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- [00:02]
A
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- [00:28]
B
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- [00:57]
C
hey everyone and welcome back to the Rich Habits podcast Question and answer edition. These are our Thursday episodes where we answer your questions as if we were in your shoes going through whatever you're going through. You can ask us questions on Instagram inside of our DMS at Rich Habits podcast, or you can email us questions@rich habitspodcastmail.com Robert we're filming this. Vibes are high. Excited to answer a ton of questions. And summer's here. Weather's great. I can smell the, the lake air. I'm, I'm so excited to take the boat out. I mean we're, we're ready to rock and roll.
- [01:35]
D
Yeah. I think it's time we film an episode on the boat in the middle of the lake with some nice lunch and everything in a beautiful setting with the sky in the background. So let me know what day we're doing that this summer.
- [01:46]
C
That would be fun, wouldn't it? I'll, I'll bring some Jersey Mike subs, beverages.
- [01:51]
D
We should do that. People would love it. So we got, we got to plan that one out well before we jump
- [01:56]
C
to this episode, got to give a shout out to public.com the Investing for those who take it seriously. On public you can build a multi asset portfolio of stocks, bonds, options, cryptocurrency and now generated assets which allow you to turn any idea into an investable index using artificial intelligence.
- [02:15]
D
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, and even lets you back test it against the S&P 500, all with just a few clicks.
- [02:36]
C
Generated assets can be thought of like ETFs, 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.
- [02:56]
D
Full disclosure in the podcast description.
- [02:59]
C
All right, Robert, this first question is coming from our DMS on Instagram. Remember Rich Habits podcast on Instagram. Our first question Shout out Noel F. Noel F. Here we go. Noel says, I'm a senior operations leader at a corporation and I see all the tools that are available to me, systems and people, engineers, everything. Never being a small business owner, I assume there could be massive benefits to artificial intelligence, augmenting some of these insane and incredible platforms that I'm using, but instead focus on the smaller businesses with under 50 employees to help with some operational efficiency. My next assumption is that this is a largely underserved market. Could you share any insight on assumptions and in your opinion, maybe the top three operational problems that should be solved for small business owners? Robert, you're a small business owner. You've started a dozen businesses or more in your lifetime. What are some continual operational problems, maybe even now with Parish Pizza or what's going on with Silly bands? What are some operational problems that you see a ton of if it's warehousing, if it's static, whatever that you think that the smart person out there who's tenacious and willing to go build with AI can solve?
- [04:20]
D
Yeah, I think this is a tremendous question and you really teed it up well because every small business owner and even medium sized businesses, so let's say people that are doing 10 to 20 million dollars a year, they have a lot of inefficiencies that I can solve and I believe it's going to help everyone run their businesses more profitably and more efficiently because it is truly everything it can be from supply chain solutions to the graphic work for marketing to how to book calls and how to keep track of client leads and all of this AI and all of these tools are so good now and getting better every month that I think this is tremendous idea as someone starting a business because there are tens and tens of thousands of small business owners out there that think that if they just use ChatGPT five minutes a day they're using AI. That is not the case anymore. We've already integrated so many different AI tools to help us in the graphic design department, for instance, to make things so much better, we're using them in our sales programs to help keep things more efficient. Even in our email strategies. Instead of just buying and using go high level, we built out AI services to help there too. So I think this is a tremendous question and definitely a huge hole to fill for small business owners if you're talking about building out a company to service them with these different tools to help these small business owners become more efficient. Because it's across the board in every sector and as we learn we're integrating more and more things. So it does take time, but I think it's a great idea, especially as you say, for these five to 50 person companies.
- [06:04]
C
Yes. So as it relates to actually building out the tools, I would probably assume a lot of small business owners might not have the wherewithal to do that. Not trying to, you know, insult anyone, but you gotta be pretty tech heavy here to understand how to, you know, code and things like that. With AI, I'd imagine you probably vibe code something but instead of wasting your time trying to build out the tools, I think you should go hunt down and find tools that already exist. Including which was just announced on May 13th of this year. Claude Cowork for small business. You can go toggle on Claude for small business inside of Claude Cowork, connect the tools you already use and pick the job you want it to do. Claude does the work you approve before anything sends posts or pays. Here's from their blog post. It ships with 15 ready to run agentic workflows across finance, operations, sales, marketing, HR and customer service. And it also includes 15 skills built on repeatable tasks that owners told Anthropic that slows them down like planning payroll, closing the month, getting a pulse on the business, running your next marketing campaign. I mean they've got it all figured out. It's QuickBooks and HubSpot in Canva and DocuSign and PayPal. I mean you just connect it to Claude and it just goes in and does it. And I want to just really emphasize here, if you're a small business owner, you've got under 50 employees and you are not using AI agents in your business. You are leaving money on the table. Not that this is extra revenue, but it's like being able to hire a super genius that is as efficient as like six different employees. Now with my open claw and Claude co work And Claude Co and everything I've been able to build with Claude Opus 4.6 and 4.7. I've been able to do things unimaginable to myself just five years ago. If you have someone in your business that's young, maybe they ride out of college, they grew up with this AI stuff, or they're really, really eager to learn more about using it and implementing it into the business, just please take it seriously. Because I've said this for a couple months now, AI in 2026 is not the AI in 2022 or 2023. Right. ChatGPT and answering little prompted questions and, hey, what do you think about this? And you know, make me this or that. That's four years ago. The AI technology we have now, like, we'll literally have an agent go in, read all of your inboxes, in your Gmail, across your Mac or Yahoo, whatever, read your email inboxes, figure out things that you have to do, and then start doing them for you. If it's like, hey, Austin, I need you to make a presentation as it relates to a sponsor we're trying to secure for a newsletter. It will read that say, oh, I can do that. Make the presentation and then have it ready for you by the time you wake up the next day, or whatever it is for you to review. And then maybe you just trust it and it sends it to the person, like, who knows? But, like, these are legit employees. Like, they are just as smart, just as capable. So I love that Claude's doing this. They got their small business inside. Claude Cowork Robert's using it, I'm using it. It's really exciting to know that so many small businesses now can be empowered, just like our friend Noel F. Is here at these big, big corporations to be efficient with their human capital.
- [09:26]
D
And I want to be clear about this for any of you out there that are running small businesses. You're in your 40s, 50s, or 60s, and you're fearful of all these tools. Please don't be my partner. Invest funder. He's in his 70s. He got in there. He took some lessons from Austin. He really got in there and got involved. He's running his own clog code and his own agent now, and it is cutting down his workflow just in underwriting alone in real estate deals by like 30 hours a week. So don't be fearful of it. Get in there, try it out. Because the only thing that can happen is you're going to learn along the way and become more efficient. So don't worry about it and think that it's a young person's game. I promise you it's not.
- [10:08]
C
Our next question comes from Leslie T. Leslie says about 40% of my portfolio is in ETFs, in 60% is in single stocks like Nvidia, Palantir, Reddit, etc. My plan is to be a long term holder of those names. I know you and Robert have spoken about taking 25% profits after you're up about 50% on the investment, but is that something you still recommend for high earners with consistent income? For example, I have Nvidia that's up almost 500% and I haven't taken any profits. And selling shares would actually mean that I'd be letting go of shares that I would just want to rebuy today. Maybe I'm misunderstanding this whole thing. Could you please give us an example with actual numbers to paint a clear picture of your process as it relates to single stock investing? Great, great question Leslie. So let's set the stage. Robert, Every single person listening right now should only want to focus on investing into the index funds and ETFs that go up over a long period of time. Literally if you put your whole portfolio in the s P, the NASDAQ, the Dow Jones VXUS or you know, some international index funds, your 100% of your portfolio can be invested into these index funds and ETFs. You will build a lot of wealth throughout your life, full stop. However, we like to focus on the core satellite portfolio Strategy, which means 65 to 85% of that portfolio is invest invested in those index funds and ETFs I just talked about. But you leave yourself 15 to 35% wiggle room to then diversify into other things like precious metals or real estate or venture capital or blue chip single stocks. Now how I think about it is there's two types of blue chip single stock investment sort of ways you can go about this. Think about a fork in the road. The first way is you are a long term investor into things you fully believe in and you plan to hold for forever. That's my Nvidia's, my Microsoft's, my AI, AMD's, my Teslas, my Amazons, all that stuff. I don't plan to sell those shares. I believe in those companies for a very, very long time. So any like profit taking, like throw it out the window, I want to be a net buyer of those companies, right? So that's the first one. The other one is where Robert and I Talk about this profit taking strategy. This is the opportunistic ideas. These are the. Hey Robert, did you see that? Cerebras just IPO'd. I would love to dollar cost average into a Cerebras. I think that's a, a really cool company. I believe they're growing well and, and as they come down in valuation, I get more and more excited. But I'm not 100% convinced that they will take market share from an AMD or an Nvidia or something like that. So it's more of an opportunistic idea. I feel very good about it. I have a deep investment thesis on it. I'm not gambling, I'm not rolling the dice. I've, I've very much built a, a thesis on why I'm doing this. But it's one of those things where I mean like we saw with a Palantir or a Robin Hood or you know, a lot of these other names, they go up, down, left, right and in circles. And so if it is an opportunistic company that will likely go up, down, left, right in circles, I'm the type of person where as it does go up, I'm taking some money off the table saying, yep, this was good. I was right on this. Cerebras worked or you know, whatever the name is. I opportunistically saw a disconnect between the stock price and the fundamental price or whatever that idea is. Right. We've got a whole episode. Talk about how to analyze stocks from scratch. You can go learn more about it inside of the Rich Habits Network as well. But that is sort of how I approach these opportunistic investments. And those opportunistic single stocks come from the satellite section of the portfolio. It's a couple percentage points of your net worth. It's not, you know, in your case, 60%.
- [13:56]
D
Yeah, I really like that breakdown and appreciate it. And let's, let's talk about Nvidia and Palantir for instance. When I first started buying those two companies way back in the day, I was looking at those companies as being part of that satellite strategy, kind of the high risk, high reward, but also very volatile. Now that those companies have matured over the past five, 10 years, I look at those as long term holds. But I agree with Austin 100%. It should not be a big portion of your portfolio because those companies are going to go up, down to the right and all over the place and they are going to be very volatile. So just like Austin alluded to that is why we take profits on these kind of high risk, high beta names and then we move that money and those profits back over to our long term holds. Like we mentioned the Amazons and now the Nvidias and the Teslas of the world. So I hope that helps. I agree with you. If Nvidia is one of your long term thesis holds, then go for it. You don't necessarily have to take profits, but if you're betting on something like Poet Technologies or you know, some other, you know, space stock or something in Quantum and you see a big run up, up, you definitely want to take those profits, migrate it to something more stable. That's a more of a long term hold because you can always get back into those high conviction plays. I hope that helps.
- [15:18]
C
Yeah. So how I think about it is energy. For example, starting this year, I thought that energy was going to rock and roll and I was very much correct on that. I made just over, I think eight or $9,000 running with energy here in the first quarter of the year. And the Iran war certainly helped that as well. I was like, cool. My blended energy positions here are up between, I think lowest one I realized was like 35%. The highest I think was around 70 or 80%. I made like 8 or $9,000. Hey, I'm up a ton. This was great. I do not believe to hold energy for forever, right? This is an opportunistic thing that I'm taking advantage of because I see the markets are broadening, sectors are broadening here. Energy was dramatically undervalued in relation to the S and P like we saw that. I acted upon that. I took my profits and then I took that money and redeployed it into vgt, right? So it's like it's not that I'm you know, taking that, rolling it here, tossing it into that like whatever. It's. If and when your opportunistic ideas work out well, you take those profits, you exit those positions, you do what you were supposed to do, right? Have a beginning, middle and an end, right. Have a plan before you even enter an investment. We talk about this all the time. And then redeploy that capital into a long term something which for me I decided on vgt. I thought it was a great idea and I like vgt. It continues to trend up into the right. To Robert's point, it's one of these long term names, index funds and ETFs that we talk about.
- [16:41]
D
And I think one more call out that you had Austin, that I thought was Brilliant is when you saw all of these global shortages in the fertilizer potash and then you kind of did your research and did what you do, you found IPI and I think it's up like 70% in the last six months. So that's what it's all about, finding these, these ways to see these secular growth trends or even a short term trend and be able to ride that, make the money, take profits and move it elsewh.
- [17:10]
C
Yeah, I, I, you're totally right. I think we published that episode on January 16th. It's up 28 since that episode was published. And another funny one Robert, we had talked about, I think it was on a rich habits radar episode earlier when all these ice storms were happening because I lost power for like two days or something. Generac, Generac stock and back then it was trading around your 170s or whatever. It's now up 86 this year obviously because of what's going on with these AI data center buildouts. They figured out finagle their way in there. But if anyone jumped on Generac because we were talking about it being a good idea with these winter storms being pretty crazy and you actually held onto it. Cheers to you my friend. I did not ride that wave, but I hope someone, someone got some inspiration and did. All right, Robert, let's now jump to our next question. This one's coming from Chris J. Chris says hi. Robert Nostin. Hoping you could help me with a very fortunate tax problem. My grandfather gifted me $20,000 of Wells Fargo stock when I was young after his local community bank was acquired by them. I made it to be responsible with his legacy and over time it's grown to more than $800,000. I know having that much money in a single stock is a major concentration risk, but I've been very hesitant to diversify because the capital gains tax hit and strong dividend income. My wife and I are in the 35% federal tax bracket. I'm in my early 40s, I contribute to my 401k. I've got a good savings, I've been responsible with my vehicle payments, very small mortgage, no credit card, all the good things. We live within our means. So how would you recommend unwinding or diversify a position like this in the most tax efficient way possible? There's a couple ways to think about this one. Congratulations. I mean you're sitting on $780,000 worth of capital gains on an incredible gift by your grandfather. And it's incredible to see you've been so steadfast and responsible with his legacy and you've been able to grow that in a responsible manner. It's really, really cool to see that. So you mentioned you're in this 35% federal tax bracket. You're married, so that means that you all are, are making under $640,000 a year, but over 256,000. I wish I knew the exact number there. This could help a little bit, but that's okay, we'll work on it anyway. Now what you need to figure out here and worry about because this is such a big number, is the capital gains tax rate that you all might fall inside of. Because if you are married, filing jointly, and you keep your total, you know, taxable income for the year, including these realized gains below 613,000, doll capital gains will only be taxed at 15% where if it is above that $613,000, you then get bumped up to 20% long term capital gains. So 5% difference there doesn't sound like a lot, but when we're talking about hundreds of thousands of dollars of potential capital gains, it is a lot. So the first thing I would do is probably spread this out over maybe two calendar years. If you can swing it right, maybe like sell a ton in December of this year and then also sell a ton in January of next year to try and, and kind of break it up to keep your taxes as low as possible on that so you don't go above that 15%. But that's. Yeah, man, this concentration risk is so hard. Something else maybe you could consider doing. You know, talking about taxes here, I wonder if there's a world, and this is totally up to you. You all make a ton of money, so maybe you could, but I, I don't know your entire situation. You could donate the shares. You all can create a donor advised fund. You could donate 100 or $200,000 worth of the stock in your grandfather's name. Great way to live on the legacy there into maybe a charity or some sort of foundation that he might have been really passionate about or something your family cares about. And you can use that as a write off against your taxable income, which could of course offset some of the taxes here as you take profits and reallocate. But here's the mistake you don't want to make. I understand that taxes are a thing, especially when you're sitting on $780,000 of gains. I mean 780 at 20%, we're talking about $150,000 of taxes. But even after that, that you sell $620, $630,000 after taxes of this money. The last thing you want to do is sit on this Wells Fargo stock for four years or something crazy. And you know, Wells Fargo year to date is down 23%, which means at the beginning of this year, this 800,000 might have been a million. And even if you sold all of it in that instant and paid your capital gains, you still would have had more than this 800,000 you have now or roughly 700 something you have now. And so the mistake you want to avoid here is taxes are important to optimize for, but when things are as volatile as stocks make up a ton of your net worth, the concentration risk I think is more important to optimize for than the taxes. Like taxes take a back seat if a stock is going down or you way too exposed to a sector or something's going on here, here. I don't care about the taxes. Figure out the taxes later. The taxes are important, but like you can lose way more money in concentration risk than you ever could lose in, in taxes. Depending on, you know, the long term capital gain tax rate we're, we're talking about here with Wells Fargo.
- [22:24]
D
I love that breakdown and concentration risk is everything here. Because. Yes. Could they take $100,000 a year for five years and diversify it out into other things that are less volatile and not going down and, and create better gains? Absolutely. But I like where you're at, Austin. I would sell it. I would not want all that money in one place. I would stop worrying about the taxes. People worry about taxes so much that a lot of times if they did the math, they'll find out that by sitting in something that they shouldn't be, especially at that high of a concentration risk, they're actually leaving more money than they would pay in the taxes on the table in growth because they're so fearful of the tax bill. So you have a lot of options year. Sell it all, take the hit, move on and regrow it or do what Austin said. And that is that stage selling where you sell off a hundred, 150, 000 a year for three, four, five years. Get yourself diversified. I personally would sell it. You didn't pay for it anyway. It's all from growth and dividends. So you're not being hurt by it.
- [23:26]
C
Anyway, I'm doing something fun here. Robert. I wonder if there's a world where our friend Chris J. Can thoughtfully sell covered calls two to three weeks out against this position and make A ton of money on the premium here. And I'm just doing this live. It's trading at 73.40 a share right now at the moment. If our friend Chris Jacobs perhaps wanted to sell covered calls at $73 a share, and he's got about 110 contracts that he would be able to sell, he would be able to make $21,000 of premium on that specific covered call option contract. So 21,000 plus he would make $73 a share against his, like, almost 11,000 shares. So the reason I say this is that $21,000 you. Yes, it's taxable income at ordinary taxes. So let's like peel off, you know, 30% of that. So now you're left with $14,000. But that $14,000 that you're left with can be used to figure out the tax situation. Right. You can use that to offset the tax. You're comfortable with selling the shares two weeks from now at $73 a share. And that goes for anyone. If you're sitting on a boatload of shares of something and you know you want to exit the position, do it through covered calls so that you can earn hopefully a ton of premium along the way. It's going to just be a better way to exit a position because, I mean, yeah, $21,000 of premium income here could really help offset some of this tax situation. Or, I mean, regardless, it's still 21 grand. Like, that's great.
- [25:06]
D
Well, we are definitely here to always unpack everyone's unique personal situation, because personal finance is personal. That is a great take.
- [25:14]
C
Well, Robert, speaking of optimizing portfolios and trying to really do all the perfect things here, y' all need to go check out generated assets. It's this incredible way on public that you can share with their AI an investment thesis you might have, and their AI will automatically go in and find a way to gain exposure to that thesis. My name's Robert Krok. I use generated assets, and my thesis is Peptides. I want to invest in the next evolution of retatrutide and all these great peptides that are coming out there. And so what generated assets will do is it will find all these companies that should benefit from the rise of Peptides. I mean, like literally any thesis you have, you go in, you tell it what you want to do, and you're off to the races with as little as $1,000 to invest in that specific thesis. They make it complet completely customizable. It is so easy. It's so fun. It's automatic. It's, it's great. Robert.
- [26:09]
D
I love generated assets and I did that exact thing I bought a week ago. I fed it in everything that I wanted to from my research on all the GLP1s and peptides and it created an incredible portfolio to optimize in that sector in the next two, three years. So definitely great call out. We love public and the generated assets technology.
- [26:31]
C
So our next question comes from Mo. Mo says thank you Austin and Robert for the show. I'm new to this. I'm a single mom of two preteens and I'm almost 50 years old. It is finally time that I become financially literate. I'm sitting on some money, about $50,000, but I'm unsure how to start. Do I get a financial advisor? Do I worry about emergency funds, investments, Roth kids, retirement? It is all so overwhelming. Please give me a play by play on what to do. Robert, put yourself in Mo shoes here. You're 50ish years old, you're starting for the very first time. So which means you still got 20 good years ahead of you of investing. Couple kids, you got 50 grand set aside, ready to rock and roll. What are you doing? Walk me through what you're thinking here.
- [27:16]
D
Here's the playbook. You're going to go to public.com, you're going to open an account, you're going to get the Roth set up inside of public.com and you're going to fund some money into the Roth. So if you have 50 grand grand, let's go ahead and get that Roth filled up. We're going to invest in three, four, five funds in there, the ones we talk about, voo, qqq, maybe aiq, vti. Get four or five of those funds rocking and rolling. The next step inside of Public, you're going to set up your High Yield Cash account that's going to give you that emergency fund. So what I want you to do is take three, four months of your total expenses and you're going to earmark that into the High Yield Cash account because that's going to be your emergency fund that is sitting there chugging away and growing to make sure you have it set up and ready in case of an emergency. And with two pre teens and being a single mother, I'm sure there's always emergencies that pop up. So those are the first two things you're going to do. Then the third part is you're going to take the rest of those funds and you're going to keep a little bit in Your checking account, of course, maybe two, three, four grand. The rest of it is going to go into your traditional brokerage account. All within public. If you want want, you can use any platform you like. We like public. Obviously. It's very good. But there are other good platforms out there. And you're going to do the same thing in that traditional brokerage account to make sure you're rocking and rolling with these same funds that you have in the Roth. And then you're going to keep building and keep putting in whatever money you can monthly. Because the key here is to be consistent. Like Austin said, you've got 20 more good years of rocking and rolling and catching up. So don't have fear, don't have concern. We're here to help, and we will guide you accordingly. So you've got the Roth set up, you've got the emergency fund set up, you've got the traditional brokerage set up. And every year what you want to do is try to get that Roth maxed out every single year. And then after that, your funds will go into that traditional brokerage account. And make sure you're always topping off the emergency fund fund along the way in case you have to use it during the year.
- [29:20]
C
I love that playbook, Robert. I think the emergency fund is so important, especially when you got the two preteens. Now, here's what I would love to encourage you to think about, which is you've got 20 good years of investing ahead of you and you might be thinking, oh, I'm late to the game. I'm learning for the first time. I'm overwhelmed. I'm not feeling great. Robert just laid out the plan. Emergency fund on public.com high yield cash account. Go put $20,000 into that. That's great, right? That is your fortress, your foundation. The I need new tires because I popped a tire and it can't repair it. The kid let me know morning of that he needs $75 for a field trip. Like. Like the stuff that's not in the budget that always throws you off and makes you feel like you can't invest. That's what the emergency fund is for. And we build that back up when we need to. But remember, it is insurance against your investments. We need you to be investing and building wealth. And so here's the. Here's the playbook. You know, Robert shared with you. The Roth ira, the taxable. I love everything you. But it's about the consistency. It's about not just doing it this year, it's about doing it next year. And the year after that and the year after that. So again, here you could probably get about 30,000 of this 50,000 invested and working for you across the Roth IRA and the taxable brokerage, 7,500 to the Roth IRA. The rest will go to your taxable brokerage. VO, QQQ, DIA ETFs like that. Just a third, A third, A third if you want. It doesn't really matter. What matters is you are invested and you're moving and grooving. Now here's the, here's the fun part, Robert. $30,000 this year and then starting next year you start maxing out just the Roth IRA at $625 a month or $7,500 a year. You do that from 50 to 70, you are going to have $1,050,000 in your Roth IRA by that time. And that's tax free money that you can take out, you can enjoy in retirement, you can use to travel, you can use to hang out with the kids, like whatever, right? Like that's, that's money that is yours. It's a million dollar nest egg that started from 50,000 at about 50 years old. Because you consistently, not just here this year, consistently every year invested and maxed out that Roth IRA at $7,500 a year. And you're saying, guys, I don't have 625amonth, you better figure it out. I mean, you got 20 years, you got 20 good years here, compounding to make sure you got a nice seven figure nest egg. That might mean, hey kids, love y', all, we're not going to this thing we do every month anymore at the bowling alley or hey, I, I'm so excited that I, you know, you guys are preteens getting ready for high school, but y' all might have to start getting some jobs to pay for your own, you know, cars or oh, you want to go to college, I'm rooting for you. I hope you do it. Here are the best scholarship ways to do that because it can't come from me right now. I got to make sure that I'm focused on my own retirement at the moment. The thesis here, Robert, is important and it's that investing consistently over a long period of time builds inevit wealth. That's what we want. You don't have to do everything perfect. You don't have to feel overwhelmed. You don't have to do all these crazy cool things. You just have to do two or three things correct over a 20 year period of time. And you will be rich. That's it.
- [32:32]
D
I love that take. And the only thing I want to add for everyone listening, if you've got parents or maybe you're 48 or 52 or 58 years old, it's never too late to right the ship. And one of the biggest reasons we exist, the Rich Habits Podcast and the Rich Habits Network is to help you all figure it out and lose the fear. It is overwhelming. It is scary to try and figure out what do I actually do. But that's what we're here for. So make sure you understand that. Share this episode with a friend and get them involved because everyone has issues with their finances and everyone has blind spots. And we're here to change that.
- [33:10]
C
So our next question comes from Channel V. Channel says hi Austin and Robert, obsessed with the podcast, just turned 34 and I work as a nurse in the San Francisco Bay Area. I currently live at home home with my parents to save money with paid off student loan debt but just about 10,000 on a credit card I'm still paying down. My monthly take home pay is $9,000 after taxes and four or three contributions with monthly expenses around 4,500. That includes storage, subscriptions, pilates, a car payment, etc that I'm actively working to reduce for retirement. I have 380,000 in Favr X a 2055 target date index fund inside of my 403B. I contribute 11 pre tax. My hospital matches 6% and provides an automatic 5% basic contribution each pay period. I also recently opened a Roth IRA held at Schwab with $13,800 in it across VX, US, VGT, SCHD in AIQ and I'm maxing that out every year outside of retirement. I'm building a $15,000 emergency fund with Ally's high yield savings account. Currently have 4,600amonth in there and I'm contributing a thousand a month. I'm saving 12,000 dol for an egg freezing procedure this fall. I currently have 7, $500 saved contributing $1,500 a month. So my question is I know target date funds aren't always the preferred choice for long term growth, especially at my age. Would you recommend I reallocate my 403B away from Favrx entirely? Or is staying the course reasonable? Giving my timeline? Sincerely, Chanel V Love your tenacity and ability to get in there and work and that's what's so cool about nurses. Robert. I respect nurses so much. Nurses are the type of people that get after it. I Just every nurse I know is just so ambitious and excited and whenever they see a problem, specifically a money problem, in front of them, they know if it's with travel nursing or if it's with extra shifts or extra midnight or whatever's going on, they can go make a ton more money working in the hospital and they can tackle their money problems. And I've always seen that across nurses. And again, I respect nurses so much for doing that. But channel Let me start by answering your question on F A V R X. So here's what I want everyone at home to do. I want you to type in morningstar.com it's a completely free platform, not sponsored, everyone uses it. Go check out morningstar.com and at the top there's a little search bar. Search F A V R A this is the Fidelity Freedom Index 2025 Fund Premium 2 class. You'll see a tab called Performance. I click on Performance and I scroll down. I then see dating back 10 years all the way back to 2016. It tells me the total return of that investment. So I see 2016 is 9.4. 2017 is 20.5, 2018 is negative 7 point. Great. So we have total performance for this investment. Now what I want to do is compare that to Voo, which is the S&P 500. You do the exact same thing. Maybe open up a new tab in your browser, type in voo, scroll down to Performance, and then you can see Apples for apples. What VOO performed total performance there, including expense ratios and everything compared to whatever you're looking up, which in this instance is F A V R X. So let's walk through it. Robert. In 2016, Favrx delivered 9.4%. Voo was 12.1. That's a 2 1/2% difference. 2017 Favrx was 20.5%. Voo was 21.8. I'm starting to see a pattern. 2018 Favorx lost 7.2%. Voo in the same year lost 4.5%. I'm really starting to see a pattern 2019 26% for Favrx compared to Voo's 30%. 31 1/2%. So this is why we talk about especially for young people like myself here. I just turned 30 the other week. I think our friend Shanel here mentioned she's 34. She's got 30 more years of compounding ahead of her. But she's already left probably double digit returns just in those four years on the table by parking her retirement funds in a target Date fund like favrx opposed to just putting it into your normal cheap VOO or qq, QQM or whatever you got out there to just ride the wave. And so it's not that you are doing things wrong. You're investing, you're moving up with the markets. That's great. But over 10 years, I don't know the quick math. I could probably use AI to figure it out, but I'd argue there's probably 20 or 30% that you left on the table just in the last 10 years by having your money sit in this favrx target date fund. And, and you know, 10%, 15% of about $400,000 here is 60 grand, right? And that 60 grand compounds over the next 30 years that you're going to be investing. So we're talking about hundreds of thousands of dollars of potential money left on the table by putting your money in target date funds at a young, young age, like you have been doing, I'm sure here for probably a decade now.
- [38:36]
D
The biggest takeaway for me in this situation, as you called out 34 years years old, a very long time horizon of compounding and investing. Target date funds are a set it and forget it strategy. And that's fine if you don't want to optimize your money and you feel like you don't want to touch it. But for every other reason, I don't like target date funds. I'm very vocal about it because I don't think anyone should have their money, especially for 30 years in a set it and forget it format. We want to see active manager management. We want to see you be able to adapt to the market changes. And we always say something that I think is very critical for this question. Make your money work as hard for you as you work to get it. And that phrase right there sums up why I don't like target date funds. Because like Austin alluded to, especially as you get older, the first five or 10 years, you might be fine, you leave a little money on the table. But as you get older and older, the target date fund becomes more and more conservative and it takes the foot off the gas with your money money sooner than I would like to see. And that's when you really see the compounding differences of what you're leaving on the table. I personally wouldn't do it. I would move the money out. I would get that basket of funds Austin alluded to, because you're going to make so much more money on the table, but you also have more control because you can adapt to when a Covid happens, when a war happens, when things change and there's other opportunities to grow your money further. That is why I don't personally, personally talk about target date funds or tell people that I think it's a good idea to be in them.
- [40:09]
C
Yeah. Also I'm just kind of looking at it right here online. Seems like, I mean a lot of this underperformance is probably just coming from how much is invested in bonds. You know, I'm seeing about six and a half, 7% of this sitting in bonds. Why are we in bonds in our 30s? Right. We should just be investing in, you know, assets and equities and ETFs and things like that. Because you know, you got 56% in US equities and then 37% in non US equities, which is, which is cool, like VX US. Like that's fine. That's great. So if I were to probably, you know, just try and analyze why it has underperformed probably that 7ish percent that's sitting in bonds. It's just like sitting in cash. It's like why are we sitting in cash? Why, why am I holding cash when inflation is eating at that for the last 10 years here. And the other thing I want to call out, and this is some tough love for you, 34 years old and living at home. Let's figure that out. You mentioned you've got $4,500 a monthly expenses. I'm glad you're actively working to reduce that. That's a of lot of money for someone who's not paying rent or not doing or paying much for anything. You got a car payment, which I'm assuming is probably under $600. Gym and pilates. Cool, let's give that 400 bucks a month because you're doing Pilates and the whole thing. Now we're at 1,000 subscriptions. Call it another, I don't know, 200 bucks. So now we're at $1,200. Storage can't be that expensive. Maybe another 250 all in here for what you just told me, we're at fifteen hundred dollars a month. So where's the other three thousand dollars a month going? And I'm not discounting, you know, you've got to spend money on stuff. I get that, that, but maybe that 45 can get closer to 3. Maybe that 45 can get closer to 25. Really want to help you and encourage you to like be very honest with your budget. Especially as someone who's not spending money on rent or a mortgage or anything like that here. I'm glad to see you paid off your student loan debt. I have no idea what that amount was. Congrats to you. But yes, let's, let's hone in on those expenses. You make a ton of freaking money. Let's move out of the parents basement. Let's figure it out. You're 34. This is awesome. You're making great money. It's not like, you know, you figured this out out now. I'm glad you're trending in the right direction. You've got $380,000. Like there's no reason you should be living at home anymore, in my opinion. So, Chanel, get after it here. We're excited for you. Yeah, this is great. So our next question comes from Patrick K. Patrick says Austin and Robert, my wife and I discovered your podcast in March and we are hooked. We are in our late 30s. We have a net worth of $1.6 million. She's a 16 year veteran teacher with a doctorate degree who is leaving the profession and pursuing her own educational consulting business. At the end of the month, I'm a partner at my law firm. Have $255,000 in taxable bridge accounts, 810,000 in retirement accounts, a fully funded emergency fund, and cash reserves for future alternate investment opportunities. And we max out our 403B and 401K accounts. With the profit sharing getting close to that $72,000 annual limit, we're on pace to invest about a third of our gross income in 2026. We have 75,000 across two 529 accounts for our daughters. And the rest of our net worth is in home equity and personal property. The only debt we have is two and a half percent interest on our mortgage. We owe about 300,000 on that. My question relates to our taxable brokerage account. We have $230,000 invested with the fiduciary. He charges one and a half percent per year, but has earned a cumulative 20% return in that account over the last 10 years. Our portfolio there is primarily in individual stocks rather than generic funds. Because of your portfolio and our advisor's performance, I'm comfortable paying the 1 1/2% fee, but am I putting too much weight in his with that return? While it pains me to pay the one and a half percent fee, I do see value added given the trades being made in that account. Robert, I'm confused. I will let you take a stab at this.
- [43:47]
D
Yeah, I'm thoroughly confused, because the one and a half percent is probably pretty typical for an account size of $230,000. But you say a 20% return cumulative over the last 10 years. So that tells me mathematically it's a 2% return year yearly for the last 10 years, giving you that total of 20% return. I don't think that's what you mean. I think you mean he's gaining you 20% return year over year for 10 years. Because otherwise it would not make sense to stay with that broker with a 2% return but also pay a 1.5% fee. You'd be much better off just putting everything in the ETFs we talk about. You say the generic ETFs and generic the funds that must be coming from him because the wealthiest people on earth, I know, invest in all of the funds we talk about, as do I and Austin. So I'm a little confused by this, but let's say you did make a 20% return and your sentence is correct, which I assume it is, because you're very thorough above that. Let's say that's the case. I would definitely dump that person immediately because you can do much better than 2% annually for returns. Even in the most basic funds like vo, qqq, vti, aiq. They're all going to make you way more money. And it's so easy for you to control it and not give up that 1.5% fee.
- [45:15]
C
Yeah. Now let's pretend maybe this was a typo.
- [45:18]
D
Yep.
- [45:18]
C
And he's earning 8% per year on average for the last 10 years, which is bonkers. That's incredible. Returns. What? What about that?
- [45:27]
D
Yeah. If you're making 20% returns and they have a true 1.5% fee at that size portfolio and they' not as a fiduciary, charging you commissions on every trade in and out, then I think it's fine. Rock and roll. Keep going. Go another two, three years and then reevaluate. But I just don't know that I believe these numbers are accurate if it's a true net return to you and to the portfolio. Because something just doesn't add up here. It's not impossible for someone to achieve 20 returns year over year for tax 10 years, but it's highly unlikely. So I would just dig a little deeper, make sure you're understanding the numbers correctly, and then dig into the fees as well, because as a fiduciary, they shouldn't be charging you commissions. But I don't know, because I'm not Seeing the fund or who it's with.
- [46:15]
C
Something else you should do is talk to AI about time based weighted returns. Right. Like, for example, I know sometimes people get confused. They're like, you know, I put in $10,000 into this account three years ago and it's done really well. Well, and then I put in, you know, 220,000 in the account. And so from an actual, you know, dollar for dollar return, I only have a, a 20% return over that 10 year period of time. But the little amount of money that I put in the beginning has actually been growing really, really well. And a bunch of money I put in at the end is kind of skewing the total return there. You should really look at, like, maybe there's something more to this that we're, that we're not seeing. If it really is 20% cumulative returns, and that's the only excuse I could possibly think of, that it would be a 20% return over the last 10 years is like, you had a very little amount of money in this account that was growing perfectly fine, and then you recently dumped in a ton of money. And then you see, okay, I'm only up 20% on the total amount there, but like 85% of the total amount came within the last couple of months. Right. So a lot of the growth came for the last nine years or 10 years, whatever it was. And like, that was fine. And then like, so, you know, I could see that being kind of wonky because that does confuse people. I see that, you know, confused sometimes for myself. And so my different accounts, like, wait a second, I've done better than that. And then you look at it like, oh, wait, yeah, no, that's like total versus time based. That's interesting. On the flip side, if you're making 20% a year and you're paying this guy one and a half, that's cool. But it's not so much that it's the 20% per year that's, that's impressive because remember, in 2023, the S&P did 26%. The S&P did 25% in 2024, 29% in 2021. Right. So 20% is a cool number, but it's all relative. Relative? Yep, it's all relative. You have to always benchmark your portfolio every year. I try and benchmark it every six months against things like the S&P, the NASDAQ, the Dow Jones Industrial Average, and make sure that your risk adjusted returns align with your risk profile as an investor over a long period of Time, everybody. Thanks so much for tuning into this week's episode of the Rich Habits podcast. Question and answer addition. Had a good time chatting here, Robert. What a fun one.
- [48:24]
D
Yeah, it was definitely a really good episode. I feel like we're on fire lately. A lot of people stopped stopping me in the street at the airport. Man. Love the podcast. It's really grown on me and I share it with my kids. Last night, I did a small speaking engagement I told you about. People were like, yeah, my daughter loves your podcast. I'm like, how old your daughter? 19. And that means we're doing our job and we're reaching the right people because we have people of all ages, all walks of life, and all income and portfolio levels. And I think that is the key of what gets me out of bed and makes me so excited every week to do this with you. Austin is being able to help everyone because at all levels, everyone has blind spots and things they don't understand or fears. And we are here to oa that away and help everyone figure out how the heck to win with their money and build wealth and financial freedom.
- [49:17]
C
Completely agree. And yeah, I mean, it's wild. You're right. When we were going to the Rich Habits retreat, so I obviously flew from Nashville to Austin, Texas. I got stopped twice at the airport. It's just. It's so fun. Like, if you ever see Robert or myself out and about anywhere, say, what's up? Say hello. We love you all. We love hanging out. We love learning about your experiences and what you think of the show and any feedback you have. Like, we're just. We're just a couple of dudes recording a podcast in our spare bedrooms at our homes here. So approach us. Don't feel intimidated. We're having a good time and we're so, so grateful. And by the time you're watching this episode, I will be on vacation in Cancun, Mexico with my fiance. So no rich habit radar episode. Friday, May 22nd. Or if there is an episode, we found some footage or something cool and decided to publish it. But we will not be. I'm on vacation. Rober going to be traveling to let us enjoy our time here. But it's so great to hang and we'll see you guys on Monday.
- [50:34]
E
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C
Some follow the noise. Bloomberg follows the money. Whether it's the funds fueling AI or
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B
crypto's trillion dollar swings, there's a money
- [51:13]
C
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- [51:15]
B
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