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- [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 this episode, you'll understand exactly how covered call ETFs generate monthly income, how they're all built differently, and where they specifically belong in your portfolio. My name is Austin Hankwitz. I'm joined by my co host, Robert Kroke. Robert is a seasoned entrepreneur with lifetime revenues of over 300 million, and I'm a multi millionaire in my late twenties with a background in finance and economics. As the show name might suggest, 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?
- [00:43]
B
In today's episode of the Rich Habits Podcast, we're Demystifying covered call ETFs, the fastest growing category of income focused ETFs on the market, to figure out how they actually work, how the biggest ones differ from each other, and who should realistically own them. Today, we're breaking down the mechanics behind the strategy, comparing three of the most popular funds side by side, and giving you a framework to decide where a covered call ETF fits inside your diversified portfolio.
- [01:12]
A
I think that's a great call out, Robert, because we see the headlines 12, 15, 20% yield, right? A 12% yield doesn't exactly mean you're earning 12% consistently on your money. Some of these ETFs are slowly bleeding share price while they pay you a monthly distribution. All covered call ETF strategies are not created equal. The difference is how they sell those options and how those distributions are taxed. Those two differences can mean thousands of dollars or more less in your pocket over time.
- [01:43]
B
So whether you're retired and looking for monthly income in your 30s and curious about these yields you keep seeing on social media, or just trying to figure out why everyone's suddenly talking about income focused ETFs. This episode is definitely for you. So Austin, let's start from the very beginning. What is a covered call?
- [02:01]
A
And I just want to reiterate here, the title of this episode is our Favorite Passive Income Strategy. And the reason we made that the title for this episode is because you see a lot of these gurus online talk about how laundromats, car washes, maybe even some real estate can be passive income. But at the end of the day, there's nothing more passive than doing nothing and getting monthly distributions from these covered call ETFs, which make it my favorite our favorite passive income strategy that anyone can do. You Just open up a brokerage account on public.com or whatever broker you want to use and you start buying and accumulating shares of these ETFs and you start collecting monthly distributions.
- [02:41]
B
Austin, I love this call out because you're right. So many of the gurus are telling you buy the laundromat, buy the vending route, but they don't ever touch on the fact of who's going to go fix that laundromat when it jams, or the coin machine isn't working, or the vending route is empty. Guess what? There is nothing passive about those. I'm not saying they're bad, but they're definitely not what we're describing in today's episode.
- [03:04]
A
So if you're someone who's truly looking for the definition of passive income, look no further. Let's talk about covered call ETFs. So Robert, you said, what is a covered call? Let's jump into that. A covered call is one of the simplest options strategies in investing. And once you understand how it works, the entire covered call ETF category begins to click. So here's how it works. Let's say that you own 100 shares of a stock. Let's use Tesla as an example. Because I've done this in real life with my real shares of Tesla stock. I went out a couple of years ago and I bought hundred shares of Tesla at about $220 a share. So about $22,000 of cash left my account and I bought shares of Tesla with it. I then sold someone the right to buy my hundred shares that I paid 224 for 250 per share by a specific date. So I bought it for 220. And then I told someone, I said, hey, if you want to purchase my shares at 250 by a specific date, you can. And for that, right, that covered call option contract, it's called a covered call. Doing that sort of transaction there, they paid me a cash premium. It's called premium. This is cash deposited straight to my brokerage account. In this example, let's just make up a number, let's call it 500 bucks. So after you sell a covered call, three things can happen. Only three things. Scenario one, Tesla stays below the $250 strike price by the expiration date of the contract, the contract expires worthless for the buyer. Because why would I pay 250 a share if Tesla is trading at 240 or something, right? There's no buyer that's gonna wanna do that. So their right to Exercise, the contract is worthless. I get to keep my hundred shares of Tesla stock and I keep the $500 premium they paid me. This is what I call the freest money that exists. It is awesome. I turn around, I can sell another covered call for the next month, collect another 500 bucks, or what number might be. I literally did this for years, Robert. In 2024, 2025, I've made north of $18,000 in premium income on my 200ish shares of Tesla stock over the years. It is an awesome strategy. Now, that's scenario one. Scenario two is Tesla goes to exactly $250 a share. Same outcome, contract isn't worth exercising. Oh, if I'm the buyer, I'll just buy shares on the open market. No worries. To exercise this contract, me as the seller, I get to keep my shares and that $500. Now, scenario three is where things get tricky. Let's now pretend that Tesla stock rises well beyond that 250 strike price to $300. Now, the buyer, the person who has the right to buy my Tesla stock at $250 a share, they say, why would I pay 300? If Austin's going to sell me his a hundred shares of Tesla at 250, I'm obligated to sell those shares at 250. Even though they're worth $300 in the open market, I still made a $30 per share profit, since again, in this example, I hypothetically paid $220 a share and I'm selling them for 250. Plus I collected that $500 of premium. So it's certainly not a loss by any stretch of the imagination. But I missed out on that $50 per share upside. Right. I sold it at 250 where the open market has it listed at 300. That's $5,000 that I hypothetically left on the table in this example. And that is the crux of covered calls. So, Robert, maybe explain why that 5,000. So important.
- [06:42]
B
Yeah, that $5,000 trade off is the entire foundation of this covered call strategy. You're trading some of your upside potential for guaranteed income today. One important term here is covered. The call is covered because you actually own the shares. You have the stock sitting in your account backing up the contract that you sold to this other person. So to summarize, a covered call means you own a stock. You sell someone the right to buy it at a higher price than you paid by a certain date. They pay you a cash premium to you for that. Right. And if the stock doesn't reach that price, you keep everything and do it again and again and again. And this is how we make a ton of money doing this, as per Austin's example regarding Tesla. So let's talk about why entire ETFs are built around this strategy and what that means to you.
- [07:34]
A
Yes, and let's be super clear here, Robert. Covered calls, once you get your reps in, you get to really understand how they work. But there is a whole industry, a whole sector, a whole thematic of ETFs built around this strategy. Some of them are specifically doing single stocks. Others are doing indices. Others might be doing sectors. Right. Some examples include SPYI for the S&P 500, but also BTCI for Bitcoin. That's a covered call Bitcoin Strategy. There's also TSly, which is a Tesla stock covered call strategy, or C O N Y, which is a ETF that's specific for Coinbase stock. These covered call ETFs are everywhere. And we want to make sure everyone has full understanding before they make the decision if any of these ETFs fit inside their own, well, diversified portfolios. So, Robert, let's dig in as to why These covered call ETFs exist in the first place. So you're saying to yourself, great, I want to sell some covered calls, collect some premium every month. This sounds like fun, but there's a catch. The catch is to sell one single covered call contract, you have to own 100 shares of the underlying stock. I use that as an example with Tesla. I said, cool, I've got $22,000. I'm going to go buy 100 shares of Tesla stock. Maybe you want to do that with Nvidia. Right now that's like $20,000 or maybe 100 shares of Apple stock right now, $29,000, Robert, that's a lot of money, and that's just on one stock. If you want to run a diversified covered call strategy across dozens of stocks, we're talking about hundreds of thousands of dollars of capital just to get started. That's the problem that covered call ETFs specifically solve. They pool investor money together and they essentially do three things at scale.
- [09:29]
B
Yeah, let's break this down. First, they buy the stocks. Typically it's a broad basket like the S&P 500, or a curated group of those large cap names. Second, they sell those covered calls against those holdings, collecting the premium every week or every month systematically across that entire portfolio. And third, they distribute that premium income to you, the ETF shareholder, as monthly distributions. This is the monthly income that hits your account. That's where the 8%, the 10% or the 12% yields you see advertised are coming from.
- [10:03]
A
That's right, Robert. So instead of needing half a million dollars to go build your own diversified covered call portfolio, you can buy one share of a covered call ETF at $50 a share and you're getting that institutional level options income immediately. That accessibility is why this category has absolutely exploded over the last four to five years. So many people talk about it on X and Reddit and Instagram people are these income focused investors. It has been such a investing trend to get paid that monthly passive income. But this is where things get complicated because not all covered call ETFs use the same strategy that Robert and I just explained with Tesla. The way they might sell those options, specifically where they set the strike price relative to the current market price, what types of option contracts they use, how the income is classified for taxes. All of these things creates massive differences. And what you actually earn after everything, everything is said and done, and after you pay Uncle Sam. And that brings us to the most important segment of this episode. So Robert, let's now walk our listeners through three of the most popular s P500 covered call ETFs side by side, which is Jeppy J E P I, X, Y, L, D and S P Y I. And then show everyone exactly how different they are under the hood. And I think it's important to talk about these three specifically because one, everyone understands here, at least I hope so, that are listening what the S&P 500 is. We all have Voo in our portfolios, right? 500, largest of the most profitable companies in the United States. And so as we think about a covered call strategy that sort of benchmarks against the S&P 500, you can begin to compare apples to apples. So Robert, kick us off here with this awesome comparison.
- [12:01]
B
Yes, all three of these ETFs are built around the same basic idea. Own large cap U.S. stocks and sell covered calls to generate monthly income. But the way each one executes that idea is completely different. And those differences definitely show up in your yield, your total return and especially your tax bill. So we want to break those down one at a time so you know exactly what you're getting into.
- [12:25]
A
So let's start with Jeppy J E P I. This is the most popular covered call ETF of them all. $36 billion of assets under management, 35 basis point expense ratio and a yield of about 8%. It's the one your financial advisor has probably mentioned to you, here's how Jeppy actually works. The first difference about Jeppy, that I think a lot of people forget, is that Jeppy does not hold the full 500 constituents of the S&P 500. JP Morgan's portfolio managers actively select about 130 large cap stocks that they think are going to perform well. Which like, okay, that matters because it means Jeppy's performance can deviate significantly from the S&P 500, which it certainly has over the last several years.
- [13:17]
B
And second, and this is a very critical part, Jeppy doesn't sell standard call options. Instead it uses something called Equity Linked notes or you'll see it as ELNs. These are specific financial products issued by banks that mimic the payoff of a covered call without out actually trading listed options on the exchange. Jeppy buys these ELNs and the income from those notes flow to shareholders as these distributions. Jeppy sells its exposure at out of the money strike prices, which means there's a buffer between the current stock price and where the upside gets capped. And that allows JP holders to participate in some market appreciation before that cap kicks in. Think about buying Tesla at $220 and selling the covered call strike price at $250. Some upside appreciation does get captured.
- [14:10]
A
Now here's the part that makes my stomach turn. Because Jeppy uses these ELNs instead of actual listed options, the IRS treats virtually all of the premium income Jeppy generates as ordinary income. Not capital gains, not return of capital. Ordinary income tax at your full marginal rate. Which means if you're a high earner and you are getting taxed at that 32% federal tax bracket, nearly a third of every JP distribution goes straight to the government. Which means in a taxable brokerage account that 8% yield is much closer to 5 and a half percent after taxes. That is a meaningful haircut. And if you can't hear it in my voice, I hate this covered call etf and it makes me so upset that people actually put money in it because it's a, it's, it's a, a terrible product. I'll leave it at that.
- [15:00]
B
Well, everyone following along knows we've never talked about Jeppy. So I love this episode and doing a deep dive to break these down because they are the three largest covered call s P500 funds out there. So that leads us into the next one and this is xyld and they take a completely different approach. It has a 0.60 expense ratio and a yield of roughly 10 to 11% higher than Jeppy. Xyld holds the actual S&P 500, the full index replication, not an actively managed subset like Jeppy. So you're getting the True S&P 500 exposure as your base in this fund,
- [15:42]
A
which I think is a good thing. If you want to benchmark against the S and P, you better hold it. But the key difference here is where Xyld actually sells those call options. And our previous example, Robert, we talked about me buying Tesla stock at $220 a share and selling the covered call with the strike price at 250, which means I'll profit that $30 per share difference. And the premium I collect, Xyld sells at the money covered calls, which means the strike price is set right at the current market price. So if The S&P 500, because it holds the S&P 500 in this ETF is trading at 7,000, Xyld is selling at 7,000. That means any appreciation in the S&P 500 above that level is money left on the T. You're, you're collecting premium. Yeah, that's true, but you're giving up essentially all of the market's upside.
- [16:40]
B
Yeah. Xyld share price has been gradually declining over time, so let's make sure everyone understands that. But you're receiving monthly distributions, but the underlying value of your investment is eroding. And that's where the numbers get a little wonky and why we're breaking these down today. So if you're spending those distributions living off them in retirement, that might be perfectly fine. But if you're reinvesting them and expecting wealth accumulation, Xyld has significantly underperformed the S P500, that Voo that we talk about all the time. And on the tax side, Xyld uses actual listed options, so its distributions are a mix of short term capital gains and return of capital. That's better than Jeppy's straight ordinary income treatment, but it's still not ideal in a taxable account.
- [17:29]
A
So let's recap. Jeppy, terrible black box of investments, high taxes, no good vibes. Then you've got this Xyld product. They got the S&P 500, which is good, but they're not writing and selling contracts out of the money. They're doing it right at the current price, which is going to cap that upside, which is why you've seen the share price of Xyld decline over the years. So now let's talk about, in my opinion, the best product that exists when it comes to S&P 500 covered call ETFs, and that is Spyi. Spyi has a 68 basis point expense ratio, which is the highest of the three, and a yield of 10 to 12%. But before you look at that expense ratio and say, whoa, that's, that's a lot, look at the total return. This ETF is our favorite because since inception In August of 2022, Spyi has returned 66.5% cumulatively and a half percent annualized returns. Over the trailing three years, it's returned roughly 16% annualized, has outperformed JPI and XYLD by a wide margin, capturing anywhere between 75% of the S&P 500's annualized return depending on the year, all the way up to last year, it captured like 94% of Voo's total return during the same period.
- [18:56]
B
And here's why. Like Xyld, spyi holds the actual S P500. The full index replication. But SPYI sells out of the money call options on the S P500 index. Out of the money means the strike price is set above the current market level. So if the S P500 is at 7,000 spy, I might sell calls at a $7,500 strike price. That means that the S P500 can appreciate 5 or 6% before any upside gets capped. So you're retaining significantly more of the market's growth. And in strong bull markets, that compounds enormously. And that is one of the many reasons why SPYI is our favorite.
- [19:42]
A
And mind you, Robert, this goes for all neos funds. They take this strategy, this outperforming strategy, and they apply it to iwmi, qqqi, iaui, iyri. I could go on for days. III Right, you like that. So let's, let's now talk about the tax treatment because I also think that's where SPYI kind of stands out here. And again, I want to be very clear, Robert. When we sat down to figure out what this episode topic would be about, we wanted to talk about passive income and how we're collecting passive income in our own portfolios. And we both sort of were thinking, we're like, well, we use a lot of neo's funds to collect passive income collectively between the two of us, make thousands of dollars a month from these things. Why don't we emphasize that audience and remind them that these products exist. NEOS isn't involved in this episode at all. I'm sure they're going to be happy we made it, but this is us sharing Our unique perspectives and our real experience about building passive income in our portfolios with products that we believe in. If there was a better covered call ETF out there, I'd be the first to admit it. I just haven't found one yet. So if you know of one, send me a comment. I'd be happy to give it a look. But let's now talk about the tax treatment, Robert, because this is where SPYI stands out. SPYI uses S and P 500 index options that qualify as Section 1256 under the Tax code. Which means regardless of how long you've held the ETF position, the gains and losses on these contracts are automatically treated as 60% long term capital gains. We like that. And 40% short term capital gains. The maximum federal tax rate on long term capital gains is 20% compared to that ordinary with JEPI at up to 32, 35, 37%. Right. Depending on your tax bracket. Same yield on paper, but completely different outcome in your brokerage account after taxes.
- [21:35]
B
And on top of the Section 1256 treatment, Spy has been able to classify a significant portion of its distributions as a return of capital. That's very, very important here. Return of capital is not taxed in the year you receive it. It simply reduces your cost basis in the etf. So you're receiving income, keeping more of it it and deferring the tax liability. So Austin, let's break it down side by side. So the picture is crystal clear on these three different ETFs and who the clear winner is.
- [22:08]
A
Yeah, the clear winner obviously is spyi and anyone that sells out of the money. Return of capital section 1256 full index replication. So when you're looking at anything out there, full index replication out of the money 1256 return of capital. That's sort of like the big green flags to look for, but yeah. So jeppy 130 randomly selected selected stocks. I mean I wouldn't say random, but it's like black box. Who knows what goes into that selection. They do sell out of the money calls, which is cool, but they do it through ELNs. So it's taxed as ordinary income. Three years annualized, total return 12%. Yuck. Xyld holds the full S P 500, which is cool, but they sell at the money options. They yield 10 to 11 per year, which is pretty cool. But their total return, when you include that erosion of the price because of those at the money, not out of the money, it's only 8%. That sucks. And then you bring in spyi, the full S&P 500 out of the money index options, 10 to 12% annual yield, annualized total return of 16%. Distributions from those section 1256 contracts are taxed at that 60, 40 split. Plus you get a nice big. I think it's like 95% of these distributions, Robert, are return of capital, which means you do not pay taxes on the money you receive in the same calendar year you receive it. I love making money that I don't owe taxes on in the short term here. It's awesome.
- [23:40]
B
Yeah, I feel like we need to make those shirts that you always talk about, and that is, I love free Internet money because this is one of those cases. All right, so let's go through now the trade offs and who benefits most? Because now that all of you understand the mechanics, let's talk honestly about the trade offs. Because covered call ETFs are not free money. And there are specific situations where they make a lot of sense and also specific situations where the outcome might be confusing. So trade off number one, income versus growth. Every dollar or premium income you receive from a covered call etf. ETF is upside you gave away. That's a feature, it's not a bug. So in 2025, the S P500 delivered 17.8% returns for its investors where Spyi delivered only 16.7%, which is about a 94 capture. And Xyld only delivered 7.9% and Jeppy only 8.1%.
- [24:41]
A
Trade off number two is the yield is not the same as the return. And this goes for those single stock covered call etf'. This is a major trap people find themselves in. I see people online all the time talk about, yeah, I'm making 30, 40, 50, 60% annual yield with my TSLY, C O N Y or whatever insert ETF here. That is a single stock, covered call ETF. But then you look at the price of it and it declines a ton. A great example of this again is to just go look at the TSly ETF since inception. Back in November of 2020, it was trading at $205 a share. And yeah, it pays out 60, 70% yields, whatever you want to look at there. But now it's declined 85% in value since then. So you really have to look at the total return, not just the yield.
- [25:38]
B
Yeah, I think that's a great call out because so many people see the headlines and they get excited and it's very misleading without people understanding. So I think this is a very important episode for that very reason.
- [25:49]
A
So Robert, let's wrap the episode with who should actually own these covered call ETFs in their portfolios. Maybe give me some like portfolio breakdown, some age ranges maybe, things like that.
- [26:01]
B
Yeah, I think covered call ETFs are great for retirees who need monthly income to cover those living expenses, replacing a paycheck with these predictable distributions. But they're also great for pre retirees who maybe are within 5 to 10 years of retirement who want to build that income floor that they can count on, but they also work well to supplement Social Security or that pension.
- [26:24]
A
That's all true, but I also think they're great for people like me who desire predictable tax efficient monthly income in their portfolios. And they like to either put that money back to work in their portfolios or use it to supplement their lifestyle. I've said this on the show, I mean many times. I've got six figures invested into neo's funds like spyi, qqqi, btci, iyri, iaui. I love the funds. I make over a thousand a month in predictable passive cash income predictability here. It's passive, it's awesome, it's tax efficient. And I again take that money and reinvest it back into the funds or I use it and put gas in my car or buy groceries. And what's really cool Robert, is that predictability holds up pretty well during some market turmoil. These Neos funds were what I leaned on a little bit here during the first quarter of the year when we saw the craziness happen in the Middle East. I still made made that money. So Robert, let's close out the episode by answering the question I'm sure everyone is thinking after we just broke that down, which is do I own this? Should I be buying this? And if I should be buying this, where does it fit in my portfolio specifically?
- [27:38]
B
I think everyone listening should look at it that their portfolio kind of look at it in three sleeves. You have your growth sleeve, which we talk about all the time, the vti, qqq, maybe moat some individual stocks. Whatever your core alloc looks like, that's the piece that compounds over decades and builds that long term wealth. You have your stability sleeve, treasuries and money markets, the piece that provides that ballast and liquidity when the markets decline. And then there's your income sleeve. That's where these covered call ETFs live and provide you that stable income over time.
- [28:15]
A
That's right. So maybe if you're in your 20s or 30s, think 5 to 10% of your portfolio that's about what it is for myself. If you're in your 40s, maybe think 15 to 25% of your portfolio. And if you're in your 50s or even approaching retirement, maybe bump that up to 25 or maybe even 40% of your portfolio to build that income floor
- [28:34]
B
and an actual retirement, the income sleeve might grow to 50 or 75% because now you need those distributions to pay the mortgage, cover healthcare and fund your lifestyle. That's the phase where covered call ETFs truly earn their place. Austin, what a great episode. I am so glad we covered this because it's all over. The headlines are everywhere about covered call ETFs and we love NEOS funds. And that is why I'm glad we covered the three top funds and broke it down. So everyone understands is it a good fit for them and where does it fit? So whether you're retired and building an income floor or 30 years old and just trying to understand what all the fuss is about, you now have the framework to make that decision for yourself.
- [29:17]
A
Yeah, and shout out to my friend Mike, Mike, you know who you are. I had dinner with him maybe a couple weeks ago and he has like a ton of Neos funds. So much so he gets paid, I think it's like 35 or $40,000 a month in these tax efficient monthly distributions every single month, like clockwork. I mean, you just keep putting zeros behind this stuff and it, it scales with you, which is really exciting. So shout out to everyone that's got Neo's funds or any other covered call product in your portfolio that you agree with. Again, this is nothing to do with NEO specifically. It's just Robert and I were sitting down and thinking, I don't think we've done a good job recently of encouraging find passive income for themselves. True passive income, not vending routes or laundry mats or phone booths or they don't have phone booths anymore. Robert and I were talking about phone booths before this.
- [30:06]
B
I used to own them. I used to have them. They were very.
- [30:09]
A
I know you did, but this is like, this is the most passive income in my opinion that exists. It's super, super tax efficient. Specifically talking about Neos funds and so highly recommend. If you're looking for a way to actually make 10, 10, 20, 50, 100, a thousand dollars a month, consider putting and nibbling now here at some Neos funds and get your reps in. You're like, whoa, I just woke up to $78 in my, in my brokerage account today. That was kind of Cool. Let me try that again next month. Whoa. I just Woke up to 1:86. I'm gonna take it out and go use that to go buy myself a nice dinner. Right, Whatever you wanna do there. Really cool stuff. Now, Robert, before we jump to the Q and A section, I gotta give a specific shout out to Phoebe Thompson. Phoebe Thompson has been on our team for a while now. She helps us with social media with the Rich Habits podcast and everything like that. That and now she's a published author. She has a book on Amazon called Girls Our Age and it is awesome. Really cool cover art by the way. So if you want to go learn more about Phoebe Thompson's book Girls Our Age, we'll have a link to it in the show notes below to Amazon. It's a nice hardcover book, just came out here recently. Super proud of Phoebe for being a published author now. And major, major shout out to doing this. I mean, I can't write a book. That's awesome. Congratulations, Phoebe.
- [31:24]
B
Definitely shout out Phoebe. We love our team members and she crushes it for us. So really proud of her for the book.
- [31:32]
A
And Robert, this is a great reminder too. If you want to buy a covered call ETF, there's a platform called public.com that is specifically built for investors that take investing as seriously as we do. Because on public you can build a multi asset portfolio of stocks, stocks, bonds, options, crypto, ETFs and now generated assets, which allow you to turn any idea into an investable index using artificial intelligence.
- [31:58]
B
Yeah, 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, builds a one of a kind index index, and even let you back test it against the S&P 500, all with just a few clicks.
- [32:20]
A
We were just talking about ETFs here and generated assets are very much like them, but with infinite possibilities. They're completely customizable. They're based on your thesis, 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 rich habits paid for by Public Investing.
- [32:41]
B
Full disclosure in the podcast. Description. Description.
- [32:43]
A
All right, Robert. So our first question comes from Alexander on Instagram. Alexander. Oh wait, duh. Everyone, you got a question. DM us on Instagram Rich Habits podcast or email us at Rich Habits podcast gmail.com. so Alexander on Instagram says, I have $60,000 in my bank account at 19. Holy smokes. Alexander says I'm interested in investing most of this money. Money I currently do have money put into the ETFs you talk about, but I want to give them an extra boost. I'm worried if I withdraw that money it might affect my loan capacity for an investment property I'm looking to buy alongside my parents in the coming months. What is your take on this? Good question, Alexander. So couple things here, my friend. The first One is you're 19 with $60,000. That's incredible. Congratulations. You are wealthier than I sure was at 19. I'm sure wealthier than Robert. Wealthier than a lot of listening here at 19. That is a ton of money to have at 19 years old, in my opinion. I'm not sure that investment properties or teaming up with your parents or things of that nature is the best first move to make at 19. I would much rather see you have this $60,000 working for you the old fashioned boring way, which is in index funds, in ETFs like Vooq, QQQ, DIA, MOAT, things of that nature. Maybe over the coming years when you have your base built fully to that hundred thousand dollar mark, you want to then go take some money and use that to perhaps purchase a rental property or an investment property of some sort. Be my guest. But I'm not sure I would do that here. Assuming the 60,000 is all you have.
- [34:28]
B
I agree with that 100%. I know it's fun and it sounds great. I bought my first 4 plex at 23 years old. I thought I was a rock star. Are. But keep this in mind. Let me paint a picture for anyone out there who's younger and doesn't have their base built but still wants to buy a property right out of the gate. Be careful because let's say in this instance you have $60,000 and you use 30,000 of it for closing costs and down payment, everything to buy this first property. But then you realize that the hot water tank is bad, there's some issues with the foundation or maybe the roof needs a repair. Then all of a sudden you're 10,000 more into the property. Then pretty soon you're in that danger zone zone because you've eaten away at all of this work you've done to get to the 60,000. So I agree with Austin 100%. I wouldn't buy the property yet. I would keep rocking and rolling, keep working, keep my cost of living low and keep putting the money away because we want to see that base. So you're making money while you sleep. And of course, I want everyone to buy real estate, but not first, before they have the base built.
- [35:30]
A
And the only thing I'd add, Robert, is I'd really want to encourage Alexander here to think about, they said, I want to give my ETFs an extra boost. Maybe, but maybe that extra boost comes in the form as, like, the satellite portion of your portfolio. Right. We talk about the core satellite portfolio strategy a lot, which all that means is 65 to 85% of your portfolio is invested into the index funds and ETFs we talk about. And the other 15 to 35% is diversified into single stocks or different asset classes like precious metals or real estate or venture or whatever you want to go there. And so that's where the boost comes from. But we always want people to ensure before they're diversifying into other things, they've built their base. So continue to invest. Alexander, you are crushing it. At 19 years old, you're just not there yet. Now our next question comes from Elizabeth on Instagram. Elizabeth says, my husband has gone back to work. At 66 years old, he's a professional project manager earning over 200,000. We have little to no savings. Our 401k is completely depleted. Where do we start investing to make the most of the next three years of his salary?
- [36:38]
B
Hmm. This is a tough one. I'll take a stab at it. You're gonna have to make some serious changes. And I'm not trying to be gloom and doom, but it's 66 years old. Even though I believe we're all gonna live a lot longer, you really need to dig deep. I would start by getting a pen and paper out. Sit down with your husband and go through all of your expenses right now and find out how you can lower your cost of living and sock away as much of this 200k a year over the next 3 years. Years. So let's say you could find a way to put away 40% of that for three years. That would be a good dent. But you can't do business as usual and expect to get anywhere you desire to feel comfortable in retirement. And at 66 years old already, you've got to make some serious changes because you don't want to be in a situation where he has to work another 10 years just so you guys can have any hope of some sort of retirement with any comfortability. So that's where I'd start. I'd start with the budget. Budget. I would do A really, really deep dive in all of your expenses and get rid of everything you can and then go from there. Because you need to start getting this money activated that could be in some of these funds. We talk about. It could maybe be depending on if his work has any kind of 401k or any kind of match. Maybe that could help as well. But, Austin, what is your take here? Given the age of this person?
- [38:02]
A
I think the first place I would start is what you said, which is like the budget. Obviously you guys are in this situation because what you were doing before wasn't working. Or maybe you had really bad luck. Medical emergency, like, I have no idea, to be honest. I'm not going to assume anything. Everyone's lives are different. We're starting from scratch, and we're. We're definitely older here. So we have to do the math equation. We got to figure out this math equation. The math equation is how much money is hitting our checking account on a monthly basis from my husband's project manager salary, how much money is leaving our bank account every month for our monthly expenses, and how much margin can we find? How many subscriptions can we cancel? How many insurance companies can we call and renegotiate our rates? Or switch from Farmers to Geico? Can we switch from AT&T to Visible Wireless and save 80 bucks a month? Like, what can we do to try and get our monthly expenses as low as humanly possible to find the margin in that budget to save and invest a nest egg aggressively over the next three, four, or five years? Now, the other question is retirement at the age of 65. I mean, earlier than 65, but I mean, 66. Here you can tap into your Social Security. I would encourage you to probably start doing that sooner than later, specifically so that could also build a nest egg for you. Do not live off of that income. Do not spend that income, but take it from the government and get it invested as properly as you possibly can. Maybe that's an ira. Maybe it's a taxable account. Maybe work with a professional. That's going to help you navigate the best way to approach this. But get that money working for you. Don't let the government hold on to it. It's only going to grow by 3 or 4% if the government has anything to do with it. You can grow this money by 8, 10, 12%. I mean, the S&P is already up 6% this year. The NASDAQ's up 11% this year. Right? That's just by parking it in the index funds. We Talk about which again, again is two to three times better than what the government would do with their T bills. So get your Social Security and start investing it. That's, that's my quick take. The other thing to consider here is like, what does retirement look like? Retirement is not an age. It's a math problem. Am I earning enough off my portfolio and other passive income streams to offset my monthly living expenses? So let's say your monthly living expenses are $4,000 a month. Let's say your Social Security is $2,000 a month. You guys now need to come up with $2,000 a month somewhere else else. That could be 4% rule from the portfolio, right? Maybe that's $24,000 a year. That means your portfolio would have to be between 900,000 to a million dollars. I have no idea if that's possible in three years time. But you guys have a great income and there's a ton of different ways to think about this. This is just a math problem. And the biggest advice I can give you, do not be afraid. Do not feel hopeless. Do not feel like this is something that you is out of your control and you're going to be screwed. It's just a math problem. And the faster you sit down and figure out the solution, right? Solve for X, right? Just like you were in algebra class, the faster you can sit down and solve for this math problem. How much money do I need? By what date? How much money do we need to save per month? How is it going to help us reach this goal? How much do we need in retirement? Where's that money going to come from? Social Security? Maybe I get a part time job at the bakery, right? That's going to be an extra thousand a month. Month. Like there's a lot of different ways to think about this. And I promise you there's a solution to this math problem. So please do not be afraid of it. Do not get discouraged. There absolutely is hope here.
- [41:37]
B
And for everyone else watching this episode and this question and listening along, this is why you have to get ahead of it. This is why you have to invest early and often. So if you're in your 40s or you're in your 50s right now, don't keep kicking the can down the road because at some point you're gonna run out of time and you're not gonna be able to comfortably. And we don't want to see that happen to anyone on our watch.
- [42:02]
A
In addition to that, maybe these people. Elizabeth here on Instagram and her husband were great savers. They were just very unlucky. Have umbrella insurance. Have the right insurances in place to ensure that if you do have a medical emergency or a terrible lawsuit because someone slipped and fell on your property, your rental property, and they sued you for everything you had, like, who knows? But have the right insurances in place. Place. This is another great reminder for that as well. Now, before we go into our last question, Goldman Sachs Research just published something that went pretty viral, Robert, on the social medias of the world. They're calling it the return of physical assets. Specifically these tangible assets that can't be disrupted by artificial intelligence.
- [42:41]
B
Yes, Goldman says that this one bucket from the report has outperformed capital light companies by roughly 35% since the start of 2025. That's 35%. And at the same time, the software sector is currently down about 35%. The report basically says the market is repricing what things are worth today based on whether physical and hard to replace or just digital and vulnerable to disruption.
- [43:08]
A
They call these winners heavy assets with low absolesence, which is halo as an acronym there. And we're reading this and thinking, you know, what I'm sure we're going to see in that report report is blue chip artwork. And here's why. There's scarce supply for artists like Picasso and Basquiat. And while software valuations began to fall earlier this year, a klimt painting in 1907 just sold for, get this, Robert, $236 million in November. Obviously that's an outlier. That's not all the artwork out there, but it's the highest price ever paid for modern art at auction. So pretty low obsolescence if you ask me.
- [43:44]
B
That's the thing. The Art Price 100 index has outpaced the S&P 500 by 64% from 2000 to 2024. We've been using today's sponsor, Masterworks for years. They let you invest in shares of museum quality artworks featuring Banksy, Basquiat and Picasso without having to spend millions of dollars. And this is a compelling investment most people couldn't possibly access Without Masterworks. Since 2019, over 70,000 members have invested over $1.3 billion dollars across more than 500 artworks and across 26 exits to date, investors have seen net annualized returns like 14.6%, 17.6% and 17.8%.
- [44:31]
A
So while Goldman Sachs is telling investors to get real about physical assets and the wealthy have poured hundreds of millions of dollars into a single painting, you might want to see if art is a fit for your own portfolio best. Better yet, our listeners can skip the wait list at Masterworks Art Rich Habits. That's Masterworks Art Rich Habits. Link in the show notes below.
- [44:57]
B
As always, investing involves risk. Past performance is not indicative of future results. See important Regulation a disclosures@masterworks.com CD shout out Masterworks.
- [45:09]
A
We love Masterworks and it's a great way to add to that 15% satellite portfolio section that talk about a lot. Now our final question comes from Bola on Instagram. Bola says, hey guys, quick question. My friend sells jewelry and they're currently making it in the United States, but they're looking to start manufacturing from Asia. Not sure where to start. Do you have any advice? Robert? This is all you.
- [45:31]
B
Yes, definitely. So here's the blueprint for anyone out there that's starting a brand that's going to manufacture in Asia or maybe already has a brand and it's starting to grow. Get your contracts in order. I see people all the time. Time they jump on Alibaba, they start talking to people in messages and say I have this cool product idea without any protection. So first and foremost use chat, GPT, use Gemini, Claude, whatever you use. You're going to create these three documents. A manufacturer's agreement, an NDA agreement which is a non disclosure and a non circumvent agreement. All three of those documents are very, very important. Get those done first. Then once you're ready and you go to Alibaba and start searching for manufacturer for this jewelry. Don't share with them anything, any of your drawings, anything about your product until you find a manufacturer that looks like it's going to work and they're willing to sign these documents. Now one pro tip I have for everyone listening that's doing this. When you go to Alibaba, you're going to see a thousand listings. Try if you can to avoid any listing that in the description of the company says XYZ Transition Trading. Because all that means is they're trying to get leads from Alibaba. Then they're going to go to the actual manufacturer. So you're actually hiring a middleman if you do that. So look for manufacturer in the description. It'll say XYZ Jewelry Manufacturer because in that way you're buying direct and you don't have a middleman eating into your profits. So that's it. That's the blueprint. Get the contracts in order. As soon as you find a factory that looks good, you can message them them say hey, before I discuss my product and my needs. Can you please sign these documents? And then once you're protected there, you'll be good to go. Because trust me, the horror stories of people finding a hot product because someone shared it with them and then they start selling it to other vendors. Happens all the time. This is how you prevent that.
- [47:31]
A
What a great breakdown. Robert, everybody. Don't forget, Phoebe Thompson is now a published author here. Girls Are Age is the name of her novel. It's on Amazon. It's going to be in the link in the show notes below. We're so proud to have on our team doing incredible things. That's it for this episode of the Rich Habits podcast. We'll see you on Thursday.