizing that I may be sitting on too much CA. My husband and I are both close to 40 years old and we have at least 6 months of living expenses and a larger fund for fund family activities. And home upgrades in a high yield savings account. Should we be investing a lot of that money in our bridge account instead and then pull it out when we're ready for a big trip or project? I equate investment accounts with retirement, so it's hard to think about withdrawing that money in the near future. Robert and I, we, we don't disagree here, but I'm on the more conservative side. Robert's a little bit more on the invest it and get it going side. But let, let me walk rationale and I'll let Robert share his. So I'm a big believer in something called sinking funds. Sinking funds for me are a savings bucket for a future expense that I know is coming up. So, AP in your instance, you know that you've got this fun family vacation coming up. You guys take every June, it's a $5,000 vacation or 6,000, let's say $6,000 vacation. So what you do is you put $500 a month aside for the next 12 months to make sure that you've got money set aside for this vacation. You don't have to go into debt for it. You're not selling your investments to go on vacation. Right. That's the purpose of a sinking fund. And you can do the same thing with like a kitchen renovation. Hey, we know that a kitchen renovation is going to cost us $12,000. We don't want to go into debt for it. So we're going to save up some money every month for the next several months until we can pay for that with cash because high interest debt sucks and there's no reason to do it. So that is how I approach those things. So in your instance, though, it seems like you're sitting on cash for like a maybe sort of event that might be coming up in the future. Like, we might go on a family activity. We might renovate the home. Like, we don't know. If I were you, I would really encourage you to dial down what that timeline looks like, how much you need for that, and put that money aside. It's cool to have that money. Like, for example, my girlfriend and I knew we were going to buy a couch in the next six months. And so I carved out the $5,000 and I set it in this account. I was like, we're going to use, use this in the near future to buy a couch. I wasn't investing it. I wasn't thinking about it, like, because I know it's going to be. It's already spoken for. Right? We're going to spend it here very soon. There's no reason to think about, like, returns and things like that in the near term. And then we bought a couch last month and I just got a call earlier saying it's ready to get picked up. So it's like if you have a future expense like a kitchen remodel that you know you're going to do in three or four or five, six months, you're just kind of figuring out the nuances and the contractor and the designs and stuff. Now that's cool. Put the money aside. Don't worry about investing it. But if you're like, yeah, maybe one day we might go do this thing. Well, if that one day, one thing isn't for like another year or two and you have no clue as to what it is, then it's definitely a good idea to be investing that money and letting it grow and compound over a long period of time.
- [40:57]
J.J. Maxwell
I love that takeaway. And we are definitely of different ilks on this one because this is the way I look at it. If I need money. Like today I needed money for an investment investment. And so within three hours, I was able to get $50,000 taken out of one of my traditional brokerage accounts and put back into one of my main bank accounts. So I always look at it, that parked money is dead money. And I want my money always working for me to make more money. And then if I need it, I can get it pretty quickly. That is why we always talk about having that bridge account, something that you can move money in and out of without penalties, without consistency concerns. So I agree of having an emergency fund, and I really appreciate that you guys have it in high yield savings, but in my opinion, three months is plenty. Almost never are you going to be in a situation where you're going to need more than that. And I also agree with Austin 100% about the sinking fund. I think it's a great strategy to add to what you're doing, but I don't think you should be sitting on a ton of cash. Too many people do this that they leave so much money on the table because it is not invested. You guys have heard me say for years, make your money work as hard for you as you work to get it. And when it's sitting in a checking account making 0, you are not implementing that strategy. So we're definitely on the same page. Just a little bit difference in the levels of how much emergency fund you should have.
- [42:23]
Austin Hankwitz
Now, here's my question for you, Robert. We can talk about this in real time. I think three to six months is great. Three months is like 90% of the population. But there are people out there like used car salesmen or maybe like a real realtor, are people who are on like commission based like 100 commission, which means that in my opinion, they should have a larger emergency fund because they could go dry for, you know, two, three, four, five, six months before the next big check. Would you agree?
- [42:46]
J.J. Maxwell
Yeah. And the same thing goes with business owners. There's a lot of business owners that will keep like a year's cash on hand because they might be seasonal, they might have big shipments coming in and they need to make sure they have that working capital on hand hand. Totally agree. But I think for the average family that is W2 that has a consistent paycheck, I think three, four months is plenty. Because I never want to see people sitting, I see it all the time where people are sitting on 100,000, 200,000, a million dollars in cash, making no money. And when you think of a million dollars, it's making nothing. Even at 10%, you're making $100,000 a year. And if you get in that habit over years of not, not keeping your money working for you, you're leaving millions of dollars on the table over your lifetime. So I totally agree with you on that aspect. For the people that have either seasonal revenue or they're commission based and they might have some slower months.
- [43:41]
Austin Hankwitz
Totally agree, everyone. Thank you so much for tuning into this week's episode of the Rich Habits podcast. We very much appreciate it. If you have a question to ask us for any other future episode, Rich Habits podcastmail.com Rich Habits podcast on Instagram or join the seven day free trial happening right now with the Rich Habits Network. We've had over a hundred people join us with this trial. They are loving it. It has been a blast seeing all these new people, hosting them, seeing their faces every Tuesday night for our Zoom call or weekly live stream we like to call it. It's been a blast. And don't forget, if you are someone who is a nerd and you're trying to figure out how to best optimize your portfolio, check out Double Finance. It's definitely interesting to us. It's something that I've been using now since September and something I think I'll continue to use in 20, 25 and beyond. And finally, the Grit Money Summit in person is sold out. So if you're not someone who already claimed a ticket, I'm sorry we can't get you in. But the virtual component will be streamed live, streamed on like YouTube and X and Instagram and all the different places. So definitely register. Regardless, there'll be a free link to join that in the show notes below. You guys are gonna love it. We are super, super excited for that place on April 3rd starting at 3pm.
- [44:54]
J.J. Maxwell
I love it and I just want to tell all of you how appreciative we are that you come back each and every week. You share the podcast with friends. You all are checking out the free trial to join the Rich Habits Network. So we are very, very blessed and very, very excited and just appreciate each and every one of you.
- [45:12]
Austin Hankwitz
Thanks everyone and have a great start to your week.