Loading summary
Transcript67 lines
- [00:00]
A
Hey, everyone, and welcome back to the Rich Habits podcast, a top 10 business podcast on Spotify brought to you by public.com by the end of today's episode, you're going to completely understand how investors are monetizing volatility instead of fearing it. How different parts of the market can pay you at different times throughout the month, and how to build a portfolio that's diversified, not just up and down, but side to side across risk diversity, asset classes and financial outcomes. My name is Austin Hankwitz and I'm joined by my co host, Robert Kroke. Robert is a seasoned entrepreneur with lifetime revenues north of 300 million. And I'm a multimillionaire in my late 20s with a background in finance and economics. As the name suggests, every episode we talk about rich habits as they relate to business, finance and mindset. So, Robert, what are we talking about in today's episode?
- [00:53]
B
In today's episode, we're starting with the word that pretty much defines the markets right now.
- [00:58]
A
And.
- [00:58]
B
And that is volatility. We're seeing big daily moves, company leadership rotation, policy uncertainty, and a lot of investors are asking the same question, what do I do when the market simply won't calm down? And instead of trying to predict when volatility might disappear, we're going to talk about how to actually use it to your advantage. That's why we're excited to welcome back Garrett Paolella and Troy Cates, managing partners at NEOS Investments. You two oversee over 20 billion in assets and you spent decades trading through numerous market cycles. So this is exactly the kind of environment where your experience matters most. So, Garrett and Troy, as always, welcome back to the show.
- [01:37]
C
Thanks for having us. Robert and Austin, great to be here today.
- [01:40]
D
Yeah, happy to be here. It's been a while. So glad we're back.
- [01:42]
A
It's been a while. It's been too long, fellas. It's been too long. All right, well, before we jump into the actual interview, gotta give you a major shout out again on the Gold High Income ETF. IAUI being nominated for ETF.com's Best New Options Income ETF Award. It's getting hard. Keep track of all the awards that you guys are being nominated for. I know QQQI won an award from ETF.com last year, so just congrats on the nomination this go around and I'm so sure you guys are going to get nominated for more in the future as well.
- [02:15]
C
Thanks, guys. We appreciate it. All about the investors. Just keep our heads down and focus. And luckily some of the investors nominate us for these things because that's where it all comes from.
- [02:23]
A
Amazing. So volatility is the subject of today's episode, and volatility normally scares investors, but your flagship funds, SPYI and qqqi, designed to monetize volatility. Can you explain how elevated volatility in today's market can actually improve the potential total return for income? Focused investors like myself and others listening to this episode think about volatility.
- [02:50]
D
You're normally seeing these elevated volatility levels when the market sell off, when the S&P 500, when the equity market sell off, you see a spike in volatility in those different volatility indexes. Where that comes into play with our funds specifically is our rules based strategy and how we roll these different option portfolios on top of The S&P 500, the NASDAQ 100, the Russell 2000 and so forth. And what volatility does is gives us an opportunity, gives the fund an opportunity to potentially sell calls further out of the money and write on less of the notional while still bringing in the same amount of premium we need to satisfy the distribution goals that the fund has for for the year. So you think about like last April when we had this tariff announcement, we had the equity market selling off, we had a spike in volatility, volatility levels we hadn't seen since COVID And it gave the funds as they were rolling their option portfolio an opportunity to sell further out of the money, which gives you an opportunity to potentially get a higher total return if the market moves higher. And we also were able to cover less of the notional. What does that mean when we're rolling these options and we're selling these calls, using those index options to cover say The S&P 500 and spyi, for example, when volatility is higher, we're able to cover less of the notional. So if you know there's a hundred dollars in the fund and you cover 55% of it, so you cover $55 of it, there's still $45 in the fund, 45% that's not covered by short calls. So if the market moves higher and through those short call strikes that are out of the money, you can continue to potentially participate with the upward move of the market because you didn't cover the entire notional of the fund. So for us, that's a key part of how our models and how our rules based strategies work. So when this heightened volatility comes, we don't shy away from it we look at it and can hopefully take advantage of that heightened volatility as we're rolling those option portfolios.
- [04:42]
A
So how I understand SPYI and QQQI is you all hold all of the same underlying constituents of the S&P 500 and the NASDAQ. And then what you're doing is you're selling covered calls against that underlying portfolio. And by doing that you're essentially generating a 1 to 1.5% monthly return on that portfolio itself. So with Spyi you're looking at 12% on an annual distribution yield. I think qqqi is around 14 or 15% if I'm not mistaken. The phrase like to use when I'm explaining These covered call ETF, specifically the NEOs funds to people is you guys are essentially taking the upside price appreciation for the future with the S and P or the NASDAQ and translating that into monthly income for investors. And it's a really cool approach you guys use. And I love the way that you just described this Troy, with the volatility because to your point, because of your rules based strateg, we think about, you know, a great example kind of rewind now to the yen carry trade unwind of August of 2024. We saw Spyi pay a materially higher distribution yield for the month of August in, in 2024 because of the volatility in the markets. Right. So you guys, to your point, are taking advantage of volatility as it might occur and who knows when it's going to occur, but when it does, you guys are helping investors monetize it. So whenever their portfolios are seeing some red, well, you get a little bit of infusion at the end of the month there when it comes to these distributions. So I think it's, I think it's a wonderful strategy.
- [06:18]
B
What I love about that framing is you're not telling investors to hide. You're saying if volatility is here anyway, let's get paid for it. And that naturally leads into the bigger picture because NEOS isn't just about one fund or one outcome anymore. You all have now built what seems to be a full solutions toolkit for investors. Hedged ETFs, Core Income ETFs, Alternative ETFs, Enhanced Fixed Income, and now the newly launched PDF boosted ETFs. So can you walk us through how investors should think about blending these different strategies together? Not just up and down classes, but side to side across risk tolerance and objectives. And what portion of their portfolio do you think should be exposed to These types of products. I know that Austin has a ton of your funds. I have a solid amount myself. But how do you like to help investors think about allocation as it relates to these products?
- [07:10]
C
Yeah, Robert, I think that's a great question. I think what it always comes down to is the investor needs to really understand what their risk tolerance is and what their own financial goals are. And so I think as we talk to any investors, whether those are institutional investors, you gotta be locked into what it is that your risk tolerances and your goals are ultimately doing. That should be the guiding principle. We can talk about what each one of the products do, but I think what we really enjoy about what Neos tries to focus on is being that solutions provider. So as you had mentioned, we have the equity. So thinking about equities, you have the equity core cover call strategies, right, that are seeking slightly lower volatility and tax efficient income. You of the hedged versions that are going to give up some of the income to try to protect against, you know, falling markets. We now have launched the boosted versions which is really looking to add leverage into the core cover call strategies to give you more upside and participation in the market. But you can also choose a wide swath of fixed income with us or alternatives such in crypto like Bitcoin or Ethereum or gold or real estate. And so what we're ultimately trying to do is empower the investor that no matter where they are within their investment cycle, whether that's early, mid or late stage, they can create a portfolio that matches that risk profile or matches their cash flow needs. Or thinking even just specifically in a product is I've never owned energy and maybe that makes a lot of sense. And so, you know, they look at one of our MLP or energy infrastructure products or I've been overweight equities and that's where I like to really play a lot of my allocation in the portfolio. So why don't I try to find what has historically not been an income generating area of a portfolio with the S and P or with, you know, Nasdaq, you could get into our core high income or boosted series to kind of maintain that equity allocation. But start, start looking at generating, you know, passive income and cash flow within your overall portfolio. So I think no matter what though, as we talk to investors, it's always got to be rooted in what are their needs and they need to guide, you know, ultimately on what that is. And then we could talk about how different products react, you know, to one another. But having 19 funds now really lets you build an entire diversified portfolio. And I'd say, like, that's the last point. We really love to talk to investors about building diversified and what we call durable portfolios because we never know what's going to happen in the markets. Equities could be up 10, they could be down 10 tomorrow. You could have a tweet on social truth that completely flips the economy on its head. You could have something positive, jobs numbers, you know, come out and, and then ultimately the market still reverses, even on good information. So I think as long as you stick with that financial plan and have durability diversification, the rest is really embedded of, of what the investor is looking to have allocations in, in their portfolios.
- [09:46]
A
You quickly skimmed over a really interesting stat that I wanted to highlight. 19 ETFs. Now, when I, when I started investing into Spyi, you guys had three, right? Q. Q. Q. I wasn't even a twinkle in your eye yet. It's, it's unreal. And I just want to commend you guys again on how well you've built out this suite of ETFs. To your point, Garrett, of if you want to invest in alternatives, you can do that. If you want to have core exposure to the Russell 2000, the NASDAQ, the S& P, you can do that. If you want fixed income, like bonds or, you know, T bills, you can do that. Like, it's, it's unbelievable. But you also mentioned the Boosted series, right? So I personally, I've been really intrigued by this. We've got a ton of questions from inside the Rich Habits Network about the Boosted series. Can you talk a little bit more about what are these new NEOs boosted ETFs? What was the problem you were trying to solve for investors by introducing them to the market?
- [10:42]
D
It comes back to what Garrett said earlier, like being a solutions provider. And we were looking at our suite and thinking about starting with the S&P 500 and the NASDAQ 100. So you have SPYI and QQQI as the kind of the core products there. Then we had built out the hedge products. We had qqh, we have spyh, those are doing great. And that's if you want to really, you know, still be involved in those markets, but you want to take a more conservative approach and have a measure of downside protection. So we started to think on the other side, what if you want to be more risk on? And so we built out the Boosted suite to have boosted versions of spyi, QQQI and Our other large ETF BTCI for Bitcoin, these are boosted or levered versions of those three ETFs. And so the structure of them is very similar. Where we're owning say for the boosted spyi, we're owning all 500 plus names of the S&P 500. We're selling S&P 500 index options, those calls out of the money, very similar to spyi. But we're adding that leverage through an option portfolio. We're not doing it for an intraday traded type portfolio. We're thinking longer term durability, as Garrett said earlier, thinking about how you could get that risk on exposure through the options market. And we do that through a put call combo. So a synthetic long where we're buying a call, selling a put same strike, same expiry to give you a Delta 1 position to the underlying and giving you that added notional. And then we're adding additional short calls to bring in more premium. So over time if the market's moving higher, you could potentially outperform in that S&P 500 boosted product more. Then you can have better performance than potentially than spyi and still have a larger distribution than spyi. But I think it's important to note that the risk to the downside with levered products, whether it's the boosted products or others, you have to understand what that risk is and understand that if the market moves lower, if the S&P 500 moves lower, you're in a levered product and you could have returns on those levered products that are worse than potentially the underlying reference or for example SPYI in that example. So it's really giving the investor the opportunity to either go more risk on, sit in the core or pull back and maybe go into one of the hedge products and have those three for the equity products at least to toggle back and forth between and really either get more income and take more equity risk or pull a little.
- [13:00]
A
I think that's awesome and I love the way you guys have sort of built this right on the low risk side, quote unquote, right, you've got the hedged ETF of spyh for hedged down the middle, you've got spyi, which is what you've had for years now. And it's, it's a core portfolio holding on my own. And then on the now more riskier leverage side, you've got xspi, which is that boosted etf. So you guys are going all across and I think it's so cool. I mean it's just back to what you guys were saying. It's like, listen, we're not here to tell you what to put in your portfolio, but we're going to give you the tools and resources and products to make those decisions, no matter what that risk tolerance is.
- [13:38]
C
Yeah. And I think, Austin, you said it really well before explaining what a cover call strategy was. Right. You're giving up some of that upside in a covered call to create that, that upside return as income. What we're essentially doing is doing that in boosted, but adding some more leverage to try to capture back some of that upside that you're giving up. Because there's no way that you can generate income and upside. You can have your cake and eat it too in the financial markets, unfortunately, otherwise I don't think anyone would be sitting here because it'd be that easy. But if you think about how do you get some of that back?
- [14:09]
B
Right.
- [14:09]
C
It's. It's taking more risk. And by able to do that within a 1 all in the product, it allows the investor at least to choose that. If I want some more risk and I want to seek more total return, obviously I understand that I'm going to take some more risk to the downside as well. But that's where you're able to capture the ability to, you know, seek additional returns within the underlying reference assets that have the S&P 500 like we've been talking about as an example, 100% Gary.
- [14:34]
A
Now, before we jump to our next question with Troy and Gary, you guys know that we've been all about giving you the best tools to help you take your investing to the next level. And if you're not already using Blossom, this one is genuinely different. At its core, it is a beautiful portfolio tracker. You link your brokerage account and everything syncs in automatically. Clean visuals, clear performance, dividends tracked automatically. Which means if you're investing in neos funds like us, you're going to want to track those distributions.
- [15:03]
B
Yeah, the UI alone is worth it. It's one of the few investing apps that actually makes you want to check your portfolio. Not in a stressful way, but in a. Wow, this is a really clean way.
- [15:14]
A
And here's the part that really sold us. It is not just your portfolio, but you can follow other investors and see their real verified holdings.
- [15:23]
B
Yeah, exactly. These aren't screenshots or trust me, bro, portfolios. They're brokerage, linked and verified. You can literally see when someone adds to a position, trims or holds, including my site.
- [15:35]
A
The best part is It's a community of long term investors like Robert and myself, not this get rich quick traders of futures and forex and whatever else is going on in these discord groups. Because on Blossom you can start to understand how long term investors like ourselves actually behave. What they buy, what they ignore. And the transparency is, in my opinion, something you just don't see on other platforms.
- [15:58]
B
Yeah, we're both on there, our portfolios are on there and people can follow along in real time. It's transparency done. Right?
- [16:05]
A
So if you want a clean portfolio tracker, a genuinely great user experience and a way to learn from real investors with real money, go check out Blossom using the link in the Show Notes below.
- [16:15]
B
It's free, easy to use and honestly one of the best investing apps we use.
- [16:19]
A
You can just go search Blossom in the App Store, click the link in the Show Notes or go to blossomsocial.com on your computer. All right, Robert, let's jump back to our interview with Troy and Garrett. So my question here for you is, can you explain the specific importance of your funds, your NEO's funds, compared to the normal benchmark index funds and ETFs that exist today? Right. It's like what's the core differences here? Right? It's like you've got the NASDAQ 100 and you got QQQI. You guys are tracking the NASDAQ 100, but like what's that core difference between the two? Right? What's the difference between QQQ and qqqi?
- [16:53]
D
Think about the differences in qqqi. You're bringing in income and sourcing that off the volatility of the options market around the Nasdaq 100. So in the Nasdaq 100 ETF QQQ, you're long all 100 plus names of the Nasdaq 100 and you're in it for that growth of that index and those underlying names in our product qqqi, you're still long those same names and the same waiting. So you're still getting that growth. But we are, as we talked about before, selling those index calls out of the money to bring in premium. So we're sourcing that from the volatility of the options market. We're not paying out the distributions from the underlying names. They're not paying these huge dividends that we get to pay out. So for us, really sourcing that income from the options market, whether it's QQQI or whether it's a Bitcoin like BTCI or our Ethereum NEHI or any of the other products, we're really sourcing that income from the options market. And the higher the volatility, kind of go back to the beginning of the conversation. The higher the volatility, the more income you can source from that options market. So when you think about the NASDAQ 100 is inherently a little bit more volatile than say the S&P 500. So you're going to bring in a little bit more income on a monthly basis that we could distribute out through the monthly distribution process. And you might have a little bit higher of a distribution there, say, than an spyi because the volatility is a little lower in the S&P 500.
- [18:13]
B
And before I go into my next question, can we touch back on that for a second and explain to our listeners? Because I know we did this before on a prior episode, but should they or can they own QQQ and QQQI simultaneously? And what would be the advantage to that?
- [18:31]
C
Yeah, absolutely, Robert. They definitely can and I think we always support that. Right. Regardless if it's a NEOS product or products. Right. You should never have all your eggs in one basket. So don't own just one, you know, ETF or one fund for your whole portfolio or just one asset management firm as a whole. We love the ability for investors again, back to like their risk to returns, like what are they trying to achieve, you know, for themselves and what are they ultimately comfortable with? The ability to use multiple products helps divers, diversify that risk away. And that risk could be the downside risk. That could be cash flow risk, but it also could be upside risk. And because our products inherently are focused on generating income, whenever you generate income, regardless of our products and your overall portfolio, you're usually giving up growth in total return to generate income. Right. Just think fixed income relative to equities. Very different risk profile and total return profile, but you're getting cash flow and income from one and usually not from the other. The idea here is yes, you could look to own and should maybe a QQQ and a QQQI and match that to your individual risk return and goals. Looking at how you need cash flow relative to total return and long term kind of price appreciation.
- [19:43]
B
Yeah, that helps me a lot because I've been asked that question in the past and I never remembered to ask you guys directly. So I really appreciate that breakdown. And the next thing I want to talk about, I'm excited to talk about is your new distribution calendar. Instead of all the funds paying at the same time near the end of the month, different Segments of the NEOS lineups now distribute in different weeks throughout the month, which is a pretty big shift in how people can think about their cash flow. And if they play their cards right, investors can get paid every single week from their various NEOS funds. So can you explain the thinking behind this structure? Because some of our listeners are die hard ETF holders and some are just now getting into investing. So maybe start out simply with what distribution means for these investors and how the new calendar works.
- [20:30]
D
This was an exciting change for us because one, it helps us operationally. You know, as you said before, we were distributing all the ETFs on the same day towards the end of the month. But we were looking at our suites and decided how could we break up each week and have a different suite distribute during that week? And just to be clear, we're still distributing monthly income. We're not looking to do weekly per fund, so each fund's still distributing once a month, but we broke up each suite. So week one is the boosted ETF ETFs, week two is our fixed income suite, week three is our high income suite, and week four is the hedge product. So thinking about it, as you were saying, Robert, if, if you own a hedged product and you own a boosted product and you own a high income product, you're getting paid on different weeks of the month. So for some investors, they really like that. For us, it does help operationally breaking it up like that. But it was an exciting change to go into 26 and really think about as we now, as we were talking about earlier, 19, 18 ETFs, when we had three. Back when Austin started investing in Spyi, it was easy to have them all in the same day. But now with 19 and growing, it's nice to break them up a little.
- [21:35]
A
Robert, speaking of distributions, I think what's so powerful about NEOS funds is these are tax efficient distributions, right? So maybe Troy Garrett, take a moment here to explain section 1256, contracts and index options and return of capital. And like what all these like key terms that you type into investopedia.com actually mean for investors who are looking at not just that distribution yield, but the actual money they get to keep in their bank accounts after they pay taxes.
- [22:04]
C
Yeah, I think one thing we really strive here, Austin at neos, is if you're investing in an income product, how do you make that as tax efficient as you can? Right. You can't control everything, of course, but if there are ways that we could try to manage our investment process or buy Certain underlying investments within the fund that have a better tax classification than others. We're going to look to try to leverage that for the better part of it. Investor. So you had mentioned a 1256 option and we talk about how we're an options manager and Troy had mentioned index options. So majority of index options. And let's keep it simple like the s and P500 and the NASDAQ 100. Right. Those get what's called a 1256 tax classification. 1256 means a section of the IRS code and it states that 60% of your returns, your realized returns are taxed at long term capital gains rates and 40% get allocated as a short term. Right. So ordinary income. And so when we can, we love to trade those index options because of that tax classification. It tends to help people out because I think a lot of folks default to like oh, I'm going to do a covered call. I buy Apple and I sell one Apple call or I buy Spy and I sell one Spy call those ETF and those equity options are actually taxed all as ordinary income. As more institutional managers because of the size of them, index options carry a sizable amount of notional per one. So if you think about the S&P 500 at 6900, right. One option contract is worth $690,000. Most people don't have that as just a one single position to write a covered call. So we have the ability to try and utilize options or investments that can get better tax classifications for investors. So I think that's first and foremost most. The second thing we try to do is what's always helpful within, just like estate planning is when you can can you harvest losses in your portfolio? Let's just say you need a portfolio distribution. You have something with a gain, something with a loss. If you could sell both of those, you can offset some of that tax liability. Essentially our rules based approach is seeking to do the same thing when let's say in a covered call strategy, the market runs a lot and we would have the ability to, you know, rebalance. So roll as Trey talked about our options to take advantage of a potential loss on one side of the port portfolio while the equities are appreciating, that has the ability to reclassify the same way you would in your broader portfolio, a return of capital. And so just very simplistically, a return of capital is just stating that you have a loss in your portfolio that nets out against a gain. And so they view that as a non taxable event in Your portfolio. For us, what's a little different is as we're generating potential return of capital in a portfolio, we're essentially seeking to convert your total return and that short term ordinary income that the fund would be generating, Right. So on that short term basis into return of capital. And what does that do? It actually defers your taxes to the future when you sell the fund because it's changing from a ordinary income in short term to a long term capital gain if you've held the fund over 365 days. But the way it's doing that is it's lowering your cost basis. So let's just say you bought an investment at $50 and you earned a dollar worth of return of capital. As a distribution, you're now at $49 a share in your cost basis. So after your 365 day, you sold the fund. That $1 is taxed at long term capital gains because you lowered your cost basis. So it's a tricky concept to hear for the very first time. After you hear it usually once or twice to walk through it, it's a bit easier. But we're always striving to find ways in our investment approach to be tax free efficient. The investments we ultimately choose within the fund. Thinking about that income products need to be attempting to be as tax efficient as they can. Absolutely.
- [25:54]
A
No, I appreciate that. And as someone who's got six figures in neos funds, appreciate it. I don't like taxes, so thank you. You know, this whole episode's about volatility in the markets in 2026. You know, we heard that Trump's got Kevin Warsh. We've seen some layoffs with AI headlines from Amazon and some other names. You know, we've seen some volatility, right? The, the NASDAQ and the S and P have been all over the place. A lot of the high flying names that worked in 2025 are just getting beaten down in 2026 here. And if you're part of the Rich Habits Network, you know that my thesis for 2026 here through the show, something that Robert and I are very much aligned on, is energy and infrastructure. It's materials, it's international, it's some of these durable, boring, quite honestly, sectors of the market. And that to us is exciting. Here in 2026, you guys have the MLPI ETF, the NEOS energy infrastructure, high income ETF. A lot of investors are looking for income in ways that are less correlated to your traditional S P and NASDAQ and things like that. Especially after the last few weeks we've had, where does MLPI fit inside of a diversified income portfolio and what kind of role do you see it playing alongside equity based strategies?
- [27:14]
D
It's a great question and I think, you know, we launched that product about a week before Christmas and it was one that we had seen a number of advisors reach out, a number of investors reach out asking for a product like this. And we spent a lot of time working on what the underlying index would look like, working on what the option portfolio would look like. And it really slots into your alternatives income section. You know, where we think about our alternatives, whether, whether it's Bitcoin, Ethereum, gold, real estate. This MLP and energy infrastructure sector has always been a place where people go to get that diversification and potentially earn some nice dividends on off of those underlying names. But to add to that, we wanted to bring in, you know, our rules based strategy and option portfolio on top of that where we could give you additional income on top of whatever dividends you were receiving from the underlying names. So this has been a product I think Gary Carrera come if I'm wrong. It's born our fastest growing ETFs since inception. Inception. Here we are six, seven weeks into the product's inception and and the flows have been coming in. We've been really happy with the performance and how the fund is, is working out. So it's been an exciting adventure getting into this sector. But again going back to thinking about your whole asset allocation pie and starting out with those three ETFs of equities, fixed income, cash alternatives and just continuing to slice the pie up. And this is just another solution we wanted to have least at out there for investors to you know, be able to invest in and earn some income off in a tax efficient manner and over time continue to diversify and have that durable portfolio.
- [28:45]
A
You guys are way too modest performance in the last month, I'll say it because you can't. 10 and a half percent since the middle of January is what I'm seeing in my portfolio from mlpi. So like yes, you guys definitely created an awesome product at the right time and you're so good at that. You guys are always introducing these products that just happen to be the new perfect thing to have in a portfolio despite whatever's going on in the macro or the markets or whatever. And no, I love it, I appreciate it and I appreciate that breakdown.
- [29:11]
B
Troy, I'm definitely going to back you up on that. Austin, Troy and Garrett, this has been incredibly helpful if you're listening to this and you're feeling uncertain. This conversation really highlights that there are ways to stay invested, manage risk and still generate income come no matter what stage of the bull market or bear market we're in. And I love it because I feel like our audience gets a front seat, you know, passenger right along on the ride while you guys are creating all these incredible products for everyone out there, including all of the rich habits, people and followers, people in the network. And so are there any parting words or anything you guys want to share about the market or what's around the corner for Neos funds that you guys want to share with our audience right now?
- [29:54]
C
I'd love to share one thing that I think we, we always talk about and I maybe expressed it a couple times in here, but I think do your research right there is, there's a ton of product available out there as you think about like your overall investing career, your passive income. Right. Your rich habits. As you think about that, we always say look at what your estate planning goals are, look at what your risk tolerances and pick what fits you, not what your friend says at a cocktail party that is the next hot thing that's going to be up 10, 20, 30% of your portfolio because it could be down 10, 20, 30% at that same timeframe. And so I think it's overall diversification and just making sure you do your research and you're comfortable with what you're buying and you know what those expected outcomes of returns are when the fund performs well, when it's in the mid range or when it's not in favor for whether that asset class or that strategy is. So it's always helpful to make sure you think about that as you're building kind of long term wealth or you're in your deaccumulation phase and living off of it so that you don't wake up, you know, saying, oh, not going on vacation, I just lost, you know, 20% of my portfolio value. You know, all being in AI trades.
- [30:56]
A
Definitely don't want that to happen. Now before we ask Garrett and Troy our final question, got to give a shout out to public.com the investing platform for those who take it seriously. On public, you can build a multi asset portfolio of stocks, bonds, crypto options and now generated assets which allow you to turn any idea into an investable index using artificial intelligence.
- [31:18]
B
And it all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year, you can literally type any prompt and Put the AI to work. It screens thousands of stocks and builds a one of a kind index and even lets you back test against the S&P 500 all with just a few clicks.
- [31:39]
A
Generated assets are like ETFs with infinite possibilities. They're completely customizable and based on your thesis and not someone else's. So go to public.com rich habits and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com forward/rich habits paid for by Public Investing.
- [31:58]
B
Full disclosure in the podcast description.
- [32:01]
A
All right, Robert, let's now jump back to our interview and ask Garrett and Troy our final question. Actually, before you guys leave, I'd love to get just a 30 second, 60 second breakdown of where, where you think we are here in, in the markets, seen some volatility, seeing some of these high beta names roll over. We've seen the indices trade sideways for three months. What are you guys looking at right now? What's interesting to you? What are you keeping your eyes on as it relates to maybe economic data or earnings or like what, what as $20 billion fund managers that you guys are. What is interesting? What are you guys looking at right now?
- [32:34]
D
I think the most interesting thing we're, we're watching and I'll let Garrett go after is really what the volatility market's doing. Thinking about that added volatility we've been seeing that we're talking about, we talked about it last year and thinking about how volatile the markets are were last year specifically around the tariff announcements or any announcements that came out of the administration. So I would imagine this year is very similar. We're also looking at what's going to happen with the Fed. Are they going to continue to cut rates? We have, you know, a new FEG share coming in the next couple of months. Are we going to see more rate cuts? And what does that look like to people that keep money in cash or T bills or the likes and what does that mean for their income needs and where they could source additional income? So we're keeping an eye on the Fed and obviously the volatility markets.
- [33:19]
C
Yeah. And I would add, right. Like even a consolidation phase for a couple months is not a bad thing. Consolidation is a good thing in the overall market. But I think Troy hit it on the Fed and on volatility and like what's going to come in the next couple of months. The economic data has come out pretty strong. I mean obviously as we got some data about gdp, you know, in fourth quarter of last Year was more positive than people expected. The jobs market, although you see announced, you know, layoffs, you know, more broadly. Broadly seems as if the jobs numbers though each week still come in pretty decent, I would say. And so I think there's a lot of stuff that the media loves to hype on both sides. That's what media does. It gets viewers, it gets clicks, it gets watches, especially that kind of more mainstream financial media. And so I think you gotta again stick to what it is that you're comfortable with and what you can weather within your portfolio. But overall it's definitely going to be kind of all eyes on the Fed and economic data coming out, knowing that there's going to be spits and spats of tweets that go out on a short term impact, you know, the market. So just prepare yourself, I think, you know, for that is what we're hearing, you know, broadly from a lot of more institutional investors.
- [34:25]
A
Thank you guys so much for sharing your perspective. And I know you guys boots on the ground, I mean you've got a ton of institutions I'm sure that you're talking to. So appreciate you guys sharing their perspectives and just everything here in this episode. I always learn something whenever you guys are on the show. So I very much appreciate y' all taking the time and everyone listening. Please go to neosfunds.com check out their products. I got six figures in these ETFs. Personally I, I really believe in what they're building. They are, you put them up against Xyld jpy, you put them up against any of these other like cool covered call ETFs that you see online that are popular, they're outperforming them year over year and they're more tax efficient and they're just, they're building these products for durability and I commend you guys for that, seriously.
- [35:08]
C
Well, thanks guys. We appreciate it. Appreciate the opportunity to come on. It's always a pleasure to be here in front of the honest and just also wrap with you guys. Likewise, we always learn all sorts of new things from you all and what you're doing and congratulations on the continued growth of the podcast and all that you're doing.
- [35:22]
A
Thanks man. Actually, I take it back. I got one more question for you. Can you guys explain, and I want, I'm not going to name names because I don't, I'm not the type of person to do that, but can you guys please explain the importance of paying out distributions from income that has been generated versus paying 120% yield on an ETF or something. Because I think a lot of people right now are looking around at these different ETFs that are paying yields that are over 100%. They're like, wow, this is really cool. I'd love to get a 120 or what, 80%. Can you guys just spend 30, 45 seconds explaining why it's important to pay a distribution on income that you actually generate inside the portfolio versus 100 yield?
- [36:08]
D
It's important. Goes back to what Garrett was saying earlier. Doing your homework, doing that educational piece and understanding the great thing about an ETF is you can pull up our holdings or any holdings of an ETF and understand what's in the portfolio. You could see what the actual mechanics are. And when you look at it and think about our products and what we're trying to build here. Yes, maybe if you're sourcing by yield or distribution online and you're going from top down, you see these, as you said, 120, 80%, 90%, whatever distributions. The important part for us is building products that over time, the total return can support the distributions going out. And when we're selling these calls, for example, in SPYI or QQQI and bringing in that premium on a monthly basis and distributing that out, that's what we're distributing. So we're not looking to have a flashy distribution number because we think it should be out that way. We're putting out what is built into the fund and what the fund can produce over time. And the goal is to make sure that total return can support that over time. Otherwise you get into a phase where, where you can't support that and you start seeing your, you know, nav erosion, which I'm sure you've seen people talk about and stuff like that. So it's really important to understand not only what the total return of the fund can do, because that's a good way to equalize when you see these larger yields, look at the total return, look at what those distributions are compared to what the overall price return and total return can do in the fund.
- [37:31]
B
Thank you guys so much for stopping by. It's always just an incredible conversations. I know our listeners love it. Can't wait to have you guys. Be back soon.
- [37:39]
C
Looking forward to the next opportunity. Thanks for having us on.
- [37:41]
A
Yeah, thank you, Robert. I am so grateful that we have people like Troy and Garrett in our network. These, these two individuals that between their 19 ETFs, some over $20 billion of assets under management. I mean, they have Built durable covered call high income options based ETFs for longevity. Right. I mean I've said it a couple times now. I've got six figures in their ETFs. I believe in what they've done. I've been an investor since 2002. 22, 2023. We first had them on the show, I know like in 2023. I mean we've spotted them early as as incredible ETF providers. They've been nominated for two awards now by ETF.com they won one award, you know, yet to see about this next one. But it's like they've done a wonderful job of of building a product suite that allows our investors that during times of heightened volatility, AKA a right now when these high beta names that some people might have in their portfolios are moving around. The NASDAQ had a double, you know, two and a half percent down day the other week. Like you're seeing volatility in the markets. If you want to have a hedged product, if you want to be diversified into energy and infrastructure, international gold, Bitcoin, Ethereum, which I guess is down too. But regardless, like they offer you the opportunity to diversify your portfolio not only into those asset classes and sectors of the market, but to generate income through those investments to offset more volatility. So if you are someone who is spooked about volatility at all in your portfolio right now, go to neosfunds.com find and learn more about Spyi QQQI MLPI. Again, it's a big position in my portfolio right now. I'm buying thousands of dollars of it every single day. I think it's going to be a great winner in 26. Like get yourself some NEOS funds and just take a deep breath. You can be all right.
- [39:31]
B
I love episodes like this. I feel like I can run through a brick wall right now because, because I think about, like you mentioned, we were so early to connect with NEOS funds with Troy and Garrett and they just have all these incredible products right there. So I almost feel like it's our little cheat code. Even though they've grown to be so huge already, but just such great products for the everyday investor. And I just love that we get to bring them on the podcast and really get kind of, you know, inside and really understand everything they're working on and how it benefits our audience audience. It's such an amazing journey and like you said, we do learn a lot on each of these episodes and I hope everyone else is learning as well.
- [40:11]
A
All right, Robert, so let's now jump to the Q and A section of this episode. If you have a question to ask us, please shoot us a DM on Instagram Rich Habits Podcast or email us your question at rich habits podcastmail.com these three questions were all Instagram DMS. So the first one comes from Peter C. Peter says, hey guys, I love your podcast. I've learned a lot listening to you over the past couple of months. I'm trying out your honest budget tool, but I had a question around tracking my spending on credit cards. For example, I used a zero interest credit card to purchase a dishwasher for $600. I then paid $200 toward the credit card bill during that same month. What exactly do I track? The fact that I spent $800 total 600 or 200. Really great question. Here, let me me kind of back up and hopefully set the table here for you, Peter. When it comes to budgeting, I like to budget the, the 600, right? That's the thing I spent money on. That's the money that I spent, right? I spent 600 on a dishwasher. I spent 400 on a microwave or, you know, $300 at a dinner. Like, even if it's on a credit card, like, that's the money that I have spent. Now, I'm the type of person to pay off my credit cards every single month before the, you know, the due date. So I don't accrue any interest, which means that I spend it by swiping my credit card. But then that amount of cash also leaves my bank account during the same month. So the cash outlay is equal to the amount that I've spent. But in this instance, your cash outlay, assuming you do not pay it off, is only 200 versus the 600 you spent, which means you still owe $400 on this credit card. Now, you mentioned it's at 0% interest, which is cool, I guess, but at the end of the day, we don't want to be carrying credit card Deb. Just a bad habit in general. But if I were you, I would look at the $600 versus 200 or 800, whatever, because the 600 is what you spent money on and that's how much cash should come out of your bank account to pay off your credit card on a monthly basis.
- [42:19]
B
I think that's a great breakdown and it's a little confusing how this is. This question is posed, but I'm going to take a stab at it to add a little bit of Value here. And I look at it this way. You state that you spent the $600 for the dishwasher on a credit credit card, but did you budget for that? Were you prepared to do that or was it a last minute expense? Because it was a last minute expense and you did not have your emergency account set up for that emergency because the dishwasher went out, then it really wasn't budgeted. And that kind of defeats the purpose of the honest budget, in my opinion. Yes, you should do what Austin said, put in the 600 because you did spend it and then put in the 200 giving you that net of 400 for the that month. But I want to be clear, in my opinion, we want to try and be ahead of these types of purchases. That's why we have the emergency fund. So we're not putting these types of last minute decisions on a credit card in the first place.
- [43:13]
A
Great take. Yes, please have an emergency fund. That's always a great idea. So our next question comes from Manny O on Instagram. Manny says. Hi, Austin and Robert. I'm 61 years old and I have a question. I have $300,000 in invested through my Roth IRA and my 401K. However, I owe $40,000 in high interest debt. I want to pay off this high interest debt immediately. It's at 19% interest. Would you recommend I get a loan at a lower interest rate of 7 or 8%? Should I borrow this money from my 401k? What do I do? Manny, I got a quick solution here for you. So yes, pay off high interest debt, 19%. Bad news, bad bears. First, first and foremost, get yourself an honest budget. Figure out why you went into $40,000 of credit card debt. Was it because you were living beyond your means? Was it because you had a medical emergency? Was it because there was a funeral in the family? You had to pay for it. You didn't have the emergency. Like figure out why it happened. And one, if it's something you can control, please control your spending. And you know, if it's something that was unforeseen, like bad luck happens, I totally get it. That life is always in the way of us and it's okay. But the good news is, in my opinion, there's a way to go about this where you should be just fine. So one of the interesting characteristics of a Roth IRA is you are able to withdraw your principal tax and penalty free. So for example, if you are someone, you said you have $300,000 in your Roth IRA IRA and your 401K combined. So let's say you have 150,000 in your Roth and 150,000 in your 401K. Let's say of the $150,000 in your Roth IRA, 50,000 of that is compound growth and 100 of that is contributions. You contributed $100,000 to your Roth IRA. It's now worth 150,000. And that 50,000 difference is your profit without penalties or taxes or any sort of bad news. Weird vibes. You can withdraw your contributions Roth ira like free and clear. So if I were in your shoes, Manny, because I'm a big believer and you cannot out invest high interest debt. I would not borrow against my 401k. I would not go get a loan. I wouldn't do any of that. I would literally take $40,000 of my contributions in my Roth IRA. Not profits, not talking about it, just the contributions. I take 40,000 of those contributions out of my Roth IRA and use that money to pay off your high interest debt and never go back into high interest debt again.
- [45:49]
B
I think that's a great point in a strategy that everyone should listen to because we always say don't borrow from your future for current debts that you've occurred. And this is a tough one because $40,000 in high interest debt is really, really bad. So I love that breakdown, Austin. And I think that's exactly the playbook of what to do here. Because you don't want to go get another loan against your Iraq in your 401k and do all that stuff. Do what Austin said. It's the best way to get rid of this debt quickly and get rid of that high interest right away so you can get back on track and just don't allow it to happen again because you need to be saving for your retirement at 61 years old instead of going backwards paying off high interest debt.
- [46:32]
A
And I mean, you are 61, right? So you're over 59 and a half. You can tap into these things without penalties and fees and stuff like that. Just tax taxes, like duh. But it's still important to know that you cannot out invest high interest debt. And that's what you're trying to do right now in these retirement accounts. Robert said it great. We always tell people, do not borrow against future you by cashing out your retirement accounts. But that means do not do it while incurring a 40% tax and penalty and local fee, right? That is silly. But you are not going to incur those things because you're already, you know, 61 years old. Like just use some of this Roth IRA money, use it to pay off the high interest credit card debt and then never go back into high interest credit card debt or any high interest debt for that matter. So our final question comes from Stephen B. Stephen says, I'm a huge fan of the show. I was actually big on hydrogen stocks back in 2022 and 2023, and I bought Bloom Energy when it was $10 a share. I was wondering if it would be smart to hold on to this stock and see this bull cycle cycle out or if I should sell it. I sold about half of my profits already when it was around 95 a share. I really love the show. Thank you all for everything you do. The quality is the best out there. Thank you so much, Stephen. Robert, I'll let you start this one.
- [47:48]
B
Yeah, Stephen, great job. I'm really happy that you took profits. I think that's one of the number one things that people seem to forget or don't understand in this world of investing. You have to take profits along the way. We talk, talk about this every single day in the Rich Habits Network, in the newsletter, everywhere we can, we talk about taking profits. You've already done that. So what to do Next? You've taken 50% off the table already. What do you want to do next? There are other places you could redistribute this these funds and do really well. But we do like Bloom Energy still. So maybe take another 25% of profits and let the rest ride. Because I do believe Bloom has a very long term upside. But that's what I would look at. But I am just so happy and proud to hear you say you take profits. So many people buy a stock, right, ride it up 200%, never take profits along the way. Then it goes back down 30, 40, 50% because of this volatility we're talking about. And then they're mad at the world because they didn't take profits along the way. So that's my take.
- [48:51]
A
What is your strategy for taking profits?
- [48:54]
B
So my strategy is simple. When I get up 50% on a position, position, I take 25%. When I get up 50% more, I take another 25%. 50%, 25. I do that until I'm fully out with my own money and playing on house's money. But sometimes I don't go all the way, like in this instance. So if I use an example of mine, Nvidia, right now, I have taken profit four or five times over the last few years. And now I'M just riding the rest of it. But some of it is still my money that is in the stock. But I've taken out so much in profits that I have left more in than usual because my conviction remains really strong on Nvidia for the future.
- [49:36]
A
No, I love this breakdown. And let's just do some hypothetical math here for fun. Let's say our friend Stephen has 500 shares, right? They took $5,000 at $10 a share. 500 shares of Bloom Energy stock here and they wrote it up to 95. So it was worth about 47,500. Took that 5,000, now it's worth 47,500. And you said that you sold half of it, you took your profit, so you sold out of about $24,000. Amazing, right? You are more than out of your position. You've got house money at this point, in my opinion. Bloom Energy is one of those names. I own Bloom Energy, by the way, but it's part of my long term, you know, portfolio holdings. Like I just buy a little bit more of it every single day or every single week whenever I dollar cost average. Like if you want to let this one and ride, I'm not mad at it. You've already taken your profits. You want to see the, the bull cycle out or whatever. But here's the thing. We talk about this all the time inside the rich habits network. Whatever decision you make, make sure you're going into that decision, eyes wide open. Bloom Energy experiences volatility all the time. Robin Hood has experienced a lot of volatility. Bitcoin has experienced a lot of volatility. Precious metals have experienced a lot of volatility. And so no matter what strategy you pick, oh, I'm going to, you know, dollar cost average into this name because I believe in it long term. Robinhood's a great example. Simple for me. I think Robinhood's going to be a great company over the next five, 10, 15 years. I see the wealth transfer happening. I see people using Robinhood. I mean, I, I think they're going to be Vanguard 2.0. I want to own that in a decade from now. Yeah, the stock's down a ton and it's in a, you know, downtrend for sure. But I'm okay with that because I know that I just want to own equity in this business for years to come. But I understand that owning equity in this business for years to come also means 40, 50, 60, 80% downdrafts in price along the way. That's just how it goes when you're investing into single stocks, very different from the index funds and ETFs that we talked about here with Neos funds. I mean, you think about the s and P500, you're thinking about maybe a 15, 20% pullback. You know, call it maybe 30% or, you know, NASDAQ, same thing, 25, 30, 35% pullbacks. You're not seeing a 60, 70, 80% pullback in the indices. You only see that in thematic ETFs and more specifically single stocks. So Bloom Energy. If I were in your shoes, Stephen, I would hold on to the other 200 hypothetical shares. I'd ride the wave and I'd close my eyes until 2030 and see what happens.
- [51:55]
B
I love that breakdown. You know, it's all about understanding your buy box, your risk tolerance and what makes sense for you. But the number one underlying message for everyone, take profits along the way. Don't be greedy. That's the number one thing for me that everyone needs to really get into their heads, build that muscle and do. Because that's what we're here for. We're here to build wealth, make profits on our decisions, and really understand what we're buying and why.
- [52:24]
A
Everybody, thank you so much for tuning in to this week's episode of the Rich Habits Podcast. We are super grateful that Troy and Garrett decided to join us from EOS funds.com major shout out again to them for joining us on this episode. If you got a question for future episodes, send us a DM on Instagram Rich Habits Podcast or email us@richhabitspodcastmail.com and finally, if this volatility in the stock market is scaring you or your portfolio is like, what the heck is going on? What, did I pick the wrong things? I don't understand. Consider joining the Rich Habits Network. My portfolio is in there. Robert talks about his portfolio all the time. We host weekly 2 hour long Zoom calls every Tuesday night where we talk about our decisions and our ideas and what we think about the market. And like, we just try and make sure you guys aren't surprised. And I think we've done a very good job. We have nearly a thousand people now inside the Rich Habits Network and we're just so, so grateful to have the support of several hundred people and of course the support of the tens of thousands of you all that come back and listen to the show every single week. So thank you so much. Please consider leaving us a five star review. If you learned something. Please consider sharing this episode with a friend and we'll see you on Thursday.
- [53:33]
D
There.