Q&A: Investing $200K of RSUs, Buying a Failing Biz, & $1.4M Net Worth at 34

Summary

Rich Habits Podcast: Episode Summary Episode: Q&A: Investing $200K of RSUs, Buying a Failing Biz, & $1.4M Net Worth at 34
Release Date: January 9, 2025
Hosts: Robert Croak and Austin Hankwitz

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Introduction

In this engaging Q&A edition of the Rich Habits Podcast, hosts Robert Croak, a decamillionaire with over 30 years of business experience, and Austin Hankwitz, an eager entrepreneur in his 20s, delve into various financial queries from their listeners. Covering topics ranging from mortgage strategies and investment diversification to early retirement and managing underperforming financial advisors, Robert and Austin provide actionable insights to help listeners take control of their finances.

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Mortgage Strategies: Heavy Down Payment vs. Investing

Listener Question by James D. (05:06):
James seeks advice on whether to make a substantial down payment (70%) on a property to quickly pay off a mortgage at a 7% interest rate or to opt for a more modest 20% down payment, investing the remaining funds in the market with the potential for higher returns.

Robert's Response (05:06):
Robert advocates for the 20% down payment approach. He emphasizes the potential for higher long-term gains by investing the extra cash in the markets, which historically outperform mortgage interest rates over extended periods. Robert states:

“I believe you should put down the 20%, not the 70%, take all that extra cash, get it into the markets, because you're right, over time, a long period of time, the markets are going to outperform 6 or 7%.” [05:35]

He further explains the benefits of leveraging low-interest debt to build wealth, noting that wealthy individuals often utilize credit to enhance their financial growth.

Austin's Commentary (06:43):
Austin expands on the concept of "good debt" versus "bad debt," defining good debt as funds used to acquire appreciating assets like real estate and businesses. He shares his personal calculation, comparing the cost of paying down his mortgage against the potential returns from investing:

“The big difference here, Robert, between money that we invest in the markets and the interest rates we pay on the mortgage is the money we invest in the markets compound and grow exponentially.” [08:10]

Austin underscores the importance of compound growth in investments versus the static nature of mortgage interest, advocating for maximizing investment potential.

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Custodial IRAs and 529 Plans for Newborns

Listener Question by Manicon V. (09:37):
Manicon, a new parent, inquires about opening custodial IRAs for newborn twins. She discovers that each child must have earned income to qualify and wonders if alternatives like the 529 plan are more suitable, especially concerning unused funds.

Robert's Insight (11:39):
Robert acknowledges the flexibility of 529 plans, highlighting their adaptability even if children decide not to pursue higher education. He advises:

“5 29s are a really great tool and there is so much flexibility with them and that is why they work even if the kid doesn't go to school.” [11:39]

He encourages further research to ensure the chosen savings vehicle aligns with the family's financial goals.

Austin's Additions (11:57):
Austin suggests exploring various avenues to utilize leftover 529 funds, such as trade schools, certificate programs, or K-12 tuition. He emphasizes the flexibility of 529 plans in supporting diverse educational and developmental opportunities:

“Think trade schools, think certificate programs, maybe study abroad programs, apprentices...” [11:57]

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Diversifying Large RSU Investments

Listener Question by Danish V. (13:35):
Dinesh, a 42-year-old tech professional from Seattle, plans to diversify $200,000 from vested RSUs. He is torn between investing the entire amount into SPYI or splitting it between SPYI and VOO, especially considering his potential entry into the highest tax bracket next year.

Robert's Advice (13:35):
Robert recommends a more diversified approach beyond just SPYI and VOO. He suggests incorporating additional funds to spread risk and enhance potential returns:

“I would like to see you add in some more funds into this and break it down with a little bit better weighting rather than just 50, 50 or all in one.” [13:35]

He encourages exploring global markets and even cryptocurrency, depending on individual risk tolerance.

Austin's Perspective (14:32):
Austin aligns with Robert's recommendation, tying investment diversification to early retirement goals. He emphasizes managing monthly expenses and ensuring portfolio income exceeds those expenses to facilitate early retirement:

“If this person was making $7,000 $8,000 a month in passive income and their monthly expenses were 6,000, then theoretically speaking, they could retire...” [14:32]

Austin stresses the importance of balancing debt management with investment growth to achieve financial autonomy.

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Allocation Across Major ETFs and Considering Business Acquisition

Listener Question by Joe F. (21:10):
Joe, a 47-year-old planning to work another 20 years, seeks advice on reallocating investments across major ETFs like VOO, VGT, VTI, and QQQ. Additionally, he contemplates purchasing a failing auto retail franchise and asks whether obtaining an SBA loan for the acquisition is advisable.

Austin's Response on ETF Allocation (21:10):
Austin introduces the "core-satellite" portfolio strategy, advocating for a balanced allocation between stable, core investments and opportunistic, satellite investments:

“Think about your portfolio as the earth and then satellites that are orbiting the earth...” [21:10]

He recommends maintaining the majority of the portfolio in robust ETFs while allocating a smaller portion to higher-risk, high-reward opportunities.

Robert's Strategy for ETF Allocation and Business Acquisition (22:59):
Robert provides a specific weighting recommendation for ETF investments:

“I would look at it as something like maybe Voo is 40%, Qqq is 30% and then Vgt and Vti are 15 and 15...” [22:59]

Regarding the potential acquisition of a failing business, Robert advises careful evaluation of the business's fundamentals and the reasons behind its decline. He emphasizes the importance of having sufficient financial reserves to support the business through turnaround efforts:

“Make sure you understand something. When you're getting your financing order, you need to make sure that you have at least six months to a year of cash burn...” [23:43]

Austin's Additional Insights (25:56):
Austin cautions Joe to build a solid financial base before taking on new ventures like business acquisitions. He highlights the risks of tying up too much capital and the importance of maintaining liquidity:

“Please have money working for you in the markets while you buy this business over time and you're going to be just fine.” [25:56]

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The 4% Rule for Early Retirement

Listener Question by Brandy G. (27:28):
Brandy, childfree and not planning to leave an inheritance, asks whether she should adhere to the traditional 4% withdrawal rule or adjust her spending in retirement to enjoy her savings more.

Robert's Explanation (27:28):
Robert clarifies that the 4% rule is designed to prevent outliving one's savings, not necessarily to leave a legacy. He advises Brandy to consider her longevity and future spending needs:

“The 4% rule was built around the Trinity study and it's to make sure you don't run out of money in your lifetime.” [27:28]

He underscores the importance of cautious withdrawal rates to ensure financial sustainability throughout retirement.

Austin's Addition (28:37):
Austin concurs and suggests that while the 4% rule is a conservative guideline, individuals with well-managed, diversified portfolios might safely withdraw more. He references the book Die with Zero as a resource for balancing spending and savings in retirement:

“I think if I had had $2 million invested or even a million dollars invested... I think I would be able to sustainably return, call it 6, 7, 8, 9% on average...” [28:37]

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Transferring Property into an LLC

Listener Question by Aaron G. (30:09):
Aaron has recently purchased a home intended for rental purposes but hasn't yet transferred it into an LLC. He seeks guidance on the process.

Robert's Guidance (30:09):
Robert outlines the steps to transfer property ownership into an LLC, emphasizing the importance of legal accuracy to protect personal assets:

“You're just going to contact your lender, you're going to tell them what you're doing, and you're going to make sure that you have all your documents in order...” [30:09]

He advises utilizing a quit claim deed or warranty deed and consulting with a lawyer to ensure the process is correctly executed.

Austin's Recommendations (31:14):
Austin endorses Robert's advice and introduces resources like Dynasty Trusts, which simplify the process of placing properties into trusts or LLCs. He stresses the importance of protecting rental properties from potential liabilities:

“They are super focused on helping people protect their properties from those different types of attacks...” [31:14]

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Addressing Underperforming Financial Advisors

Listener Question by Duck City USA (32:17):
Duck City expresses frustration with a fiduciary financial advisor who underperformed the S&P 500 by over 10% while charging fees, questioning whether to continue the relationship.

Robert's Straightforward Advice (32:17):
Robert strongly recommends taking immediate action, such as having an honest conversation with the advisor and considering alternative management options:

“There is no way you should be underperforming that badly in a bull market... You definitely need to have a heart to heart with them and you need to shop around.” [32:17]

He warns against the pitfalls of advisors funneling investments into their own financial products, leading to compounded fees and reduced returns.

Austin's Further Explanation (33:23):
Austin elaborates on the hidden fees associated with many financial advisors, illustrating how these fees can erode investment performance over time. He encourages self-management or selecting advisors who align closely with the listener's financial goals:

“These people also have mutual funds. It's kind of like a double fee structure really...” [33:23]

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Building Wealth with a $1.4M Net Worth at 34

Listener Question by Scott F. (35:52):
Scott and his wife, both 34 years old with a combined net worth of $1.4 million, seek advice on further enhancing their financial position to retire early, considering their substantial investments and income.

Robert's Strategic Suggestions (35:52):
Robert recommends diversifying into larger real estate investments, such as multi-unit apartment buildings or commercial properties. He also advises increasing cryptocurrency exposure and exploring pre-IPO and venture investments to accelerate wealth growth:

“Look at value engineering... I think you're at that level now where it's time to begin to diversify into things of that nature...” [35:52]

Austin's Recommendations (40:49):
Austin encourages Scott to leverage his accredited investor status by investing in pre-IPO companies and startups through platforms like AngelList. He highlights the potential high returns from such investments while advising on maintaining a balanced portfolio:

“Dabbling in the dark arts of startup investing, I think that could be a really, really good idea.” [40:49]

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Conclusion

Throughout this episode, Robert and Austin demonstrate a profound understanding of personal finance, offering nuanced advice tailored to individual circumstances. From optimizing mortgage strategies and diversifying investments to critically evaluating financial advisors and planning for early retirement, their insights empower listeners to make informed financial decisions. The hosts emphasize the importance of leveraging debt wisely, maintaining investment diversification, and continuously educating oneself to navigate the complexities of wealth-building effectively.

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Notable Quotes

• Robert Croak (05:35):
  “I believe you should put down the 20%, not the 70%, take all that extra cash, get it into the markets, because you're right, over time, a long period of time, the markets are going to outperform 6 or 7%.”

• Austin Hankwitz (08:10):
  “The big difference here, Robert, between money that we invest in the markets and the interest rates we pay on the mortgage is the money we invest in the markets compound and grow exponentially.”

• Robert Croak (27:28):
  “The 4% rule was built around the Trinity study and it's to make sure you don't run out of money in your lifetime.”

• Austin Hankwitz (28:37):
  “I think if I had had $2 million invested or even a million dollars invested... I think I would be able to sustainably return, call it 6, 7, 8, 9% on average...”

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Final Thoughts

This episode of the Rich Habits Podcast serves as a comprehensive guide for listeners navigating various financial challenges and opportunities. Robert and Austin's expert advice, grounded in real-world experience and financial principles, equips individuals with the knowledge to optimize their financial strategies and achieve long-term wealth and security.

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For more insights and personalized financial strategies, subscribe to the Rich Habits Newsletter and explore the Rich Habits Network.

Transcript

[Robert]

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[Austin]

Rated TV14LV hey everyone. And welco to the Rich Habits Podcast brought to you by Public.com, a top 10 business podcast on Spotify. This episode is our question and answer edition, which means we take your Questions via Instagram, DMs, emails or inside of the Rich Habits Network and we answer them as if we were in your shoes. Now the majority of the questions we're actually taking in today's episode were emailed to us over this like holiday break. We had about 40 of them that were sent to us in the last two weeks and we included like six or seven in this episode. Email specific for you guys. So if you've not sent us a question via email yet@richhabitspodcastmail. Com, definitely do that. We try our best to read all of them. And speaking of emails, Robert, we have the Rich Habits newsletter, which I would argue is the best newsletter all of 2025.

[Robert]

Definitely. I spoke to several people over the holiday that are in the Rich Habits Network and people that we've gotten to know and so many of them commented on the newsletter which was amazing because they were like this is the best newsletter out there. And so it is really reward, rewarding to see that we have created this community. But also the newsletter is so helpful for so many people along the way. So I'm excited about 2025 and all of the amazing things we have in the works for everyone that follows along.

[Austin]

So if you want to subscribe to the newsletter, it's completely free. Just drop in your email address. You can Google Rich Habits Newsletter and it'll pop right up. Or there'll be a link in the show notes below. You can subscribe that way too. Every single Thursday, mid morning, mid afternoon, we send you an email. It's succinct, illustrations all over the place. It's perfect. So go check out the Rich Habits newsletter now. If you're serious about investing, you should not just be reading the Rich Habits newsletter, but you should also know about public.com public.com is where you can invest in everything. Stocks, options, bonds and crypto. They even offer some of the highest yields in the industry like their bond account at 6% or higher yield and it remains locked in even if the Fed cuts rates. So what sets Public apart is how they give you the tools you need to make informed, informed investment decisions. And this is why it's so important. Robert they went out and they built their own AI tool. It's called Alpha. And it doesn't just tell you if an asset is moving in your portfolio. It tells you why the asset is moving. So if it's down 4, 5, 6% like Tesla stock was the other day, it's going to explain to you why the stock is moving so you can actually understand what's driving your portfolio's performance.

[Robert]

I love it. And remember, Public is a FINRA registered SIPC insured US based company with a customer support team that actually cares. So the bottom line is your investments deserve a platform that takes them as seriously as you do. So fund your account in five minutes or [e-mail] rich habits and get up to $10,000 when you transfer your old portfolio. That's public.com rich habits paid for by Public Investing. Full disclosures in the podcast description.

[Austin]

You heard that right. They will pay you up to $10,000 in cash if you take your existing portfolio from a different platform and migra Public. Now to earn that much money you need to have a big portfolio, but the average person will get a couple hundred bucks. Super simple. You guys can go figure that out. Public.com rich habits thank you so much Public for sponsoring the show in 2025. Now our first question is coming from James D. James says hi Austin and Robert. I appreciate all you do with your show. Your dedication to explaining the intricacies of personal finance in layman's terms doesn't go unnoticed. With the average 30 year mortgage now around 7%, how would you approach a down payment? Say an individ has the ability to put down upwards of 70% on a property. Is it in their best interest to do so? And pay off the mortgage quickly to avoid significant interest in the long term. Or is it better to put down, let's call it a 20% down payment and keep the lump sum invested, knowing that the rate of return over the 30 years has a strong chance of beating the interest rate. Now, I know I could always refinance in the future, but there's no mortgage like having no mortgage. So, Robert, what's your take on this question?

[Robert]

Yeah, I love this question, James, and it really is something that comes up a lot. So let me take a stab at what my take is on this. And it's really important to understand you're absolutely on track. I believe you should put down the 20%, not the 70%, take all that extra cash, get it into the markets, because you're right, over time, a long period of time, the markets are going to outperform 6 or 7%. But also on the flip side of that, you're absolutely correct that we're going to see in the next one to two years interest rates come back down in which you could refinance. And just keep in mind that the wealthy get wealthier by leveraging their credit and good debt. So I am not of the belief that having no mortgage is a good thing, especially because in a year or two from now, let's say you get it back down to 4 and a half, 5%, and the market's in a bull market making 12, 15%, all of that positive arbitrage going to you is going to help you build your wealth faster. So in my opinion, people should not bury all their credit and bury all their cash in a property because then it is locked up and you cannot get that money out or use that capital until you sell the home, or you would have to take out some sort of a HELOC or home equity loan. So that's my take on it. I like the fact if you have the cash and you want to put down the 20% to avoid the PMI, great. But I would never put down the 70% because to build that wealth, you're always going to have debt. And as long as it's good debt and it's low interest debt, that is a very, very key structure in being able to build wealth for the long term.

[Austin]

Good debt and low interest debt, those were the two key terms there, right? I believe there's such a thing as good debt and there's such a thing as bad debt. Good debt is used to buy appreciating assets, think businesses, think real estate, things of that nature. Bad Debt is used to go buy things that go down in value. Think auto loans, boat loans, credit cards, appliances, furniture, stuff like that. And then the other side of this equation, Robert, you know, personal finance is personal. So I am someone who is with a 6.6% interest rate on his mortgage of about $325,000 right now. And I wholeheartedly want to pay off my mortgage as quickly as possible because I pay about 25,000 a year in interest on this mortgage. And it sucks and realize that. But I also realize If I took $300,000 and I put it in the stock market in 2024, it would have returned about $65,000 back to me. Now, of course, that was an anomaly, right? The stock market on average goes up between 8 to 12% per year. We've had two awesome back to back years of 20 plus percent, which is again an anomaly. But I guess it really comes down to like this idea of, and this is how I justify in my head, Robert, why I think it will be okay if I pay off my Mort 6.6% interest rate over the coming years. The reason I think it would be okay is because I have three times my mortgage balance right now already invested in the markets, right. I'm just around a million dollars invested in the markets at the moment. And assuming I keep that money invested and that money continues to work for me year over year over year, I already have the exposure, right? Like, I guess I could put another, you know, 200, 300,000 into the markets and like, that's cool. But like, I guess I'm at that point now where I can choose, I have the flexibility, I have the autonomy to say no. Like my money is already working for me. Now. It'd be a completely different story if I had no money invested, I had not built my base and I wouldn't put 70, 80, 90% down on a house like that to me seems silly. I would much rather have that money invested in building wealth for me over time. Because again, the big difference here, Robert, between money that we invest in the markets and the interest rates we pay on the mortgage is the money we invest in the markets compound and grow exponentially. The interest with a mortgage is simple interest. It's a flat every single year. And so once you understand the difference between compounded interest and compound growth and simple interest on debt and arbitraging that difference there, I mean, that is where wealth begins to unlock for people.

[Robert]

Yeah. And that's why, if you think about it, some of the wealthiest people in America have mortgages and they have loans on their yachts and they have loans on their buildings because they're leveraging this low interest debt that we talk about and arbitraging the difference into their own accounts. So I love the explanation and the two sides of this. And it's just really important for everyone listening to understand that because it's all about not what you make, but what you keep and how you maximize your gains along the way.

[Austin]

So our next question comes from Manicon V. Manacon says. Hi Austin and Robert. First off, Happy New Year. I'm excited to hear all about the great episodes you've lined up for 2025. I recently had newborn twins and was looking into opening custodial IRAs for them. However, during my research I found that each child must have earned income to qualify for these accounts. Is there any way around this? Or do we need to wait until our twins have earned income? I also looked into the 529 plan, but I'm more interested in custodial IRA in case they don't want to go to college. I know that Austin mentioned that we can roll over up to $35,000 of the unused 529 plan funds into a IRA account once they turn 18. But what happens if there are remaining funds in the 529 plan? Would we just withdraw the remaining funds as income and face the additional 10% penalty fee when the time comes? Any insights would be greatly appreciated. Thanks for all you do. Best regards. This is a really great question and let me just take a first stab at this one. So you're completely right. You have to have earned Inc. Contribute to your ira. And unless your newborns are Gerber baby models, they're likely not making any money. But I would be very surprised if you can't find a way to spend this 529 money after right rolling over that 35,000, right? So the money you have over left over, which is what you're so concerned about, I'd be surprised if there's not a way for you to spend this in a manner that furthers your children's development. Think trade schools, think certificate programs, maybe study abroad programs, apprentices, even K through 12 tuition for private schools even before college. Right up to $10,000 per year can be withdrawn tax free to cover tuition expenses for private, public or religious elementary or secondary schools. So the 529. Like let me just be very clear, it's a very flexible way for you to save and invest on your children's behalf. And again, I'd be really surprised if you just simply can't find a way to spend this money in such a manner that that further develops your children's learning and career opportunities.

[Robert]

Yeah, I think that's a great takeaway. 5 29s are a really great tool and there is so much flexibility with them and that is why they work even if the kid doesn't go to school. So keep that in mind. I think it's a great question, Austin. Awesome takeaway and just really do your research to understand and make sure it's a good fit for you.

[Austin]

So our next question comes from Danish V. Dinesh V Says hi Robert Noston I'm 42 years old, I work in tech and I'm based in Seattle, Washington. First, I want to very much thank you both for helping me fix my 401k, which was drastically underperforming. After listening to your podcast, I've diversified it into Voo, QQQ, Spyi, QQQI, and other awesome index funds and ETFs that you recommend. I'm already excited with the results of the new strategy. I've already saved six months of expenses in an emergency fund. I've automated my investing and maxed out my 401k for 2024. My certified financial planner says I'm even on track for an early retirement. I and my wife also earns just about as much money as I do. I have a rental property and it's net cash flow neutral, but I also own my own house. Both mortgages are less than 3% interest. I could not be in a better situation because of you all. Now here's my question. I'll be making about $200,000 from my vested RSUs at my job after taxes in January of 2025. All of this money is from company stock that I am selling because I want to diversify out of this single stock. I'm torn between putting the entire 100 100% of it into SPYI or even splitting it across SPYI and VOO equally. I do love the passive income. Considering cash is king. I'll be hitting the highest tax bracket next year largely because of my stock RSU appreciation. I might not get such a large vest for future years as I'm hitting my cliff. What is your advice on investing this $200,000 if you were in my situation? Robert, I'll let you take a first stab at this.

[Robert]

I love this question and at 42 years old you have a long time horizon for invest, so I'd really like to see you have More diversification with this $200,000. I love Voo. Nobody talks about it more than Austin and I. I love SPYI because of the income you get. But I think you should have more diversification with this money. So I would like to see you add in some more funds into this and break it down with a little bit better weighting rather than just 50, 50 or all in one. Because there are other categories that I think you could cover as well. Maybe look at the Nasdaq, maybe look at some global economy stuff and really get some diversification. We didn't talk about crypto. And at your age and depending on your risk tolerance, maybe a portion of this goes into some crypto funds. I bet. We love. And there's some other good ones coming out right now. So I love where your head's at. But I would just get a little more diversification if I were you.

[Austin]

I like this answer, Robert. The perspective I want to share is it seems like, and I only mentioned this because he mentioned it himself, but it seems like he wants to retire early. And to retire early, two things have to happen. One, you have to have monthly expenses that you have clear visibility in that likely aren't going to increase dramatically in the future. And two, your portfolio income, your passive income has to be more than those monthly expenses. So if this person was making $7,000 $8,000 a month in passive income and their monthly expenses were 6,000, then theoretically speaking, they could retire and they would have that $2,000 of sort of flexibility every month to spend or save. If you are someone wanting to retire early, I totally agree. Right. Go with the diversification. That's a great idea. But also consider what your mortgage might look like, what cash flow might begin to look like, what, you know, your income might begin to shape up. As I guess I'm saying is it's really hard to retire early if you're paying 4,000amonth with a mortgage or, you know, you're paying, you know, maybe sometimes your cash flow on this rental is neutral, maybe sometimes it's negative. So just like figure out what big debt expenses you have in your life and if it makes sense in the next, call it, you know, two, three, four, five years, pay those off. If you do want to retire early now in that two to five year period, invest the money, make the money grow. Money doubles every seven years on average in the stock market. So I love this idea. I love the idea of retiring early. Having income paid to me by SPYI and much of these other Neos funds allows me to be on track to retire early as well. But I will not be able to retire early if I have call it my existing mortgage of like 2450 or whatever I pay every month. It's just you want to get rid of that before you retire.

[Robert]

And also for anyone else listening that's thinking about what their retirement looks like. We talk about the 4% rule and all of this. Please keep in mind, and this isn't a scare tactic, but keep in mind that things are changing. People are living longer. We are getting to a point where with better medicine and better care, the average age of people is going to be extended. So you need to make sure that you understand that when planning for retirement retirement so you don't run out of money. Because you know in the old days when the average person would, you know, live to be 76 years old, the average male in the US that is getting extended year over year. And in the next 10 years we're gonna have dramatic breakthroughs in medicine. So keep that in mind when you're thinking about retiring early, but also looking at how your retirement, what that looks like, and how to maintain the life that you want to live in retirement.

[Austin]

I love that perspective, Robert. And just a quick plug for your boys here. Episode 33, how to calculate your freedom number is a wonderful place to start if you're someone who wants to retire early, right? This freedom number is the amount of money you need invested to be able to say, wait a second, I can stop working and just live off of my portfolio income, assuming the 4% rule, things like that. So go give episode 33 a listen. We published it on October 9th of 2023. Our next question comes from Joe F. Joe says hi Austin and Robert, A friend connected me with your podcast and I love all the great information you share. Thank you for what you guys are doing. Doing. My question is this. When investing in the major ETFs you typically mention think Voo, VGT, VTI and QQQ. Regardless of whether if this money is in a retirement plan or a bridge account, would you distribute your investment equally across all four or would you follow some other allocation for context in case it impacts your advice? I'm 47, I plan to work for 20 or so more years and I have a traditional 401k. Then I'm Max to the full match as well as two bridge accounts that I DCA into monthly. But I'm considering changing the allocation of my investments. So please let me know your thoughts. This is a really good question, Joe. One of my Favorites, actually, because every year, and I shared this with Robert a couple days ago, I write a long reflection piece as to how my portfolio performed during the previous year. And so in 2024, my portfolio delivered 74.9% total returns, which was amazing. And the majority of that was driven by bitcoin, because it was up like 100 something percent there. So don't like, think I'm crazy here, but, you know, I did have some 100, 200, 300% return stocks, but it was mostly just bitcoin. But in that piece, I sat down and I said, wait a second. Something I need to get better at in 2025 is understanding weightings inside of my portfolio. Because one of my biggest winners was Hims and Her Health. It was Hims. I think the stock was up like 180, 200% or something from my average cost in 2020, 2023, when I. So I think the total return was like, in the 200% there from what my average cost was. But I only had a 3 or 4% weighting in it. Right? It wasn't a big enough weighting to make a difference. And so for Joe's question here, I would really encourage him to look more and learn more about the core satellite portfolio strategy. Core satellite portfolio strategy. What that means is think about your portfolio as the earth and then satellites that are orbiting the earth. Okay? So the earth of your portfolio is the vast majority, right? That's the 50, 60, 70% weighting. You want the vast majority of your portfolio's weightings to be in big ETFs and index funds, blue chip stocks that are going to be here for a long time, and things that have great track records of strong performance because we want to make sure that a lot of our money is invested into good ideas. Now, the SA satellites come in, in the sense of, call it this 15, 20, 30% weighting of these more opportunistic, diversified ideas that you might have. Think cryptocurrency, think real estate, think masterworks or fundrise or, you know, things of that nature. Right. Maybe a single stock that you have an idea on that you're really optimistic about. So that's how I try and approach building a portfolio. I try and have 50, 60, 70, 75% in these blue chips and the other, you know, call it 25, 35% in these ideas. Now with Joe's question, he's talking about all blue chip index funds. So, Joe, if you want to have, you know, an equal split among all of them, I think that's Great. If you want to be, you know, more heavily weighted to The S&P 500, I think that's cool too. If you want to be more heavily weighted to VGT or qqq, that's fine. Just know that those are a little bit more volatile in nature. So just be ready for that. But I think this is a wonderful way to approach investing. Having these big index funds and ETFs in your portfolio portfolio and having them be the real core to your investing strategy is really important.

[Robert]

Yeah, my big takeaway, Austin. Great, great answer. Is that core we're talking about that bridge account or that 401k where it's the meat and potatoes of your wealth. As you're building, you want to make sure that you have these blue chip accounts. So when you look at like vgt, vti, qqq, we love all four of those. If I were going to weight those in my portfolio, I would look at it as something like maybe Voo is 40%, Qqq is 30% and then Vgt and Vti are 15 and 15 because I would wait a little heavier to the tried and true s P500 in the NASDAQ because over time those just really do well. They're very stable. They're going to average 10, 11, 12%. And that's how I would do it. But like Austin alluded to, you also want to make sure that with this waiting, you understand why, because so many people, me included, I'm guilty of it. I'll take a nibble on something that I think is going to do really awesome and then it goes crazy for two years. But like Austin alluded to, it's only 3% of my weighting in my portfolio. And if I would have just adjusted that further. So for instance, with me, my portfolio for 23 and 24 was probably around 8 to 10% just in Nvidia, Palantir and Micron, I was very fortunate. Over the last two and a half years they have absolutely torn the COVID off the ball. So it was great. But then in retrospect you say, man, I should have just upped that, got that to 15 or 20%. But then you're in a situation where you're very risk on, on highly volatile sectors. So just keep that in mind. So that's why that's what I would do if talking about these four funds, how I would weight them personally moving forward. Forward.

[Austin]

Now, Robert, the cool thing about Joe is he has a follow up question. It's this. Would you ever try to buy out A franchise that is failing due to improper management. There's a chance that a business that I used to work at which was an auto retail franchise, will go under unless there's a change in ownership. This business was thriving five to seven years ago and making a bunch of profit before the current owners bought it. In addition to that, is it worth trying to take out an SBA loan in order to pay for the initial down payment of the 75 to $100,000 for acquisition? I wish I could say that I had more capital, but I just getting everything in order and I'm a little bit late to the party. I want to make sure that this is an overall good idea before I even fully approach the current owners to start discussing acquisitions. Robert, that is right up your alley. I'll let you answer this.

[Robert]

It is. I am waiting. So yes, I think it's a great question and the answer is very complex, but let me try to break it down succinctly. I love the idea of buying failing businesses as long as the business isn't failing because it's a bad service or it's an antiquated service, or it's something that just isn't a growth proposition for the future. But if you know and you have experience like you do in this instance, that the owners did a poor job but that the audience is still there, then I love this idea. And the way to look at it for everyone listening is look at value engineering. When you go look at a property or you go look at a small business, really look around at all of the simple things. First, the numbers are important, but what is simple is understanding the value proposition of your improvements. So like when I bought the pizza store last year, when I pulled up to see it, you know, they had old lights, the grass wasn't mowed, they didn't have great signage, they didn't do a good job with social media. So immediately I knew that I could improve that business almost overnight night by integrating modern technologies and modern sales tactics and modern marketing. And the same goes for this business. So if you can buy it right even though it's losing money and you can turn it around with good management and good marketing, I think it's a win win. But just make sure you understand something. When you're getting your financing order, you need to make sure that you have at least six months to a year of cash burn because of the fact that if it loses money for you for a while, while let's say it loses five to $10,000 a month, you need to have that on top of the cash flow because otherwise you're going to be coming out of pocket every single month to baby that business along and get it to profitability. So be very, very careful because a lot of people buy businesses with the thought they can turn them around, but they don't turn them around fast enough and they end up having to either take on more debt or sell the business at a loss because they weren't prepared financially to be able to harbor those losses. Because everything takes longer than you think and costs more than you think when turning around a small business.

[Austin]

Yeah, I think the only piece of advice I have for Joe is build your base first, my friend. You want to make sure you have the a hundred thousand dollars invested across the 401k, the Roth IRA, the bridge account, everything around you before you go and you buy a business like this, take on all this debt. I've seen too many people make the mistake of going into a crazy, cool, big idea that they're so excited about and they tie up all their capital into it and it keeps their capital tied up for three, five, seven years before they ever see some sort of return. And sometimes the returns aren't what they were expecting. So Joe, please have money working for you in the markets while you buy this business over time and you're going to be just fine.

[Robert]

All right, listen up folks. Time could be running out to lock in a 6% or higher yield at public.com you can lock in a 6% or higher yield with a bond account. But remember, your yield isn't locked in until the time of purchase, so you might want to act fast. Lock in a 6% or higher yield with a diversified portfolio of high yield and investment grade corporate bonds. Only at public.com forward/rich habits.

[Austin]

Thank you Public for sponsoring the podcast in 2025. So our next question comes from Brandy G From inside of the Rich Habits Network. Brandy says, how much do we really need to retire? The 4% rule lets you withdraw without having to touch your principal. I'm child free free. And I don't plan to leave any money for anybody. Should I still be following the 4% rule or should I be spending more money in retirement? How should I go about enjoying my money while I'm older? Robert, what's your take on this?

[Robert]

Yeah, I love this question, but you have to look at it differently. The 4% rule isn't necessarily utilized so you can leave enough money for other people. So I think what you're alluding to is can you spend more of it in retirement because you don't need to leave it to other people or family members. And the way to look at this is the 4% rule was built around the Trinity study and it's to make sure you don't run out of money in your lifetime. Because the worst thing that can happen to people is they go into retirement and they up it and they say, oh, I'm going to spend 6% this year, 8% this year, whatever. And then instead of having enough money for 25 or 30 years, it goes down to like 12 or 14 years. Then you have to go back to the drawing board and figure out how to make enough money to keep living the lifestyle you desire. So keep that in mind. It is not built and it is not structured for you to leave a bunch of money for the future. It is to make sure you don't run out of money. And like I alluded to in the episode earlier, is that people are going to be living longer in the coming next 10, 20, 30 years. And therefore you need to keep that into consideration when you look at the 4% rule and how much you should be spending yearly in retirement.

[Austin]

Robert, I'm right there with you. I think though that sometimes people are a little bit too conservative when it comes to the 4% rule. I mean, if I had had, call it $2 million invested or even a million dollars invested. Right. And it was invested properly. Right. Very risk managed. It wasn't into some crazy meme stocks and it wasn't into some crazy small caps or international things, I think I would be able to sustainably return, call it 6, 7, 8, 9% on average over a long period of time in that portfolio. Assuming I also have a mix of bonds, a mix of cash things of that nature. And so, so if you want to take out 4%, 4 and a half percent, 5%, be my guest. But back to what Robert was saying again, it's so you don't run out of money in retirement, not so much that you have money left over to give to your heirs. So just being able to balance that is really important. I think there's a book, I haven't read it, but it's really popular. I think it's called Die with Zero that helps people understand how to approach living in retirement. The author's name is Bill Perkins. So branded. Maybe that's a book to consider reading or yourself.

[Robert]

Yeah, I love it. It's just everyone needs to understand what their freedom number looks like in retirement and extrapolate backwards of how to get there. That's the key here. So, great question, Brandy. I hope this helps.

[Austin]

Our next question comes from Aaron G. Aaron says, I just purchased a new home to be a rental property. With that being said, I have not yet moved it into an llc. How do I go about moving a home I already purchased in my name name into an llc?

[Robert]

Yeah, sure, Aaron, great question. I think it's very important because as we say all the time, it is best to own nothing and control everything because you don't want properties in your personal names. And the easiest way, if you already own it, is to do a quit claim deed or a warranty deed it's called. And this is very, very simple. You're just going to contact your lender, you're going to tell them what you're doing, and you're going to make sure that you have all your documents in order. So if you're going to form the LLC yourself, you just have to make sure that you have the ein number number. You want to make sure you have the operating agreement and have all of your ducks in a row before you do the migration because you want to make sure that it's done properly so you don't leave yourself in a situation where down the road someone could say, hey, this was not done accurately and they could try to pierce the corporate veil if they were going after you personally. Just make sure you follow all of the steps. It's not scary, it's not hard. Any lawyer can do it for a few hundred bucks in a couple hours. But just make sure you understand, do all the steps steps, and that the LLC is fully flushed out and set up properly.

[Austin]

Totally agree. There's a website called get dynasty.com where you can put your house in a trust. They make it very, very simple. I've actually met with their CEO before. He's a really smart guy and I'm telling you, they are. They're super focused on helping people protect their properties from those different types of attacks if it's a rental, all the crazy stuff. So go check out getdynasty.com you can also, of course, work with a lawyer. You could just probably do this for free. I mean, there's so many different ways to do this, but the quit claim deed process that Robert laid out is the absolute best way to go about this. Now our next question comes from Duck City USA on Instagram. They say, hello, Austin and Robert. I'm a longtime follower and grateful for what you do. My financial advisor, who's a fiduciary, underperformed the s and P500 this year by at least 10%. And then of course I have to pay their fees on top of that underperformance. I could have done substantially better if I just put that money in voo. What are your thoughts? Do I keep them? Do I fire them? Do I just have a heart to heart with them? How do I approach solving this problem? Robert, I'll let you take a first stab at this one.

[Robert]

Duck City, you have been a long time follower. We appreciate the support and I'm going to lay it out straight to you. There is no way you should be underperforming that badly in a bull market like 2023 and 20 2024. So you definitely need to have a heart to heart with them and you need to shop around because at the end of the day, I had someone recently say that their millions of dollars lost 24% in 2024. And I don't see how that's possible. You could literally have put your money into Vooqq and maybe Vug or you know, VTI and made 15, 20, 25%. So be careful. Absolutely have that conversation with them. And if you're not happy, you can always move it to your own account and manage it yourself. And keep it simple. Stupid. Because so many of these advisors, the reason they underperform is because they have you in way too many funds and they have mutual funds and they have bond funds and they have all these different vehicles that just don't perform as well as the basics. So keep that in mind. I hope that helps. And if you need anything, you can always DM me and I will gladly help you.

[Austin]

Yeah, I think just to further explain, you know, a lot of these financial advisors, they make their money not by just charging you a 1% fee or whatever that looks like, but also by funneling money into mutual funds and ETFs. And normally those are owned by the financial advisors themselves, right? So like for example, Morgan Stanley, bank of America, right? They all have their own financial advisor stuff. And these people also have mutual funds. It's kind of like a double fee structure really. Like you charge people 1% just to manage their money and then they take their money, money and they put it into their own financial product that then also charges people money to participate in. Sometimes 40, 50, 60 basis points, right? Over half a percent. And so net, net you're paying 1, 1 and a half, sometimes 2% every single year just to now underperform the markets, which over a long period of time is gone a whole lot of money. So I'm right there with you, Robert. If you want to self manage, I think it's a great idea. If you don't feel comfortable self managing, maybe you can have a conversation with, with this financial advisor, let them know what specific funds you want to be in, like Voo, like Vti, like other, you know, index funds and ETFs that we talk about and see what they think.

[Robert]

Yeah, I love that take. And just keep in mind what Austin's alluding to is a lot of these advisors, they charge commissions on the ins and the outs. So you have to remember that if it's a true fiduciary, it should only be one fee and that is the fee they charge you for assets under management, like at Croak Capital Capital. If you're paying, you know, 1%, it's 1%. Everything else is free that comes along with it. And you need to understand that. So go have the hard conversation with them, really discuss their fee structure, the commission structure and all of that so you can understand and gain more autonomy on your money. Because they don't care about your future. They are there to preserve your capital, not grow it. And your best bet is to understand that. And you've obviously done the work by following us for a very long time to understand what you should be doing, doing. And you have to make those decisions and not let them talk you into anything else. So before we go into our last question, you have all heard us talk about the importance of diversifying your investments for a while now. And there could be a major opportunity today in private market real estate, especially with the market timing right now. Because we know it's a lot of hassle to be a landlord and of course requires a ton of upfront cash, we were focused on finding an option everyone could have access to.

[Austin]

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[Robert]

I love that answer. And Scott, my take on this would be you are definitely ready, you've got the base built, you're crushing it. At your age, everything looks really good. Now it's time to expand, get a little more risk on. And I think you're light right now in crypto. If you were to have 5, 6, 7% into cryptocurrency, that would put you at more like 35,000, 50,000 in your crypto hold. But also I think you could earmark 5% of your net investable capital and start looking at some of these pre IPO investments, venture investments, and understand your buy box. Maybe that buy box is 10, $25,000 a year right now where you're taking these big shots on companies and technologies and stuff that you believe in, like Austin and I do every single week of our lives. I think that is the next iteration for you, you to really accelerate your wealth and your growth. So really look at that, understand it. And I would do those two things on top of what Austin alluded to to get you to that next level of wealth.

[Austin]

Yeah, you're obviously an accredited investor both from your income and your net worth. So I think buying into these pre IPO companies as well as startups. Right. Dabbling in the dark arts of startup investing, I think that could be a really, really good idea. You for Scott as well, there's a ton of different funds, rolling funds on Angellist that you can become an LPN. If you're looking to become a LP in one of these rolling funds, just go to AngelList. There's a ton of them that are on there that anyone can begin to learn more about and join. Assuming they are accredited and have the capital to deploy every quarter. But this is a really good situation to be in at 34 years old. So congrats on how well you and your wife have done, Scott. And you guys are going to probably, probably have a net worth north of 10 million by the time you're 65, 70 years old.

[Robert]

Yeah, I love it. Well, thank you everyone for joining us every single week, following along, sharing it with a friend, getting value. Because our goal here is to educate and help everyone with all of the tricky little situations that come with running businesses and mindset and building wealth. Because as Austin always says, personal finance is personal and we are here to help. So always share the podcast with a friend, make sure you share the newsletter with a friend and tell people about the Rich Habits network. It is growing. We are so happy. We are adding more modules and more educational tools and 2025 is going to be a game changing year and we appreciate each and every one of you.

[Austin]

Thanks everyone and have a great rest of your week.