Rich Habits Podcast Episode 120: How To Hedge Against Market Volatility in 2025

Release Date: June 2, 2025

Introduction

In Episode 120 of the Rich Habits Podcast, hosts Austin Hankwitz and Robert Kroke delve into strategies for hedging against market volatility expected in 2025. With Robert's extensive experience as a decamillionaire entrepreneur and Austin's fresh perspective as a young entrepreneur, the duo provides a comprehensive blueprint for listeners to safeguard their investments amidst turbulent market conditions.

Guest Insights: Steven Sykes on Retail Investor Behavior [03:38]

The episode features a special guest, Steven Sykes, COO of public.com, who shares valuable insights into how millions of retail investors are navigating the ongoing market volatility.

Key Points:

• Buying the Dip: Sykes observes a persistent trend where investors capitalize on market declines. He notes, “We've seen dramatic buying the dip, but like diversifying into fixed income, there's nothing sexy about it, but it works” (03:58).

• Shift to Speculative Investments: Amid volatility, retail investors are increasingly gravitating towards high beta stocks to maximize gains during market rebounds.

• Fixed Income Popularity: Public.com witnesses significant activity in the fixed income market, with rising rates making corporate bonds an attractive option. Sykes highlights, “Investment in corporate bonds is yielding 5, 6, 7%... a lower risk compared to equities” (05:30).

Notable Quote:

"We're seeing a lot of volume in the fixed income market. Diversifying into fixed income... is a wonderful way to hit that mid single digit benchmark." – Steven Sykes (05:30)

Three Strategies to Hedge Against Market Volatility

1. Precious Metals for Diversification [07:00]

Robert Kroke emphasizes the importance of incorporating precious metals—gold, silver, and platinum—into investment portfolios for diversification.

Key Points:

• Performance Metrics: In 2025, gold has returned 59.5% and silver 37.9% year-to-date, providing a substantial hedge against market downturns.

• ETF Options: Investors can gain exposure to these metals through ETFs such as GLD (Gold), SLV (Silver), and PLTM (Platinum).

• Catalysts for Growth: The passing of significant government bills leading to increased deficits is expected to propel the value of precious metals higher.

Notable Quote:

"Gold has returned 59.5% and silver has returned 37.9% year to date... really paid off since the start of 2024." – Robert Kroke (10:00)

2. Hedged ETFs: QQQH and SPYH [14:36]

Austin Hankwitz and Robert Kroke introduce hedged ETFs, specifically QQQH and SPYH, as effective tools to mitigate downside risk while maintaining upside potential.

Key Points:

• Mechanism: These ETFs utilize put option contracts to protect against significant market drops.

• Performance Example: From February 19th to April 19th, QQQH experienced a 9.7% drawdown compared to QQQ’s 17.7%, showcasing an 8% advantage in volatility protection (16:43).

• Trade-offs: While hedged ETFs offer downside protection, they may slightly underperform during strong bull markets. For instance, QQQH’s return was 1.6% versus QQQ’s 2.1% in 2025 (16:43).

Notable Quote:

"QQQH is really keeping up with the Nasdaq up 1.6% total return this year so far compared to the Nasdaq's 2.1%." – Austin Hankwitz (16:43)

3. Investment Grade Corporate Bonds [18:15]

The hosts discuss the strategic use of investment grade corporate bonds as a reliable income-generating hedge.

Key Points:

• High Yields: Currently offering around 7.1% annualized returns, these bonds provide higher yields than U.S. Treasuries (4.5%).

• Risk Consideration: Unlike Treasuries, corporate bonds carry the risk of default. It’s crucial to assess the creditworthiness of issuing companies.

• Diversification Strategy: Allocating 5-15% of one's portfolio to these bonds can balance risk and return effectively.

Notable Quote:

"Investment grade corporate bonds are a wonderful way to hit that mid single digit benchmark." – Robert Kroke (18:15)

Listener Q&A: Practical Financial Advice

The episode features insightful responses to listener questions, providing practical advice on various financial dilemmas.

Question 1: Rolling Over 401(k) Accounts [23:36]

Listener: Tori asks about rolling over a 401(k) and Roth 401(k) after marriage, especially given the high income which restricts direct Roth contributions.

Advice:

• Traditional IRA Rollover: Open a traditional IRA with a reputable custodian like Vanguard and perform a direct rollover of the traditional 401(k) to avoid penalties.

• Roth IRA Rollover: Even though new contributions to Roth IRAs are limited due to income, Tori can still roll over existing Roth 401(k) funds into a Roth IRA for continued tax-free growth.

Notable Quote:

"Rolling into a Roth is very much so an option... Just make sure that you are rolling over cash to cash." – Austin Hankwitz (26:42)

Question 2: Handling High-Interest Debt vs. 401(k) Withdrawal [27:33]

Listener: Linda seeks advice on whether to use a 401(k) withdrawal to pay off debts or invest.

Advice:

• Avoid Early Withdrawal: Withdrawing from a 401(k) incurs a 10% penalty and income taxes, significantly reducing the available funds.

• Investment Growth vs. Debt Repayment: Investing the 401(k) funds could potentially grow to $1.5 million over 30 years, whereas paying off debts with low-interest rates (e.g., 3% mortgage) may not be as beneficial as investing.

Notable Quotes:

"This is a $1.5 million mistake by cashing out this 401k early to do something like pay off a credit card." – Austin Hankwitz (32:04)

"If you can borrow money for less than what you can make with your own, you always borrow money." – Robert Kroke (32:49)

Question 3: Rebuilding Credit After Bankruptcy [35:12]

Listener: Martin asks for the best practices to regain a good credit score and invest long-term post Chapter 7 bankruptcy.

Advice:

• Separate Credit and Investments: Understanding that credit scores and investment portfolios are independent.

• Start Small: Use secured credit cards or small credit lines to rebuild credit history.

• Monitor Credit: Regularly track credit scores and reports to ensure accurate information and track progress.

• Learn from Mistakes: Focus on disciplined financial practices to avoid past pitfalls that led to bankruptcy.

Notable Quotes:

"Your credit score is not your brokerage account. It’s none of that stuff." – Austin Hankwitz (36:22)

"Start slow, start small. Maybe a guaranteed credit card to get you back in the game of credit." – Robert Kroke (36:22)

"Living below your means... is the killer of all financial dreams." – Robert Kroke (40:14)

Conclusion

In this episode, Austin and Robert provide actionable strategies to help listeners hedge against ongoing market volatility. By incorporating precious metals, hedged ETFs, and investment-grade corporate bonds, investors can build resilient portfolios. Additionally, the Q&A segment offers personalized advice, reinforcing the importance of informed decision-making in personal finance.

Final Takeaways:

• Diversification is Key: Balancing different asset classes can mitigate risks associated with market fluctuations.
• Long-Term Planning: Avoid short-term fixes like early 401(k) withdrawals that jeopardize future financial growth.
• Financial Discipline: Rebuilding credit and managing debt responsibly are essential components of wealth-building.

For those interested in further enhancing their financial literacy and strategies, consider subscribing to the Rich Habits Podcast and joining the Rich Habits Network for ongoing support and live discussions.