Rich Habits Podcast Episode 130: How To Overcome Your Emotions During Volatility
Hosts: Austin Hankwitz and Robert Kroke
Release Date: August 11, 2025
Podcast Description: The Rich Habits Podcast is a leading financial literacy show hosted by Robert Kroke, a decamillionaire with over 30 years of business experience, and Austin Hankwitz, a young entrepreneur passionate about learning. The podcast delves into the financial habits of the wealthy, sharing insights, mistakes, and blueprints for financial success.
1. Introduction to Market Volatility
Austin Hankwitz opens the episode by addressing the common fear investors face during market downturns. He emphasizes the importance of preventing knee-jerk reactions when the market declines, setting the stage for a discussion on strategies to manage emotions amidst volatility.
Notable Quote:
"Investing was easy, everyone would be successful. And we wouldn't have people like Warren Buffett amassing billions because they figured out how to perfect it."
— Austin Hankwitz [02:06]
2. Understanding Market Sell-Offs
Robert Kroke elaborates on recent market movements, citing the Bureau of Labor Statistics' revision of job reports leading to significant market sell-offs. He reassures listeners by highlighting that such volatility is typical and should not induce panic.
Key Points:
- Frequency of Sell-Offs: The S&P 500 typically experiences a 3% drop every 1.5 to 2 months and larger sell-offs of 5-8% every 3-4 months.
- Market Expectations: Understanding these patterns helps investors remain calm and avoid impulsive decisions.
Notable Quote:
"Market-wide sell-offs of 5% or more happen every three to four months. There should be no surprise, no shock, no fear."
— Robert Kroke [03:54]
3. Strategy 1: Control the Controllables
Austin introduces the first strategy focused on managing aspects within an investor’s control to mitigate emotional stress during market volatility.
Key Points:
- Investment Consistency: Maintain a steady investment schedule, regardless of market conditions.
- Budget Management: Control monthly budgets and investment amounts to ensure financial stability.
- Tracking Progress: Monitor investments to recognize and appreciate personal growth despite market fluctuations.
Notable Quote:
"We can't control the performance of the stock market, but we can control our monthly budget, how much we decide to invest on a weekly or monthly basis."
— Austin Hankwitz [04:46]
4. Strategy 2: Be Careful with High Beta Stocks
Robert discusses the risks associated with high beta stocks—those that experience greater volatility compared to the broader market—and advises on managing their presence in an investment portfolio.
Key Points:
- Definition of Beta: Measures a stock's volatility relative to a benchmark index like the S&P 500.
- High vs. Low Beta Stocks: High beta stocks, often in technology or biotech sectors, can experience drastic price swings, whereas low beta stocks tend to be more stable.
- Portfolio Alignment: Assess and adjust the proportion of high beta stocks based on individual risk tolerance.
Notable Quote:
"If markets only went up, everyone would be rich, and what would you need us for?"
— Robert Kroke [06:48]
5. Strategy 3: Focus on Fundamentals
The third strategy emphasizes concentrating on the underlying fundamentals of investments rather than short-term price movements, fostering a long-term investment mindset.
Key Points:
- Business Fundamentals: Focus on revenue growth, profit margins, and cash flow rather than daily stock price fluctuations.
- Long-Term Vision: Maintain commitment to investments based on thorough understanding and belief in the company's future.
- Wealth Building: Staying steadfast during volatile periods leads to substantial long-term wealth accumulation.
Notable Quote:
"Focusing on the long-term fundamentals and not the short-term day-to-day stock price movement is how we stay steadfast and build that volatility muscle."
— Austin Hankwitz [12:55]
6. Listener Q&A
The hosts engage with listeners' questions, providing personalized financial advice.
Question 1:
James R. seeks advice on whether to use a new car allowance to replace his aging Mazda or to use the funds to pay down consumer debt.
Discussion Highlights:
- Robert's Advice: Prioritize reliability for professional appearance and reduce stress by getting a new vehicle.
- Austin's Perspective: Suggests weighing the value of paying off high-interest debt versus upgrading the vehicle, advocating for delayed gratification if debt is manageable.
Notable Quote:
"Get the new vehicle, trade in the one that's having its issues, really get off on the right foot in this new position."
— Robert Kroke [20:29]
Question 2:
Anonymous Listener inquires about balancing emergency funds, home renovations, and investment savings over a 3-5 year period.
Discussion Highlights:
- Emergency Fund: Aim for 3-6 months of expenses, then redirect funds into investments.
- Sinking Funds: Allocate specific savings for planned expenses like home renovations.
- Future Planning: Build a robust financial base before committing additional funds to non-essential projects.
Notable Quote:
"Make sure that you're not just aimlessly saving money where you find yourself with too much cash. You should have three to six months of expenses fully funded."
— Robert Kroke [28:08]
Question 3:
Brady asks about whether to maintain his high-mileage Toyota Tacoma or upgrade to a newer truck.
Discussion Highlights:
- Robert's Recommendation: Suggests continuing with the reliable, high-mileage truck to avoid unnecessary expenses.
- Austin's Approach: Encourages saving for a future purchase to avoid high-interest debt, emphasizing investment of saved funds.
Notable Quote:
"If you are someone who can handle a 20-year-old truck, you can probably handle a 10-year-old truck. Buy it in cash and avoid high-interest debt."
— Austin Hankwitz [31:22]
7. Conclusion and Final Thoughts
Austin and Robert wrap up the episode by reiterating the three key strategies to manage emotions during market volatility:
- Control the Controllables: Focus on consistent investing and budget management.
- Be Careful with High Beta Stocks: Align stock selection with personal risk tolerance.
- Focus on Fundamentals: Invest based on strong business fundamentals and long-term growth prospects.
They encourage listeners to adopt these strategies to build resilience against market fluctuations and achieve long-term financial success.
Closing Quote:
"Control your controllables, focus on the fundamentals, and be careful with those high beta stocks. That is how you do not have knee-jerk reactions and have the right expectations going into investing for the long term."
— Austin Hankwitz [33:49]
Summary:
In this episode, Austin Hankwitz and Robert Kroke provide actionable strategies to help investors manage their emotions during periods of market volatility. By focusing on controllable factors, carefully selecting stock types based on risk tolerance, and emphasizing long-term business fundamentals, listeners are equipped to maintain a steady investment approach even in fluctuating markets. Additionally, the Q&A segment offers personalized advice, reinforcing the hosts' commitment to guiding their audience toward financial stability and growth.