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Rich Habits Podcast
Q&A: Market Volatility, Raising Money from Investors, & Our Fav Credit Cards
00:50:47
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- [00:00]
Austin
I was never really a runner. The way I see running is a gift, especially when you have stage four cancer. I'm Ann. I'm running the Boston Marathon presented by bank of America. I run for Dana Farber Cancer Institute to give people like me a chance to thrive in life, even with cancer. Join bank of America in helping Anne's cause. Give if you can@b of a.com supportann.
- [00:24]
Robert
What would you like the power to do?
- [00:26]
Austin
References to charitable organizations is not endorsement by bank of America Corporation. Copyright 2025. McDonald's meets the Minecraft universe with one of six collectibles and your choice of a Big Mac or 10 piece McNuggets with spicy nether Flame sauce. Now available with a Minecraft movie meal. I participate in McDonald's for a limited time, a Minecraft movie only in theaters. Hey everyone and welcome back to the Rich Habits Podcast brought to you by public.com a top 10 business podcast on Spotify. Question and Answer Edition. As you guys know, these are our Q and A episodes which come out every Thursday. And we just sit here and we answer your questions in real time. You can send us us questions on Instagram via DMS @Rich Habits Podcast or email us questions at rich habits podcastmail.com youm can also ask us a question inside of the Rich Habits Network, which by the way, Robert, we are still running that seven day free trial to join the Rich Habits Network and there's been over 150 of you that have joined us over there in the last like four to five weeks. It has been a blast. We're enjoying the live streams. There's eight hours of video coursework. People are asking questions every single day. I think we're averaging like seven to ten questions getting answered there every day. It's, it's a really cool spot to be. So if you want to participate in the seven day free trial that we're doing right now with the Rich Habits Network, there's a link in the show notes below. Now, Robert, a lot of people, especially as the volatility has been rocking the markets, have been talking about their online broker. And as you know, we prefer public.com as our online broker of choice here. And we sat down recently and we've tried to figure out what are some like really big key takeaways that people should know about when it comes to this broker and why we like them over the competition.
- [02:05]
Robert
And you can invest in almost anything you can do stocks, bonds, options, crypto and more. And if you're not investing yet, you can put your Cash in their High Yield Cash account, which is paying 4.1% APY. And one of my other favorite things that they're doing right now that I really love is now you can boost your IRA with a 1% match. So what does that mean? When you open an IRA on public, you can earn a 1% match on your annual contributions right from Public. So that's just another reason why, you know, people have been hearing us talk about Public for years now, and we just love the platform and think they are tremendous to work with.
- [02:45]
Austin
So this ad was paid for by Public Investing. Full disclosures in the podcast description. But as you guys know, we love Public and we've been talking about them for half a decade now. So, actually, Robert, our first question is coming from inside of Spotify. As you guys know, you can share comments in the Spotify app. And normally we don't tell people to, like, ask us questions in Spotify because it's way harder for us to answer them on Spotify than it is to ask us a question in the Rich Habits Network or email it to us. And there's like limited character amounts, things like that. But this was a question we got on Spotify, and I thought we should answer it on our episode. It goes like this. With the tariffs now in effect and the contraction we've seen in the stock market, is it a prime buying opportunity to own some of the same ETFs and stocks that we liked, even during the bull run? So essentially how I understand this question is this person who didn't leave a name is saying, hey, guys, stocks are falling. The indices we know and love, the ETFs, they're all experiencing a dramatic correction. Do we still want to be buying? Are we still buying the same things? And why is that so? Just so we're on the same page. Let's take a step back, Robert and I. Early January, we published our three big market themes for 2025, with the very biggest theme that we were sharing with you all being volatility. It is now April, and that volatility is here. Now. I would argue that the volatility we've seen this year was much more aggressive than either Robert or I had imagined. But it happened. Now, as a quick reminder, volatility comes from market uncertainty. I think there's like a Bank of America chart, Robert, somewhere on the Internet. I'm sure we've shared it in the past with the Rich Habits Network, but it essentially shows the policy uncertainty on a chart there, and it's at sky high right now people are so uncertain as to what's happening with economic policy. And again, the stock market doesn't like uncertainty. The reason why we saw such a rally in the markets after Trump was elected and pretty much up into his inauguration, which we talked about on the show, was because a lot of people were pricing in sort of this perfect outcome, right? The deregulation, the lower corporate taxes, the pro crypto government. Like it was this perfect storm of a melt up where everything was going just insanely great. But as we also said on the show inside the Rich Habits Network, we were sharing with people, hey, I think that this is short lived. I think once he does take office, right, that January 20th, Inauguration Day and we see the headlines flying and you know, all these things that he's been alluding to on the campaign trail as it relates to tariffs and government efficiency cuts and things of that nature, that's what's really going to drive some volatility and it certainly has. But here's the deal, guys. It is really hard on a daily and weekly basis to lose thousands, if not tens of thousands, if not in my situation, hundreds of thousands of dollars in portfolio value year to date. Because the crypto market or the stock market or whatever other market you're looking at around the world is down dramatically. It's really hard to go through that. It's like mental warfare. And I just really want to encourage people to take a step back, take a deep breath and stick to the plan. The only people that get hurt on the roller coaster ride are the ones that try and get off of the ride early, right? We are in the roller coaster ride. Do not try and jump off your roller coaster. You will get hurt, right? By that I mean sell your stocks and run for the hills. What you need to be focused on over the next two weeks, two months, months, 24 months. I have no idea how long this bear market is going to happen because we are in a bear market now. I don't know if it's going to coincide with a recession. I don't know if it's going to coincide with earnings contraction from companies like, I have no clue. But what you need to do is to this question here asked on Spotify, use it as an opportunity to stay optimistic about the future of your stock portfolio. And by that I mean buying opportunity, right? Same ETFs, Voo, Vti, Qqq, Vgt, Spyi, Qqqi, all the same ETFs we liked during the bull market. We love them now because they're not trading at all time highs anymore. They have 15, 20% discounts next to their price tags. And the same thing with stocks. These multi trillion dollar massive companies that are doing hundreds of billions of dollars in revenue, they're not going bankrupt. Nothing is happening to them. There's a big disconnect between the stock price and what the actual company's underlying ear. And I think right now we're seeing a major overreaction from Wall street with all this uncertainty. So in my opinion, yes, use it as an opportunity to buy names that are going to be here for the next decade like the Amazons, the Googles, the Microsoft, the Nvidias, all those incredible companies, big profitable companies operating in secular growth trends. You want to have those as well.
- [07:37]
Robert
I think that's a great takeaway. And you know, the only thing I would add to it is I've been down this hole before, many, many times in the last 35 years of my career. And the people that have done the best are the ones that saw it as opportunity, stayed strong and kept investing. Because too many people, when there's a shakedown, they get out, they sit on the sidelines and they never know when to get back in because they're looking at the markets and they're looking at all the negativity and they're fearful and they're not sure what to do. In my opinion, this is a, a great opportunity. I think it is very, very good for the long term economic situation and manufacturing future of the United States. So for me I'm very excited. We always talk about diversity. There's, you know, the ten year is coming down so real estate's looking more attractive right now. Gold has been ripping for months. So you know, I'm always talking about precious metals. So I think there's a lot of opportunities right now that people are going to regret because they're running for the hills. And when all of this settles back in and all this fear and uncertainty subsides, people are going to wish they listened and really followed through with buying assets when they're discounted rather than waiting till they're at the top. So I think it's a great time. I agree with you totally, Austin and I love this question because I know it is top of mind for everyone. So think of it this way. Q. Q. Q. We talk about it all the time and it is at $429 roughly. And when it was at highs, let's say call it $540 if you believe like we do, that the markets are going to get right back to where they were in the future. That is a built in 25% gain just to get back to where we were recently. So look at it that way. And always remember, when in doubt, zoom out and you'll do just fine.
- [09:33]
Austin
I love that analogy, Robert. You know, I think as a lot of people are in this sort of mental warfare with themselves of like, oh my gosh, I'm down this or I'm up this or what's happening with my portfolio, don't understand it. History has told us, right, that anything you buy below all time highs when it comes to these index funds and ETFs that we talk about is a great opportunity. If you use the same chart for QQQ, right, the NASDAQ. And you go back to 2022, October of 2022, it was at 260. That was down 35% from the previous high experienced in 2021 at about $400 a share. However, not only did we go back to $400 a share, we went all the way up to $540 a share before the next correction. And so that's the sort of mindset I want people to have when it comes to these bear markets. We will go back to all time highs eventually. I don't know when, I'm not going to try and predict it, it's a fool's errand. But as long as American capitalism continues to trend higher, right, we will go back to all time highs in these INDE ETFs. And so every dollar you deploy into your portfolio below an all time high is a dollar made in the future when it comes to portfolio appreciation after we've experienced that new all time high. So like just get excited, right? Every time you put money into the markets while we're under those recent all time highs. Like it's, to your point, 25% to get us back up to where we were, I'd love a 25% return in my portfolio. So like, I just think about it as free money essentially. I know this was a sort of a long wind answer to this first question, but we just think it's so important to have the right mindset as we navigate this really treacherous time in the markets. As a lot of people feel intimidated, they feel lost, they feel hopeless, they feel, oh my gosh, I just got in the markets, but now I'm losing all this money. If you have a 3, 5, 7, 10 year time horizon like all of us do, I'm 28 years old, I'm not going to retire for another 30 years, right? Having this long term investment horizon forward looking, being able to know the markets will go back up, it's okay to buy them in their red. Be greedy when others are fearful. That's what Uncle Warren Buffett says all the time. And we really want to encourage you guys to take that to heart.
- [11:51]
Robert
This could be a whole episode in itself.
- [11:53]
Austin
So our next question is also a Spotify question. And I know you guys are going to say I need to start asking questions on Spotify. No, please do not. It is really hard for us to get back to you on Spotify with a long winded answer. Ask us on Instagram or email or Rich Habits Network. But we just saw these when we were getting back to some comments last night and really thought, thought they were worth addressing. The first one of course being some volatility in the stock market. And then this one by Alex H. On Spotify because it's pretty timely as it relates to a couple bonus offers that are happening in the credit card world. So let's take this question Alex H. Says hi, Austin and Robert, I'm a big fan of the podcast. I've been listening for a year or so and you've all helped me a lot when it comes to understanding, investing, and setting myself up for the future. I was talking with my girlfriend about credit cards and she's trying to decide which one to get with a sea of different credit cards out there. I wanted to get your opinions on the matter. She gave me the idea to ask you all about this because I tell her all the things that you talk about on the podcast and she's equally as excited to hear an answer. Okay, so Robert, I think we kick off this question by sharing our favorite personal credit cards that we use. And then I'm going to answer it with sort of a combo that I think your girlfriend maybe should consider. But Robert, what credit cards do you use?
- [13:05]
Robert
So my three top credit cards are the American Express Gold card, the blue card from American Express, and then I also still have, and I know don't laugh at me, but I still have the Discover IT card. And so I would say because I travel so much and I eat out so much, my favorite card would be the American Express Gold card because I get Uber credits, I get dining credits, I get access into the lounges. There's just so many different credits that I get that it more than pays for the annual fee. So for me, the Gold card is probably my number one and then the American Express Blue card would be number.
- [13:44]
Austin
Two for me, I Love that breakdown. A couple cards that I use personally. One is the Citi Double Cash card. So if you're someone who likes the cash back, this is unlimited 2% cash back everywhere, like all the time. So like 1% when you buy and 1% when you pay it off. So you get 2% cash back all the time. There's no annual fee. It is just a total normal cool card. Again, that's the City Double Cash card. And you actually get a 200 bonus when you spend $1500 in the first six months, which I'm assuming y'all could probably so an extra 200 bucks in cash back to get you started. Another card that I really like is the M1 Finance credit card. There's a bunch of companies that they offer 10%, 5%, 3%, 1% cash back on. It's called the owner's rewards card. And essentially it started as a credit card that if you own stock in like specific companies on their platform, you would get cash back on those stocks. It's really cool. But you get 10% cash back on your Spotify, your Netflix, your AMC and your Adobe subscriptions. 5% cash back on Chipotle, Domino's, Starbucks, Chewy, McDonald's, things like that. Two and a half percent cash back at all gas stations, Home Depot, Lowe's, Target, Apple, Sweetgreen, Uber, UberEats, Walgreens, stuff like that. And then one and a half percent cash back on everything else. This is my go to credit card. I love it. I think it's a really, really cool way to have an awesome just array of cash back opportunities.
- [15:13]
Robert
Yeah, I look at at credit card hacks is free money. We always talk about how to make the most out of what you get. And you know it's always fun when you can find these. You know I get these alerts all the time. Do you want to sign up for this card or that card? And this is what you get and it's just another way for people to optimize their spending and get rewarded for it. So I love this and it's a great question.
- [15:36]
Austin
So our next question comes from Danny S via email. Danny says if I wanted to invest a hundred thousand dollars, would it be better to invest it all at once or would be better invest it over time using the benefits of dollar cost averaging, knowing that the money remaining is in the bank and it's not really earning much unless it's invested. Really great question, Danny. I'll let Robert kick this one off.
- [15:58]
Robert
I would first make sure the money is in a High Yield Cash account like on public.com so you're earning while you're deploying. But I'm always going to be of the ilk to dollar cost average just because it takes timing the market out of the equation. Now, if you feel the markets are bottoming and you feel comfortable putting it all in at once, that's totally do your own research. But for me, it's always about dollar cost averaging over a longer period of time and making sure that I have the right diversification throughout all of my portfolios because, you know, you always want to make sure that you're covering all your bases. You hear Austin and I talk about gold and silver. You hear us talk about sometimes the ETFs and stocks we love. But then you also hear us talking about diversifying, maybe having some money in bonds and in cryptocurrency to make sure you understand any market conditions. So I love this question. For me, it's dollar cost average. But I would also make sure that while you're doing that, you have the money making you money along the way. With that High Yield Cash account on public.
- [17:04]
Austin
I totally agree with the High Yield Cash account, Danny. The framework that I use, and I've talked about this a couple times on the show in the past, is the following. If the amount of money that you want to deploy in the markets makes up more than about 20 to 25% of your total net worth, you should probably doll cost average. The reason why is let's say that your total net worth was this hundred thousand dollars and you were going to go invest all $100,000 into the S&P 500 and the NASDAQ and you were just bad news, Brian. Unlucky Joe here. And you bought the PICO top February 19th of this year and you invested all $100,000 on February 19th, not only would you be down about 20 to $25,000 in your investment portfolio video, but if that was all the money you had to your name, your net worth is now down that entire bit, right? And that to me is just like I really think that there was probably a better way to approach that. I'm not saying that the markets aren't going to go back up. Of course they will. You'll get your money back. Everything's going to be fine. But if it makes up more than 20 or 25% of your net worth, I really think it's a good idea to dollar cost average it out over two, three, maybe four months if you'd like, depending on just how big of a chunk of your net worth is invested in this sort of windfall that you're deploying into the markets. Let's say on the flip side, you had a million dollar net worth and this was, you know, only 10% of it. Yeah. I mean, theoretically speaking, your net worth would have gone down by about 20 or $25,000 from this specific investment. And I'm sure you had other investments that could have gone down too, but it wouldn't have been such a gut wrenching, emotional, visceral reaction to, dang it, I bought the top. This is terrible. I want to sell everything now. Right. Because at the end of the day, the biggest piece of advice that Robert and I are trying to set you guys up for when it comes to financial success is not having these knee jerk reactions. And if we can help you build frameworks around dollar cost averaging and how to deploy capital and how to have sort of a diversified portfolio to avoid the knee jerk reactions keeping you invested, keeping you on this sort of plan of dollar cost averaging over a long period of time, that is what's going most of you, if not all of you up for financial success in the future.
- [19:25]
Robert
And one thing I want to add to that, and that was a great breakdown, Austin, is one very important thing for everyone to know. That's listening. That's been around for a long time. Austin and I are independent educators. We're very experienced. We've both been in the field. We've both been investing. I've been investing for longer than Austin's been alive. But we are independent educators. And why is that important? Because we have nothing to sell you. So many people are going to give you a message of what they think you should do based on what they're selling you to benefit themselves. Everything we present here in our podcast in our community is based on our experience and our beliefs, not on our paychecks. So keep that in mind because I love getting to do these episodes, like Austin said, right from the dome and just really tell you our thoughts about we believe works long term and what is the best strategy without having anything attached to it other than our authenticity to help others.
- [20:27]
Austin
If you are someone who's like, I'm not giving these guys a dime. I just want to get as much information from them as I possibly can. All you have to do to really take advantage of our ecosystem is listen to the podcast every week and subscribe to the Rich Habits newsletter. We share the sauce. It's all free. It's all out there that, you know, we're not selling you a $10,000 course or $40,000 mastermind or anything like that. If you do want additional access to us, you can join the Rich Habits Network and join our live streams. That's been a great time. It's very affordable. It's less than your YouTube TV subscription every month, so like, let's make sure that's clear. But on the same token, if you are like, I don't want to pay for anything. I just love what you guys are doing. A lot of stuff is free and we take pride in that. Our next question comes from Danielle H. Danielle H says Dear Robert Noston, I discovered your podcast in late 2024 and quickly became a huge fan. I've shared it with many friends and family members since I find your advice incred incredibly helpful and easy to understand. Thank you for consistently putting out such interesting and informative episodes. I'm 45 years old and currently have $350,000 in a traditional IRA and 50,000 in my Roth IRA, which I'm maxing out every single year. My income varies between about 150 to 200,000 per year and the variable is a sales bonus. Now my husband is a state employee and has been for 20 years and is planning to stick to it, which will provide us a pension when he retires. He should qualify to receive 80% of his income when he reaches the age of 60. He's currently 50 years old. His income is $110,000. We're a family of four with our twins becoming seniors in high school next fall and each kid has $70,000 saved in a 529 account to help with their college expenses. We also own a rental property in a high rent market on the east coast and we have about a hundred thousand dollars left in that mortgage with about $400,000 of equity. Our primary home went up in value substantially since we bought it in 2019. Right now it's worth about 900k and our mortgage is 450k. I bridge account on public.com and I'm interested in adding gold to my investment portfolio. I started to research about it this week and became very confused with all the options. Would you recommend adding gold as a way to diversify my portfolio and if so, which gold related funds or ETFs do you recommend? Yes, Robert and I have been talking about gold, silver, precious metals pretty much since we started this podcast. I mean I was sort of like I wouldn't say anti precious metals because like they don't have earnings, they don't pay A dividend. But like it's been pretty clear over the last couple years that precious metals I need. I should have had a bigger allocation like you, Robert, to this asset class. And I think it's really smart for people to have such diversification to it. And when we say diversification, we're talking about like single digit percentage points of your net worth allocated to this asset class. Just like we talk about single digit percentage points allocated to fine artwork or wine and whiskey or cryptocurrency, things of that nature. So if you want to add gold or silver to your portfolio, there are two ETFs. Do it. You can buy them on public, you can buy them on Schwab or Robinhood, wherever else. GLD is the gold one and SLV is the silver one.
- [23:33]
Robert
Yeah, I love those too. But I want to back up a little bit because I think if you're going to get into precious metals, those are a great way to go if you want to use the ETF structure. I've been invested in GLD and SLV for I don't even know how many years. It's been a very, very long time time. But you can also look at other ways you can buy gold locally. Even Costco sells gold bars now. You can buy through Monx. I love the MonX exchange. MonX.com they're very good as well. They'll deliver it right to your door in a Brinks truck if you want. So I just like it because for me, I've always been diversified and I've seen so many others that don't listen to being diversified and they're all in, in real estate or they're all in, in a restaurant business or something else else. And then they just get wrecked and go broke. That is why Austin and I are always talking about diversification. So if you want physical gold and silver, go buy it off these exchanges and make sure you get it verified. But if you want it the easiest way, you can go to public.com. you can buy GLD SLV right inside your public account and do really well. And if you think about it, silver's been up a bunch too. But gold has been up, went up 15% in 2023, 27 in 2024, 13 so far in 2025. So over the last two and a half years, that's 18.3% blended average return, which is really, really awesome. I've been in gold and silver now for decades, but for any of you, I still think it's a good time to get started. Even Though we are at higher prices but it's just always a good head hedge against what's happening in the markets right now, having that diversification.
- [25:18]
Austin
And congratulations Daniella H. On being a millionaire. That is an incredible feat and major accomplishment to have at 45 years old. Your husband is 50. I mean you all are just absolutely crushing it. So congratulations on being millionaires. So our next question comes from Aaron B. Aaron says hi Austin and Robert. I've been listening to you guys for over a year and you've helped me so much from starting my first Roth IRA to knowing how how to now build a portfolio from scratch. I feel very well equipped. Anyway, I'm now starting my first business and I was hoping you can give me some tips on how to raise capital for a startup and how to best present my business to potential investors. Any advice would be greatly appreciated. Thanks again for everything you both are doing. Really good question, Aaron. So as someone who's invested hundreds of thousands of dollars into startups all across the board over the last half decade, here's what I like to see as an investor. Investor first and foremost, I like to see product to market fit. This is essentially I've got a good or service that I offer and it's generating me lots of revenue and the only thing I need now is more money so I can hire more people, start doing some marketing and make this go from a hundred thousand a month to a million a month in revenue or whatever that might look like in your situation. Investors like to see traction and a clear pathway to to here's my money. How are you going to use my money to go make more money? Right here is my money. You're already doing great. How are you going to take my money to expand your business and make more money? Is it hiring people, Is it marketing, is it infrastructure, is it operations? Like there's a bunch of different things there that you could use investor money for to build your startup and make it more profitable. So that's the first thing investors like to see. You can have like a presentation. You can make it on Canva. You can use ChatGPT to help you. Actually I would use Chat GPT to help you sort of build this and sort of illustrate what it begins to shape up as. But investors like to see product market fit. Investors also like to see a team that has seen success before. So maybe you're the only person right now building this business, but maybe there's a world where you could bring on a partner who has a lot of success and experience building businesses. In the niche that you're building a business in, if it's a tech startup, if it's a, you know, small business of sorts, maybe it's something else that you're working on. But bringing on a partner that has a clear track record of success as it relates to that specific thing is always a two thumbs up for me from an investor's perspective. And then the last point here, it's not exactly something you can do, but it's something I really encourage people not to do. And that is do not treat your friends and family like investors. I will never raise money from my friends and family. I will always go to venture capitalists. I will go to professional investors first and foremost, because if my business fails and 90%, 85 or 90% of small businesses fail within the first five years. So statistically speaking, speaking, if your business or when your business fails, you will now have to look at your friends, your family, those people that you love and care about in the eyes and say, I lost your $30,000. Right? That's gonna suck. Professional investors are much more used to that. It's just part of the game. It's a numbers game for them. For your friends and family, this might be their first and only investment they've ever made. And so like, putting them in a situation to resent you, be mad at you, hate you for losing their money is a terrible, terrible way to live life. I refuse to ever encourage anyone to raise money from like, friends and family. Always start with the professional investors. And if you're seeing some real traction and like you've raised some money and they want to get in on the action after they've, you know, been very clear traction with your business. I've always respected founders when before I invest into their business, they look me in the eye and say, there's a chance you can lose money. Right? This is not a guarantee return. Things aren't predictable. Investing involves risk. So if you're ever going to raise money from a friend or family after you've seen traction, make sure they understand.
- [29:14]
Robert
Understand that I love this take, but let's go back to the beginning on this. Just starting out, how do you present it to investors? For me, it's research. First, make sure you understand your competition. You understand the total addressable market, you understand the niche that you're in fully. And then you need to be able to replicate that into what is called a pitch deck. So many people overlook the power of the pitch deck. They make it 45 pages long or they use chat GPT to write all the copy so it's not humanized enough. Make a really awesome pitch deck that's seven to nine pages long that spells out in a very clear cut fashion what the business wants to do, what you hope to accomplish and why people should give you the money to do that. That is the best place to start for me. I see pitches at least 30 of them a month and I would say of that 20 of them by the time I'm done going through the pitch deck, I don't even know what they do, how they're going to make money, and how much potential this business could have because they didn't do the research. It is more about a clear message of how you're going to go from idea to profit and growth than it is about putting in a bunch of fancy charts and all these other things that are just blue sky. I hope that helps because for me, the power of the pitch deck is real. Just make sure you do the research.
- [30:41]
Austin
So it seems, Robert, that we disagree on this. I don't think Aaron should pitch anyone on any idea. I think Aaron should go build a business that is making money and has product market fit before he goes out and says, let's go raise some money. I think that investors would much rather see Aaron has already some sort of traction with a product, a service, a good whatever he's selling and making money on and a clear path to growth. I don't invest in ideas. That's normally not like a thing that I do, but. So do you think that Aaron should just go put an idea on a pitch deck and try and raise money?
- [31:14]
Robert
I think it's both. Most of my career, I would start the business, flush out the opportunity, get it moving and then go find capital because then you can get a much higher valuation to get growth. But it doesn't sound like Aaron has the money to start the business right now. So if it's between not starting the business, if it's a really good idea or really good product or service versus raising the capital or building it and then raising the capital, capital, I would say there's nothing wrong with raising a small round of funding to get the idea off the ground, Especially if it's a really, really good idea. Because great ideas and great opportunities don't necessarily always come from people that have a track record and experience or people that can do it on their own. For instance, one of my very wealthy friends had an idea for a construction product. He literally made three prototypes at a friend's garage that was a welder. He Then grinded them down, made them look nice, spray painted them, had a 4x8 banner, and rented a booth at a tool show. So he had no money, he had no track record, and he had never taken the product out and proved it had product market fit. He sold the product that day and he had literally no packaging, no website, no nothing. But the idea was so, so good. He sold it that day for $11 million and it changed his life overnight because the idea for the tool was so good, but he didn't have the money to really flush it out and build it and launch it on his own. So I think we're not on opposite sides of the fence. We're just at two different stages of what people should do when they want to start a business and they have a really good idea, but might not be able to do it without some money up front.
- [33:01]
Austin
Just don't make the mistake of like going into debt. I think a lot of small business owners make the mistake of like taking on 2, 3, 4, $500,000 of debt. I was listening to this podcast episode, Robert, who's a pet grooming Service that went $400,000 into debt to buy all these like mobile pet grooming vans and renovate their lease office and all these crazy things and they're doing 40,000 a year in revenue. It's like, what do you think? Thinking? Why would you like even consider that there is so much traction that you can get with just a couple hundred or a couple thousand dollars to start you off. Do not think you need to have tens of thousands or hundreds of thousands in the bank to go start a business. It is a lie. You can go build something on the Internet, you can go sell something, go make something, like for pennies on the dollar compared to before. AI now that we have all these agents and all the help in your knowledge is essentially free at this point?
- [33:55]
Robert
Yeah, I'm all about bootstrapping. It doesn't work for every type of business. But in the illustration of the dog grooming, the pet grooming business, yeah, they should have started with one used van, put good graphics on it, get minimal equipment and really test the market to see if the market wants what they have to offer. Because that's the problem a lot of people, and I've dealt with it for years and years, if not decades. Somebody comes to me with an idea and asks me if I'll consider consult and I'll tell them exactly what to do and they do exactly the opposite. I had a wonderful, wonderful woman, had an idea for a Product three, four years ago. I told her, let's order a thousand units, let's get the website up and running, let's test market it, we'll get some sales, we'll buy some digital strategies and see if it works. She did the opposite. She bought 100,000 units of the item, spent $70,000 on just inventory that's still sitting in my warehouse, warehouse, and did not listen to any part of what I had to say. And I've been doing this for decades. She lost money, she gave up after a year and the inventory is dead money. Whereas if she would have tested the market and bootstrapped like I told her, she would have been in a much better situation.
- [35:05]
Austin
And also I think Tyler Dank, think that's his last name, he's the co founder of Beehive. He has published his pitch decks on the Internet completely for free. As to how he raised like $30 million for his startup up at like a, you know, I don't know what the valuation is. Hundreds of millions I think is what Beehives now at something like that. But there's a lot of pitch decks and a lot of presentations that have gone out to become the Airbnbs, the Ubers, the Beehives, these like really cool big companies that are hundreds of millions of dollars online for free that you can just go find. So I'd really encourage you, Aaron, to go find some of these pitch decks and learn from them, find their commonalities, figure out why they had this illustration, what this explanation was, how the storytelling came out to be really, really great way to start sort of bootstrapping the idea of presenting to investors. Robert, here's a better question now. Where does he find investors? How does Aaron find his first 10 meetings to pitch to investors?
- [35:57]
Robert
Yeah, when you're just starting out and you and I are definitely on the opposite side of the fence on this one. Friends and family. That's why it's called Friends and Family Round. You go out and get your seed capital from people that are investors that have done it before. Like you said, I do agree with you. Don't go to friends that aren't investors because if you lose their five grand, they're going to haunt you for life. But you go out to people that you know and that know you. That's the key. People that know like and trust you, you know, and let's say you're starting out with a company and you're raising $100,000 or 50,000 to get started, that is the way I would do it. It doesn't mean that it's your family, your immediate family. It just means it's people in your network that you can go out to. You have your pitch deck ready, you set up a meeting, you say, hey, this is what I want to build. I need some startup capital. Would you be interested? Here's evaluation that I think is reasonable for what I'm trying to do. And you go that route. If you want to skip that route and do it Austin's way, that is a great way to do it as well. But either way I think is fine. It just depends on what type of mouse trap you're building. Because if you're building something Online that's in AI, Austin is 100% correct. You can build it for a few hundred dollars, get your LLC up and run running, and you're off to the races. But if you're building something that's like a landscaping company, or you want to open a welding shop or a restaurant, it's not that simple because you're going to need meaningful money to make it happen.
- [37:21]
Austin
I think if I were to start a business from scratch, and I was someone that needed 50,000 or $70,000 of startup capital, I would just save it, I really would. Or I'd pull out of my investment portfolio or something of that nature. I don't know if I'd like really want to go into to, you know, borrowing right now. I think personal loans are probably like 10, 12, 14%. That's high interest debt. I wouldn't want to go into high interest debt to start a business. Now if you can do some owner financing at a lower interest rate, I guess that's different. But yeah, I don't think that's a good idea because again, 80 to 90% of small businesses fail within five years. And so like if someone out there is saying, hey, I want to go start a business from scratch, that's a dog grooming business and I'm going to go take on $70,000 of credit card debt to do. Do it like you're paying now 20, 30,000 a year just in interest to carry that debt. And then like, I just. Why not just save 20,000 in cash and then maybe take 10,000 out of your investment portfolio. You know, got $30,000 and then use some of that money to go buy the used van, maybe hire your first employee for the summertime. Like, I don't know, I feel like there's a lot of ways that you can start a business without going up to your eyeballs in debt. Because when it comes to businesses, debt is very much risk, right? Like if you're going into debt to start a business and your business is unpredictable and maybe you don't get dog, you know, grooming customers for a couple weeks or maybe you have a slow season in the wintertime or like whatever it is, you're a new business owner, you don't know any of these things. That is how people go bankrupt, lose money and find themselves in very bad situations with money then. And then what sucks is like, you know, it's not business debt that just gets forgiven, it's debt on your own Social Security numbers. So like congrats, your business failed and now you still have 80,000 of debt that might be credit card debt. So it's like something I am firmly against. I think if you want to start a business, save up, be lean in the beginning, go find professional investors that have won and lost along the way that are willing to back something that has product market fit, but only raise money when you have a clear strategy to grow the business with this new money. But because people make the mistake of like just raising money to raise money, do not do that.
- [39:26]
Robert
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- [39:56]
Austin
All right, so our next question comes from Zach M. Zach says, hey guys, I'm a new listener and I like what I'm hearing so far. So here's the deal. I'm 38 years old, I'm single and I make $150,000 a year plus some money from my side projects. However, I'm living in the very expensive New York City. I got a late start on investing, so I'm trying to catch back up. My long term goals include traveling more and setting myself up for a healthy retirement, maybe even buying a piece of property. Here's my financial situation. I have no debt. I have 35,000 in my emergency fund. I have 158,000 in my 401k that I max out every single year. I have 26,000 in a brokerage account with Northwestern Mutual that I contribute 600amonth toward. And I just started a backdoor Roth IRA that I maxed out last year and will max out again this year. Now, thanks to a very successful side project, I've got about $70,000 in cash that I need to do something with. What should I do with it? Also, I know you guys typically avoid politics and are generally really bullish on the market, but I'm not feeling inspired by what I'm seeing from this administration and would love any tips on how to protect myself against the US Stock market in case of a crash or a recession. So Zach, you're 38, totally understand your apprehension as it relates to the stock market, the administration, a crash, a recession. The average bear market lasts 15 months assuming there is no recession. So as you think about investing this money or doing anything with your investment portfolio, it's really important to have a long term view. If you are really, really dead set on I am going to cash out my money and I'm going to retire in the next 28 months or 15 months or whatever it might be. Yeah, it's probably going to go down. We're going to get it's volatility like that, like I totally see that. But you're 38 years old and you're likely not going to retire for another 20 to 30 years. So using this volatility as an opportunity to invest in the stock market, just like we did under the Biden administration when the markets went down by 25% with the S&P and 38% with the NASDAQ back in 2022, using that as an opportunity to buy the dip, invest, dollar cost average, whatever you want to call it here is a great long term strategy. No matter who the President is, I can't predict what the stock market's going to do, but no President, the stock market does go up, down, left and right over long periods of time and I will continue to dollar cost average throughout that. Now what would I do with the $70,000? You literally said I got a late start on investing and I'm quickly trying to catch back up. Which tells me that you should take this $70,000 cost, average it over the next six months into the stock market and catch back up. You can do that with your Roth IRA. You can open up a simple brokerage account on public.com, which we call A, after you've maxed out that Roth IRA and start investing into the ETFs and index funds, we talk about VOO, VTI, QQQ, things of that nature. You also mentioned you've got $600 a month going to a Northwestern Mutual account I would definitely get rid of that. They charge really high fees, they put you in some crazy things. Do not do that. Close that account and then move it over to public and then deploy the 70,000 into that account, bringing it up to 96,000 thousand. And because you closed the account on Northwestern Mutual, you likely had to sell whatever mutual funds they had you in. So you'll now sit on about 95, $96,000 of cash in this account. So if I were you, I would take that and start deploying 10,000amonth, 15,000amonth into the stock market, into the index funds and ETFs. We talk about, maybe get some REITs, maybe if you want to do some international stuff like be my guest, guessed. But because you said I got a late start on investing and you're trying to catch up, that's how I would deploy the money. Despite the Trump administration, the Biden administration, it doesn't matter who's in office. What matters is having a long term investment horizon and knowing that we will see ups and downs and lefts and rights in the market throughout our lifetimes. But using them as an opportunity to build wealth over a long period of time is the way to go.
- [44:00]
Robert
Yeah, I agree with this totally. At 38 years old, I don't think you're late to anything. You might feel you started late, but you still have a long time horizon to invest. Invest and create wealth. And I agree with Austin, everything he said is getting that money moved around. Make sure you have that bridge account. Move the money out of the Northwestern account. I think that's a good idea as well. And just really stay to the course. Diversify dollar cost average and you will be in great shape sooner than you know because everything is at a discount right now. We have the tariff wars, we have all of this fear and uncertainty, but it does not mean it's not a good time to buy and not a good time to start that dollar cost aver. With the extra money you have, do.
- [44:43]
Austin
You have any perspective on Zach maybe owning some property in the future, especially in such a high cost of living area like New York City?
- [44:49]
Robert
No, I think everyone should own real estate. I just don't know if Zach's ready yet to own real estate. I think he needs to get his base more secure, especially living in a high cost of living area like New York City. But once that is more secure and more diversified, then definitely he could look at tertiary markets around New York City where they're more affordable. Affordable and there's better numbers that make sense. For real estate. And look at maybe getting a duplex, triplex, or a quadplex to get started. But it's just there's so many options in real estate that I think it should definitely come in everyone's portfolio, but just not early on because there is higher risk of losing money on a first project when you're getting to understand the numbers and how to build wealth in real estate.
- [45:35]
Austin
Yeah, I think a big call out here for you, Zach, is like, we encourage everyone to be a homeowner because rent, normally homeownership, however you want to think about it. Housing is the largest line item in everyone's monthly budget. It's just that's always the case. And when you're renting, that large line item tends to go up every single year throughout your life because rents always rise. But if you own a house, your mortgage payment doesn't go up every year. Maybe the insurance goes up a little bit, but you can renegotiate that. Some taxes, but you can kind of, you know, figure that. That out. I guess I'm trying to get at here is that when you have predictability in your budget, especially as people get closer and closer to retirement, that's a really good place to be. So, Zach, we really want to encourage you at some point in your life to buy some real estate. Maybe you can save the extra cash that you'll earn over the next couple years to have a 80, 150, $200,000 down payment on a, you know, call it 700, $901.2 million duplex or triplex in these tertiary markets of New York City, which would be a really CO to start house hacking, maybe in your early 40s, setting you up for a great position of getting some rental income as you move on to your next sort of housing relationship. But I think what's really important here at the end of the day is to get this money working for you. I don't think you're late, but you did say you want to get started and quickly catch up. So take this money out of the Northwestern Mutual account, add your 70 to it, and then start dollar cost averaging 10, maybe 15,000amonth over the next six or nine months, and you'll be just fine.
- [47:10]
Robert
Yeah, sounds like a great plan to me.
- [47:12]
Austin
So our last question comes from Samuel B. Samuel says, hey, Austin and Robert, Seeing that the markets are all going down so much, I was comparing my weightings in both Voo and Spyi over the last three months, and they've both gone down 15%. I thought Spyi was supposed to only be a fraction of the loss. You guys always mentioned how it helps offsets the ups and downs with some of the market downturns. So I'm really not seeing that. Is it because it's paying out dividends? So in reality I'm not actually losing the same 15%. Please help me understand this, Samuel. You're absolutely correct. So Spyi pays a 1% monthly distribution. So over the last three months, yes, Voo is down, let's call it 15% for round numbers, whereas Spyi, the price is also down 15% because the price of Spyi follows Voo. But over that same three month period, you got 3% of void of income. So 15% of a loss plus 3% of income now means your net loss is only 12% versus the S&P 500 is 15%. So that's sort of how you should be thinking about that. And that's with All NEOs funds, BTCI, QQQI, IYRI, all these funds pay around a 1%, maybe even 2% in BTCI's case, monthly yield. And so when you think about the total return of the ETF versus just the price return, that's where you see the difference.
- [48:35]
Robert
Yeah, I mean the simple breakdown, if we wanted to year to date, is that Spyi is down 11%, whereas Spy, the S&P 500V is down 13.5%. So that's the difference, like Austin explained, is that you do have that offset balance because of the dividends causing you to lose less in a down market like right now. So that is why we love the Neos funds. I think they are great strategies. They keep coming out, out with just incredible products. It's a great question and I'm, I'm glad we could clear it up for you.
- [49:11]
Austin
And another example here is qqqh, as you guys know, we talked about that with Garrett, I believe on the show. To start the year, they launched that sort of hedged NASDAQ ETF QQQH. So the NASDAQ QQQ is down 17 and a half percent year to date, whereas QQQH is only down 10 and a half percent. So that 7% difference there is what we're talking about now. This is more of a hedged equity. So what they're buying some puts, they're doing some other stuff to like really make sure that you're preserving capital during volatility. But that 7% difference is why you listen to this podcast, right? We've talked about those ETFs we continue to share with you guys our favorite ways to diversify your portfolios to have this mindset of dollar cost averaging. Long term strategies like we want the this market turmoil to instead be looked at as an opportunity for the long term and not, you know, this, I say it now every single time, but mental warfare, because that's really what it is right now. We see our portfolios down tens of thousands, if not hundreds of thousands of dollars year to date, and we feel like we're doing something wrong. We should have done something different. We could have timed it. We could have, you know, whatever. That's not the case. You can't think like that. You have to look at this as an opportunity because we will always go back up is assuming the last 90 years of the market continue to be the 90. Yeah, you just have to keep that mentality.
- [50:32]
Robert
What a great episode. I am so happy that we got to touch on the tariffs and all of this volatility and really try to calm people down because I know there's a lot of fear and uncertainty happening in the markets and it's just really, really exciting to be able to cover that in the episode.
- [50:49]
Austin
As always, everyone, thank you so much for tuning in every single week to listen to our Q and A episodes of the Rich Habits Podcast brought to you by public.com we are so humbled that you continue to come back. Ask us, participate in our Instagram comments, sign up for the Rich Habits Network and subscribe to the Rich Habits newsletter. And speaking of the Rich Habits Newsletter, we have surpassed 50,000 email subscribers, which is really, really exciting and we can't wait to see that number continue to grow throughout 2025. As always, if you have a question to ask us, email it@richhabitspodcastmail.com ask it via Instagram dms@rich habits Podcast or join the Rich Habits Network and post it in there because we definitely will get to it and answer it. Thanks everyone and have a great rest of your week.