Rich Habits Podcast - 108: How We're Approaching Volatility in 2025

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Starting point is 00:00:26 That was easy. Hey everyone and welcome back to the rich habits podcast brought to you by public.com, a top 10 business podcast on Spotify. My name is Austin Hankwitz and I'm joined by my co-host, Robert Croke. Robert is a seasoned entrepreneur in his 50s with lifetime revenues of over 300 million and I'm an entrepreneur in my late 20s with a background in finance and economics. Since quitting my full-time job in corporate finance a few years ago, I've built a seven-figure media business and actively advised some of the most well-known fintech companies around the world. As the show name might suggest, every episode, we talk about rich habits as they relate to business,

Starting point is 00:01:06 finance, and mindset. However, we try and bring you two unique perspectives, one from an industry veteran, which is Robert, and the other myself, someone who's still in the process of building wealth and figuring it all out. So, Robert, what are we going to be talking about in today's episode? In today's episode of the Rich Habits podcast, we're having a very timely conversation. At the very beginning of the year, we told you all that volatility was going to be. to be one of the primary themes for 2025. And as we can all see, that's very much been the case so far. So we're really very excited to welcome back to the show, Garrett Paiolalla, managing partner

Starting point is 00:01:42 at Nios Investments. Not only has NEOs been a long time supporter of the show, but they also make some of the most exciting income focused ETFs in the industry. So today we're going to break all this volatility down. We're going to get nitty gritty on all this stuff so you guys can all understand where the markets are, what you should do, and how it affects your daily lives. Excited to be on the show. And congrats on all the recent success of the episodes. It's been great to watch all the other shows. So happy to be here today. So for everyone listening, Garrett is one of the managing partners at NEOS investments. They've got billions of dollars in assets under management via SPY, QQQQI, IWMI, BTCI, right? They've got all these income focus producing funds.

Starting point is 00:02:29 that are tax efficient, pay you every single month, and it's really cool. So we're going to be talking about like, what's going on to the markets? Why is the NASDAQ in correction territory? What's going on with the S&P 500? All of our portfolios are going crazy. One day Trump's talking about tariffs, which is causing everyone to go nuts. Elon's doing something, therefore Tesla stock's going crazy. Like, there's a lot of volatility. And we told you guys about this. We said, hey, we're going to head into 2025. The easy money has been made. Volatility is here. Be ready for it. Let's take advantage of it and I can't wait to learn more about how we can begin and continue to use some of these NEOS funds to offset some of that volatility in our portfolios. So Garrett, why don't we just

Starting point is 00:03:11 jump into things? For those listeners who might not be as familiar with NEOS funds as Robert and I are and some of our other listeners could be walk through what is NEOS funds, what is SPYI for example, and what kind of investor should consider having that ETF in their portfolio? So NEOS investments is a global asset manager that's really focusing on delivering risk mitigated and yield enhancing solutions for portfolios. How do I use where I want to be invested, either it's equities or fixed income or crypto or real estate? And how do I layer on a tax-efficient income component to those core building blocks? We have over 10 products in the marketplace today. And so if we think about one of those core products, SPYI also, as you had mentioned, right,

Starting point is 00:03:57 the S&P 500 high income ETF from NEOS here. We're looking to really harness that volatility, right? So the risks that people are talking about in the markets, that volatility can also be an asset class and really an advantage in your portfolio. It doesn't always have to be looked at as from a negative perspective. And so if you think about SPYI, it's giving you exposure to the S&P 500. So we'll own all 500 plus companies within that index. And then on a monthly basis, we're really instituting an optional.

Starting point is 00:04:27 overlay that's called a covered call. And so you're selling a call option against those equities you own, which allows you to generate income off of volatility. So volatility is really the pricing mechanism for generating income in the options market. And so you look at SPYI, it's giving you that exposure to the S&P 500, targeting a 10 to 12% annualized distribution on a tax efficient basis and is really giving people the ability to own an equity allocation, for instance, but deriving a high degree of tax efficient income and harnessing that volatility as a benefit to your portfolio. And so just to kind of break that down a little bit further, you know, I had about $100,000 invested into SPYI last October. And because SPYI pays investors about 1% per month

Starting point is 00:05:17 or that, you know, 12-ish percent per year, I was collecting about $1,000 a month in just passive incomes deposited into my brokerage account because of the covered call option strategy that you and your team automatically do when it comes to your ETFs. And that's for SPYI and QQQQI and all the other things that you offer to investors. That's correct. Yes. I love it, but I want to ask, I want to back the train up a little bit and ask the question, have you seen this kind of volatility in the markets before? Although I might not look like it. I've been around quite some time as well and managed these types of products and strategies through the great financial crisis, through plenty of markets, through actually Trump's last term. And so as we think about him just being in

Starting point is 00:06:00 the Oval Office at the moment and what's kind of going on, outside of interest rates being at a much higher level than his previous term, right, his rhetoric in the way that the administration carries themselves on America first in aggression, there's ways that you're going to expect these down two, three, four, five, or down 10 percent market opportunities. And I think, for that is, yes, a lot of experience here as Nios, myself, all the rest of our team here as decades of years of experience running these strategies through all different types of market cycles. But I think that's why your podcast, education around investing in portfolio construction, or it is really important in finding ways that you don't have to be concerned about that so much

Starting point is 00:06:41 at night. You don't have to sit there day trading. You can think about how do I position my overall portfolio for my goals. We're not going to see this volatility probably subside at all, this year. Obviously, there's a big push in the administration to get out there for its first hundred days. But outside of that, right, there's still always going to be the stance of unknown behavioral events coming out, shocking the markets, you know, and ultimately making investors think, oh, did I do something wrong in my portfolio? Should I have done something? Maybe I should have took a little bit more off the table. But I was waiting for the next leg up to do that. I think that's here to stay and certainly continue for the foreseeable future. We definitely agree with you. And I think

Starting point is 00:07:18 something you touched on was portfolio construction. And I just want to remind everyone how important that is. It sounds like, oh, cool portfolio construction. I'll just go buy stuff. But I think what's really important about that term portfolio construction as we especially now head into a volatile 2025 is despite the S&P 500 on the day we record this as March 5th, 2025, only being about four and a half to 5% off all-time highs. You've got names like Nvidia and Palantir and other these big crowded momentum trades, 20, 30, 40% off their all-time highs. And so I just want to really reiterate and emphasize how important it is when it comes to portfolio construction to have the vast majority of your portfolio invested into these longstanding index funds and ETFs that we

Starting point is 00:08:08 believe in and have a long track record of rules-based sort of inclusion and exclusion, specifically the S&P 500 versus a crowded momentum trade or, you know, one of these crazy things that you might read about or your barber might tell you or, you know, Aunt Amy might tell you about. So I just really wanted to emphasize that. Something else I want to learn a little bit more from Garrett about is like the psychological side of the equation here, right? Robert is a big mindset guy, as am I. And we take pride in really encouraging people to zoom out, dollar cost average, have a strategy

Starting point is 00:08:41 when it comes to investing. but it's easier said than done, right? There's a wall of worry that's coming that I think a lot of people are trying to overcome themselves in their portfolios. You know, because when you're starting out, Robert, someone might be starting out with a couple thousand or, you know, 10 or 20,000. And so when you have a 10% correction, that's a couple hundred bucks, maybe a thousand or two total, but when you have hundreds of thousands of dollars invested and you experience a 10% correction, that is tens of thousands of dollars that you're losing on paper. And so, Garrett, can you maybe spend some time talking about the psychological and maybe some tactical stuff that people can do to just stay

Starting point is 00:09:18 focused when it comes to investing as someone who's been, you know, in so many market cycles? Yeah. So I think one of the big thesis here at Nios and always in my investment career, has been taking a more rules-based or quantitative approach behind that. And I think it's trust your plan. So even if you're not quantitatively driven, and you develop that plan, that a state plan, what your ultimate goals or your needs are for yourself and your portfolio, that should always be your guiding principle. You got to try to stay outside of the noise of all my buddies, all my friends are invested in Navidia on Amy told me to buy Navidia. Well, yes, if you want to take a small amount of your portfolio that you're willing to take a lot of risk in just to be a part of the

Starting point is 00:09:58 cocktail conversation, you can do that. But don't let that really steer you away from your core needs because your needs could be very different than somebody else's. You might want to be retiring slightly earlier and they're willing to risk it all. We think about it structurally. It's really making sure that you stick to that plan, come up with that long-term vision, and then have more fun and you're investing by tactically adding little things that you feel can incrementally add, but keeps you in the game and keeps you excited about learning about companies, learning about new innovative emerging asset classes like crypto and things where, yeah, those can be a meaningful impact. But at the end of the day, don't risk the farm on it and stick with it because I think

Starting point is 00:10:36 you'll see from what you're learning on your podcast or going back to even a lot of Warren Buffett strategy and a lot of other smart minds. Long-term compounding interest is the best way to build wealth, you know, over time. And so you don't need to swing for the fences if you can consistently stay invested into the market, not miss the swings, right? Market timing, as you'll see in tons of research, actually doesn't usually pan out. You're missing moves in the market to try to time a pull back to time this dollar cost average right just have a good long-term plan dollar cost average in and own what is nice and diversified and then have fun around the edges with your portfolio testing out you know new things or what other people are suggesting after you do your research i love this and i am all about

Starting point is 00:11:21 and i know austin is it's a big part of our message we're all about actively managing our money and understanding you have to be adaptable to market cycles and market conditions but in my opinion and you just nailed it, long-term focus and trusting the plan is the key to success and really building wealth. Too many people think in weeks and months when they're looking at their investment strategies and they should be looking at years and decades. Because at the end of the day, the old adage and it's always kind of funny when we think about markets like right now is the best performing portfolios are usually from dead people and people that lost their password. Because people are so reactive to headline news, whether it's correct or not, or if it's clickbait. And they're just so, they have so many knee-jerk reactions because they're functioning from a position of emotion and not from having a solid plan. And that is one of the biggest parts of Austin and I's message as a team is getting people to understand when in doubt, zoom out. I'll repeat that as many times as it takes a year to get people to not have knee-jerk reactions because I think it is,

Starting point is 00:12:32 ultimately the best strategy. I look at so many portfolios that people ask me to look at to help. And the people that have performed the best over the last 20 or 30 years are the people that did the least. Find good companies, find good funds, stick to it, have a plan, and just let compound interest do its job. So that brings me to my next question. We're so conditioned to think that volatility is exclusively a bad thing. And I totally disagree with this. So how can volatile times in the market potentially be beneficial for your funds and your investors because, you know, they always say that when there's blood in the streets, even if it's your own, it's a buying opportunity. So walk our listeners through it and how it's relevant to the

Starting point is 00:13:20 performance of your products. That opportunity to leverage volatility and create income, if you're thinking about SPYI as a first basis and thinking about that comparative to the S&P 500, right, you see the S&P 500 down, say 2% over a given month. And our product is looking to really distribute 1% a month of income. So if we've generated the 1% a month of income, right, we would be down 1% versus the S&P down too. But you've gotten paid your 1%. And so if you really think about the product overall,

Starting point is 00:13:55 sometimes I'd like to discuss it as a real estate investment. The price of your real estate might fluctuate up and down given market conditions. but your rental income is going to continue to come in. It's a very similar way of thinking about a lot of our products is that the monthly income, regardless of a lot of the market action, whether you're at equities or fixed income or Bitcoin, right, that will fluctuate, but you're getting paid to wait and you're getting paid that money on a monthly basis regardless of how the underlying index has performed. So then once you get a reversion back to the mean and the market starts marching higher again,

Starting point is 00:14:29 right? You participate again with those equities. but it's really around generating more of a consistent and reliable monthly income source so that regardless of what market cycle you're finding yourself in, you know that you're still able to be living and getting that monthly distribution. So I think that's more associated with SPYI. When you want to think about people concerned about volatility or reducing risks in their portfolio, right, we have a product like NUCY that had recently changed the ticker from

Starting point is 00:14:56 NUSI to QQQQH. So it was a little bit easier forever to understand that, oh, I have QQU. QQQI, the higher income version. And I have QQQH, which is actually a hedged version. So it's buying some downside protection to ensure that in market corrections and drawdowns, you actually have some principal protection in your portfolio. And so for QQQH's income, right, you're generally on 8 to 9% because some of that income is being utilized to buy that portfolio protection.

Starting point is 00:15:27 But if you think about the months where the NASDAQ is down, right? So maybe instead of using a scenario where it was down 2% and we generated 1% of income, we're talking about maybe kind of more year to date. What's happened over the first kind of two months of 2025, NASDAQ being down roughly 3%. The new QQQH is really down around 1%. So you've had an outperformance to the drawdown inequities or looking at a longer term basis. Those times when you can hedge out some of that drawdown allows you to actually outperform the index, even on the upside.

Starting point is 00:16:03 So what do I mean by that? If you think about kind of a trailing one year basis for KQQQH right now, you'd see that the NASDAX up roughly around 12.5% and KQQQH is up around 17.5%. And that's really because we've been able to hedge out some of those risks associated with, you know, December of 2024 or the start of this year and how tech is slightly underperformed, given of course the volatility concern. So again, back to that portfolio. construction, really what is helpful in your views, your estate planning goals, you know, and focusing

Starting point is 00:16:37 on the longer term investments. And if volatility concerns you, right, pick investments that can mitigate that volatility either a little bit, you know, if we think about QQQQI and a 1% outperformance, you know, on the downside or something hedge like a QQQQH that actually builds in some portfolio protection and hedge if the market's going to go down. Now, before we jump into our next question for Garrett, let's take a moment to hear from this episode sponsor, public.com. If you are serious about investing, which I think every single one of you who are listening to an episode of a podcast about volatility probably are, you need to know about public.com because on public, you can invest in everything, stocks, options, bonds, and cryptocurrency.

Starting point is 00:17:17 You can even earn some of the highest yields in the industry like their 6% or higher yield bond account right now. Public is a FINRA registered SIPC insured platform that takes your investments as seriously as you do. So fund your account in five minutes or less at public.com front slash rich habits and get up to $10,000 when you transfer your old portfolio. That's public.com front slash rich habits. Paid for by public investing and full disclosure is in the podcast description. I really like this conversation because I think it gives us an opportunity to sort of dig deeper into like what people can do during times of volatility, right? one, you can just like do nothing and it can continue to dollar cost average. That's a great strategy

Starting point is 00:18:04 in itself. Two, you can try and time the markets by like selling everything and then like waiting for it to go lower. But then like Gary, you know, we just talked about like you can't really do that very easily. So it's like I can't predict the future neither can you. And then there's this third thing, which is hedging the downside, which means that you're beginning to allocate capital instead of all of your net new capital going into like, you know, buying these ETAs. and index funds, maybe you're adding a little bit of capital to things like gold or real estate or things that are like, you know, hedges against downside risk, historically speaking. And what's cool about QQQQQH is you've built in to the ETF itself via a put option strategy, a hedge

Starting point is 00:18:48 inside of the product, which means that you will still be invested in the NASDAQ. Therefore, if the NASDAQQQH will also go down because it's underlying, you know, index is the holdings of the NASDAQ, but because we've sort of put in this hedge, this put option strategy, we're not going to go down as much. And so like as I look at right now on Morningstar, the year to date performance of QQQ, right, just the NASDAQ is negative 3%. But the year to date performance of QQQH, which is your hedged ETF, is only down 1%. So you're still down because like the underlying index is down, but you're not down nearly as much as if someone just had exposure to the NASDAQ. Yeah, that was a great example, an explanation. I think this comes back

Starting point is 00:19:35 to we talked to earlier, right, portfolio construction. And so what is your comfort level within your portfolio? Every individual is different. And so as you think about the risks that you're willing to take or the upside that you want to get, this is a great way to be able to expouse your views in your portfolio needs. So you could have an allocation of QQQI that's going to give you a lot more of the NASDAQ risk and higher income. and you can allocate a portion to QQQQH, which is going to protect more of your downside. You get a little less income, but you can maybe, for you, sleep at night better, knowing that you have some portfolio protection if you wake up tomorrow. Markets down 3%, and you're like, that completely disrupts my day, makes me want to not go to work,

Starting point is 00:20:18 not to do other things. I'm so worried about the portfolio. Well, then maybe you're one that should allocate more towards a QQQQH or, like you said, a gold or real estate where you're diversifying those. risk assets, still generating income and having a long-term plan, but you don't have to watch it day to day, so it keeps you invested. I think that's one of the biggest things that Robert said, too, is like, you've got to stay invested in the market. And so if you need to take a little less risk to stay invested in the market and not just punt, right, that's a better strategy over the long haul

Starting point is 00:20:47 to compound your retirement and wealth and passive income than it is to take the high flyers, more risk allocated, and then try to go to cash and time the market perfectly. And I think for me, the biggest takeaway from this episode that I hope everyone watching and listening gets is that there are more than two options. You don't either have to do nothing or sell it all and sit on the sideline. There are lots of alternatives that we're breaking down today to help people stay risk on, but pull back a little bit and brace for the volatility because I think that was an incredible explanation of the hedged equity income of what you guys are doing. So are you thinking about doing this and implementing this strategy into other indices as well? We are. We really want investors

Starting point is 00:21:34 to expouse their views. So although you look at our products and we have 10 across all asset classes, we also want them to choose their risk tolerance within those asset classes. So we do have an S&P 500 hedged equity income product that's going to come out, you know, hopefully within the next month or so. We've looked at other products where, you know, we do have a Bitcoin, right, that's generating high income. Well, what about downshifting some of that risk? you know, within that category as well. So as we think about other ways to allow investors to pick their risk tolerances and the asset allocation that they're looking for in those buckets of equities or fixed income or crypto, we want to let them choose those. And so, yes, we'll definitely look to

Starting point is 00:22:14 continue to expand this so that people can, you know, feel comfortable with what they want to be allocated to, but also generate this, you know, tax efficient monthly income for passive income needs and compounding? I just looked it up, Robert. And so episode 100 or 2025 market predictions was on January 13. So about two months ago from the recording of this episode. And I just looked up sort of our notes here. And in that, I said NUSI.

Starting point is 00:22:41 It's going to be how I plan to offset some of this volatility, which has now turned into QQQQH. They just renamed the ticker. So like, we try to bring you guys the sauce here before you see the outperformance, before you really need it. It's what we take pride in in the show. We love bringing you guys cool new ideas, introducing you to the industry experts like Garrett here, who's so graciously joined us to, you know, break down these different strategies

Starting point is 00:23:05 and different ways that you all can continue to navigate what is probably going to be a volatile four years under a Trump administration, but do it from a place of confidence. Yeah, I love it. And like I always say, you don't have to be first to an emerging sector. You don't have to be first to an index fund or an ETF or a stock or a crypto. you just have to be ahead of the masses and understand what you're investing in. And that is one of our life's work is teaching and educating people on how to make these moves and how to be ahead of the curve so they can optimize their financial strategies.

Starting point is 00:23:39 So unfortunately for us, Robert, this episode will come out the Monday after the Trump administration had the White House crypto event. So we don't know what's going to be disclosed or talked about there. So we're just kind of keep that in mind as we answer these questions, both myself, Robert, and Garrett here. So Garrett, what are your thoughts on a Bitcoin reserve? You guys have BTCI. You're thinking about like adding a hedged Bitcoin thing. So like, how are you guys thinking about adding allocation of this asset class and allowing retail investors to keep some allocation and exposure while also providing some income? Because I know BTCI is paying a 29% distribution rate right now.

Starting point is 00:24:19 Yeah. So BTCI will range between that 25 to 30%. But can you? view exposure to the majority of Bitcoin's move. And so I think as we think about just a crypto reserve or future products in that, right, future products for us is always around helping investors choose their views, right, expose their views, their risk tolerances. And so we just like to be that solutions provider. And so if we can think about downshifting your risk or taking that risk and generate an income in ways or even enhancing it, right, empower investors to be able to choose what it is that they need, which is honestly the greatest part of ETFs as a whole, is just that innovation is constantly happening and letting people choose in a tax-efficient way

Starting point is 00:25:00 what they want. Thinking about the crypto reserve, I mean, listen, more power to the government to try to find ways to dig us out of a significant debt hole, right? So if we think that, right, cryptocurrencies and emerging, you know, allocations or emerging sectors are coming, right, supportive of that. allow people to be able to be empowered with, you know, different investment choices. And I think as long as you disclose risks, you know, out to them appropriately, that's what our government should be more focused on than reining in and holding back investors from accessing different type of investment

Starting point is 00:25:35 choices. So it's interesting to see. I mean, overall, I think this is not a shock to investors, right? Trump was very pro-crypto through the end of, you know, his running for election, as soon as he got elected. He put it a cabinet that was very pro-crypto. So to see this come to fruition and continue to forge forward doesn't surprise me, but certainly embrace it for the fact that it does help us as product issuers create more optionality, pun intended, for investors. And that's what I think we get excited about to be able to support the needs of investors and new innovations along the way and having the White House be supportive to emerging asset classes. You know, sure, allows us to help bring more product to market. Now before we ask Garrett, our final question, let's take a moment to hear

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Starting point is 00:27:44 And let's unpack it a little bit first. You guys are always coming out with new products to meet every investor's needs, and that's what we love about what you guys do. So why don't you give us a quick rapid fire on any of the new products that you're excited about and just a brief explanation of what they are? Sure. So recently we launched our real estate high-income ETF, IYRI. So it gives you exposure to diversified U.S. real estate across all spectrums, but is looking to

Starting point is 00:28:14 generate roughly 10 to 12% in yield. So if you're thinking about being allocated to REITs, then that's at 3ish percent. You know, in the current market environment, this is going to give you that 10 to 12. You know, thinking about QQQQH, we love it. That's not a new product, but obviously a new brand of the ticker. Excited about that because of just where the market conditions have really been at the moment. And the increase of volatility lets people sleep more at night and a lot of conversations from investors, you know, around that product. We did add a 20 plus year treasury bond fund with enhanced income. And so folks that are looking to take longer duration in their portfolios within the fixed income space would still want a government, you know, allocation. TLTI is that

Starting point is 00:28:55 fund, which has been really interesting as we start to see, is the Fed going to continue to, although slowly still cut rates, you know, over a longer period of time and kind of lock in those, you know, multi-generational rates that we haven't seen in a while. And then I did briefly mention me at the S&P 500, you know, hedged equity income products coming out to market. looking at some more things within the commodity space and Bitcoin. So, you know, hopefully those will be a little bit more to talk about as, as times come. Well, I do want to double click, though, on this IYRI fund because I made a TikTok video recently explaining to people a couple, you know, different places they can park their money during times of volatility, if it's a commodity or if it's gold, like

Starting point is 00:29:35 whatever. But one of those things that I had talked about was the Vanguard Real Estate Index Fund, ETF, VNQ. And VNQ is up 7% year to date compared to the NASDAQ being down 3% and the S&P being down 1%. So let's call it a 10% swing in real estate versus like technology stocks. So like you guys just introduced IYRI, which I'm assuming is very similar to VNQ. What are you seeing in the real estate markets right now that are positive? Why are we seeing such a positive, you know, return so far in the last just two and a half months of 2025 in real estate. Yes, certainly an ease of secondary interest rates, right? So thinking that the Fed hasn't cut another Fed funds rate, but just looking at what the tenure is done just in the last

Starting point is 00:30:25 even week or two weeks here, right, is that a significant reduction on secondary interest rates, mortgage rates, those types of things. And obviously because of real estate, right, that easing of the debt lending and the leverage that real estate, traditionally has on it is definitely a function of price appreciation for real estate investments that are very heavily debt overlaid with mortgages in different structures. So I think this comes back to the portfolio construction again that we've been speaking about is like another way to make sure you're diversified across your portfolio and not taking all your bets within tech, you know, and AI if you're concerned about what that volatility could be. And so IYRI is allowing

Starting point is 00:31:06 you to really get exposure to that U.S. real estate market, but think about dampening the volatility even more and generating that kind of consistent monthly distributions that it's able to produce above and beyond just that income-oriented allocation that you normally get just by owning, you know, U.S. real estate or REITs, you know, in the public market. I appreciate that breakdown, Garrett. I'm looking at it right now. Mortgage rates are down to 6.19 percent, which is the lowest they've been since October of last year. So to your point, as, you know, the 10-year continues to tick lower, mortgage rates will likely go down as well, which increases valuations for real estate. And I know when you guys launched IYRI, we talked about it on the show

Starting point is 00:31:45 as something to look into, and you guys are outperforming both the S&P and the NASDAQ with this fund. So definitely something that I will keep on my watch list and add to over time. So appreciate that breakdown. And just for a reminder for everyone, too, because I know a lot of people may have been, you know, just started investing. and October, November, December, January of this year for the very first time. And they're like, whoa, wait a second. Why are my stocks down? You know, why is my portfolio in the red? What's going on? Volatility is the price we pay to invest. That's how I want you guys to think about it. You will not be able to get the, I mean, for the last two years, 20, 25 percent returns without also

Starting point is 00:32:26 weathering the storm of a contraction, call it 5, 10, 15 percent in the markets. I think it's the statistic, Robert, from Goldman Sachs that says 68% of all bull market years, dating back to the inception of the S&P 500, contained at least one, 10% or more contraction. Now, we're talking about contractions. We're not talking about recessions or, you know, a great financial crisis. We're just talking about the ebbs and flows of the market. And I really hope this episode can kind of usaw a lot of people into realizing that, you know, the market is a pendulum. It swings way to the upside and way to the downside, but over time, it continues to tick higher. And I want to encourage everyone to just take a deep breath. We're

Starting point is 00:33:13 trying to give you as many ideas here as we possibly can to have some hedges in your portfolio or have a little bit of income to perhaps offset the price of volatility that you're experiencing because, like everyone else, we're navigating these markets in real time as well. with the experience that Robert and I and Garrett, of course, have, which in this case is decades. Yeah, so, Austin, I think that's a great point, right? And what we've talked about a lot in this episode is something you guys started with, dollar cost average, right? You see those five to 10 percent corrections, look at that back to history and probably

Starting point is 00:33:43 looking at that Goldman Sachs example, great buying opportunity. So focus on continuing the dollar cost affidge, try to make sure that you're thinking about the risks that you build in that portfolio of construction or your long-term plans and stick with those, you know, and make sure that whatever you are investing in, you're willing to weather a down five, a down 10 percent, because those are healthy, right? Those are healthy ways to make sure that the market can continue to trend higher and companies can continue to grow their earnings that carries everything. If you just had a straight up market, it would defy all laws of financial balance sheet statements. And so naturally at some points, you got to have some type

Starting point is 00:34:21 a fluctuation, but think about those things as advantages because I don't think anyone has ever been upset buying a dip in the market when they look back at their portfolio after at least 12 months, if not, you know, certainly any longer period of than that. Yeah. So for me, the biggest takeaways from today are portfolio construction, patience, stick to the plan and diversity. I think those are the key takeaways everyone should be thinking about as they exit this broadcast and really take notes on because it's really all about just understanding what is happening in the markets. How do you navigate the murky waters when there's a lot of volatility and come out the other side, even a bigger winner?

Starting point is 00:35:02 So I love it. I think this is a great episode. Very, very fun to have you on, Garrett. As always, very enlightening. And we appreciate you spending the time with us. Yeah. Thanks, guys for having me. Just honored to be here and appreciate the opportunity.

Starting point is 00:35:16 Thanks so much, Garrett. Robert, we've been talking about volatility now since, what was it, the 13th, of January. It was one of our major themes for the year. I think it's going to continue. Earnings, growth is decelerating a little bit from Wall Street's perspective. It's called the Great Unwind, as I'm seeing in some headlines. And just there's a lot of fear and anxiety and movement in people's portfolios that they weren't expecting. We love to share ideas with you. And we love to bring you all the best of the best, but sometimes those aren't always good news. And volatility is something that is not been good news, but we're.

Starting point is 00:35:51 We're happy to have called it per se. And we're trying to give you guys the best possible ways to offset some of that volatility, if it's with income or if it's different ETFs or asset classes or whatever you can do. Because at the end of the day, the most important thing is to stay invested and continue to grow your wealth over a long period of time. And to think about years and decades, not days and weeks. That is right. Create the plan. Execute the plan.

Starting point is 00:36:19 Stick with the plan. All of the above. because people just want to have so much emotion and have these knee-jerk reactions. And we're not going to allow it here at the Rich Habits podcast because we're here to help you make money no matter what the market conditions are. And that is what I love to do every single day for each and every one of you. So now, Robert, let's jump into the Q&A section of this episode. So our first question, or just maybe a comment in general here, comes from Teresa via Instagram DMs. Teresa says, I still hold fast that cryptocurrency is fake money.

Starting point is 00:36:50 I can't pay my rent with cryptocurrency. I can't buy my groceries or feed my kids with crypto, and I can't pay my electric bill with crypto either. I've listened to your podcast from day one, and I really wish you guys would stop hyping up cryptocurrency. Until we can use it to actually live, please just stop talking about it. And Teresa's reply here was actually to our Instagram story, which was a screenshot of Donald Trump talking about their strategic crypto reserve or something like that on truth social.

Starting point is 00:37:19 and so we had thought it was a good idea to share it with you all. Robert, let me take a first stab at this, because I know you've got your own thoughts on all this stuff, and I might be coming from a much more conservative perspective when it comes to investing in cryptocurrencies very far out there for a lot of people, and including myself. So Teresa and everyone else, let me just like state two things. The first thing is I love the idea of being diversified,

Starting point is 00:37:43 as well as being invested into asset classes that are not correlated to the stock. market. I think that's a very important diversification measure that a lot of investors try and uphold when they're building a portfolio. Of course, you want exposure to profitable, publicly traded companies, but maybe you also want exposure to real estate or maybe commodities like gold or maybe like fine wines and whiskeys or artwork, right? Building a investment portfolio can mean a lot of different things. And in my experience, since I think it was the summer of 2017, I'm a I added Bitcoin and have been actively adding Bitcoin to my own diversified investment portfolio. Now, we can have all the arguments in the world about its utility or other crazy meme coins and

Starting point is 00:38:31 alt coins and all the scams that are out there. I'm not disagreeing with that. But what I am doing is I really, really believe now especially that it is a multi-trillion dollar asset class and that we have ETFs around it and even the president of the United States is flirting with the idea of having a strategic reserve of it, that having one, three, maybe five percent of your net worth tied to this asset class via Bitcoin is a good idea. And then something else I just want to quickly touch on is like a lot of people, again, about a half a dozen, we're like, oh my gosh, you're talking about Trump, I'm unfollowing you, I'm not listening to your podcast anymore, I don't want to be a part of this. That is totally your right to do. And we wish you all the best.

Starting point is 00:39:16 all we're trying to do is navigate a market environment no matter who is president. Just like we did under President Joe Biden, we will also do under President Trump and whoever turns out to be the next president. We are always trying to figure out what the markets are doing, how whoever is sitting in power is impacting them, if it's a chips act like under Biden, or if it's with tariffs under Trump or a strategic crypto reserve. Like we don't know. We're just trying to actively keep you guys updated with what's going on and help you.

Starting point is 00:39:46 navigate the market's volatility under whoever administration in real time. I love that answer, and I love this question because it drives me crazy. I think the people that have these type of responses that they're unfollowing us because we mentioned Trump or shared something from Trump, please understand this. And Austin, you nailed it. We don't care who's president. We don't care who's governor. We don't care what's happening with any of it. We are here to educate and guide people. on how to make money, no matter what the economic or political conditions are. End of story. Full stop.

Starting point is 00:40:24 That is it. We are here to help. We don't care. We are not political. We're not religious. We are here to help guide you. So you make the most money and live the best life. That is it.

Starting point is 00:40:34 So when it comes to Teresa's question about cryptocurrency, it drives me nuts. I can right now take my debit card. I can enter it in. I can connect it to a crypto account. I can put $1,000 in that. crypto account. I can buy Bitcoin, let's say, goes up to $4,000. I can then cash out the $4,000 right back into my bank account and buy groceries, pay for my kids, pay for rent, pay for my car payment. I can do whatever I want with cryptocurrency just like I can with the stock market.

Starting point is 00:41:05 Is it easy to use cryptocurrency like a dollar bill or a debit card? Not yet, but it's getting there. But at the end of the day, when it comes to being a good investment structure and a good sector, I think it's phenomenal. We've seen higher gains with Bitcoin over the last five years over any other asset class on Earth. So I've personally cashed out millions of dollars from Bitcoin alone in the last seven, eight years. So if that's not real and you consider that fake, I'm sorry. I think what you should do is more research and have a better understanding of what you are investing in because at the end of the day, we're not going to ever stop talking about cryptocurrency. We're not hyping it up. We are educating our job and our goal in life with this

Starting point is 00:41:52 podcast and our community is to help educate people on all things, business, mindset, and finance to help them grow and retire with dignity. I love all that. And the only addition I'll make is I am religious, but I don't talk about it on the podcast. I don't think anyone cares that I believe in God. So politics, religion, whatever, like it doesn't matter. We're not trying to push that on to anybody, but we are trying to help you all navigate the day-to-day headlines and encourage you to have exposure to asset classes that have historically speaking now for the last decade been uncorrelated and have outperformed the S&P 500. Just like if, like, Robert, there was a crazy champagne that was just the best champagne in the world. You could be sober and hate drinking

Starting point is 00:42:39 and not believe in it at all, but I would still encourage you to somehow own a bottle of the champagne because it tends to go up over time, right? Like that's the same thing. It's like, you might not have to believe in this stuff. But at the end of the day, having one, three, five percent of your net worth invested or even exposed even to this asset class is a good idea. And that's what we're just trying to share with people. So Teresa and the other dozen of you that had a negative comment to share. It's all good. We respect that. We love this country. It's a free country. We encourage you to do whatever is best for your mental health, your financial well-being, everything in between. Like, we're rooting for you regardless if it's our podcast or someone else, but just know that we're not coming at you

Starting point is 00:43:18 from some crazy political agenda. Like, we're just trying to help y'all make money. I love it. All right. Now let's jump into a real question coming from Michael. Michael says, hey guys, I'm an avid listener of your podcast and I love the straightforward approach you guys share. I have a question as to what to do with my annual bonus of about $12,000 before taxes. It's going to get paid out at the end of March. I'm 32 years old. I make 100,000. $125,000 a year. And between my Roth IRA and Roth 401K, which is invested into the S&P 500 in the NASDAQ, and my bridge account, I have $155,000 invested to build my base. I also have a $20,000 emergency fund and an $1,800 a month mortgage at a 3% interest rate. I don't have a car payment or any other debt. So here's my predicament. Do I just do the responsible thing and put all $12,000 of my bonus into my investments? Do I splurge on something? a little bit. How much of this should I use for fun money? Would love to get your perspectives. Robert, you want to answer this one? Yeah, I love it. And this kind of goes back to one of your themes,

Starting point is 00:44:23 Austin, and that is you're 32 years old. You're crushing it. You're doing great. You've got your base built. You're really, really doing well. I think you should look at splurging on something. What better time than now to reward yourself for all your hard work, all of your educational stuff that you've learned and really set yourself up from a literacy perspective with respect to your finances. So yeah, my opinion is it might be time to go ahead and splurge, spend all of it, spend part of it, but reward yourself. You've done an incredible job. You're so far ahead of the curve. And I love hearing stories like this. So thanks for sending this question. Michael, you have done a wonderful job. You're 32 years old. You've built your base. You've got

Starting point is 00:45:04 $155,000 invested. You have a fully funded emergency fund. You have a low rate mortgage. You have no car payment. Like you're crushing it right now. The world is your financial oyster, essentially. If I were you, I would feel as if you've been working hard or doing these things right and have likely been for several years. Maybe at the expense of a vacation, maybe at the expense of a car you really wish you could drive, maybe at the expense of something in your home that you just think is a crazy idea, like a $4,000 espresso machine, right?

Starting point is 00:45:38 Like, I don't know what makes you tick, but I do know that you can get burnt out. doing this sort of frugality stuff really easily if you don't reward yourself along the way and I would imagine considering how well you've done financially here at such a young age you might be approaching what could feel like a burnout situation so to Robert's point I'm in total agreement take half of it take call it $6,000, $5,000, $4,000 and take that dream vacation go on that really cool experience or maybe go buy that thing that just like never makes sense for you but you know what But maybe you're super into coffee. You want to get this espresso machine or maybe it's like a hot tub.

Starting point is 00:46:18 Like, I don't know what you're into. But there's something I'm sure you've kept in your notes app for a couple years now that's like, if I ever had the money, I would buy this because it really make me happy. That I think is what you should spend half this money on. And yeah, maybe the other half of it, yeah, throw it in your bridge account, use it to max out your Roth IRA. Like, whatever you want to do, you already know the protocol. You're very smart when it comes to money.

Starting point is 00:46:38 But I do think splurging on something's a good idea, especially if it's going to keep you motivated for the next 12, 18, 24, 36 months to stay with it financially. Yeah, I want to unpack this a little further because I love this question about splurging because I feel I'm going to use a reference of one of my dear friends. He is unmarried, no kids, has millions of dollars. And when I went to his house the last time I was around in Ohio, this was probably four years ago, he had really old furniture. He had a terrible 15-year-old TV.

Starting point is 00:47:13 he had a beat up truck, all of these things. And I looked at him and I said, what are you doing? You have millions of dollars. You have nothing to do with it. Why don't you splurge? You've been talking about buying a nice boat. Get rid of your crappy boat. Get a real boat.

Starting point is 00:47:30 Upgrade your TV. At least it'll cost you $300. So when you're watching TV at night, at least you can enjoy it. So you have to remember, we're never going to be educating to just save, save, save, invest, invest, and not enjoy life. you have to have balance there. Otherwise, what is the point? So I love this.

Starting point is 00:47:48 I love this question. And just always try to find a balance so you're not just building your wealth for the future and not enjoying the present. And my last point here is when you do think through what that item or experience, specifically item, I guess, that you want to splurge on is, think about the cost per use, right? Cost per use. So, for example, I spent like $2,000-ish dollars buying a state. to the art, beautiful LG 4K, QLED TV. That's like 60 inches. I'm in love with it. I love it. I love it for

Starting point is 00:48:22 movies. It's amazing. And I'm cool with that because I'm going to have it for like the next five or six years. I use my TV probably three to five times a week. I'll sit down like just last night. I was watching Love is Blind with my girlfriend. So it's like, think about cost per use. I'm okay with spending that much knowing I'll only spend it every four to five, six years, but I'll use it all the time. So don't like go buy something silly that you're never going to use. Another example of this is I just, you know, bought a $4,000 couch. I've never had a nice couch. My last two couches were Facebook marketplace couches. So now I'm like investing into what I want to be like an elevated new experience for my daily life is like I sit on a couch all day long. Like I need to have something good. So think about it like

Starting point is 00:49:01 that perspective cost per use. I think that's a very responsible way to think about splurging. I love it, love it, love it. One of my big expenses is mattresses. I do not skimp on my mattress. I want to make sure that when I fall asleep, that I feel like I'm at the best resort on earth. So you'll never see me skimp on a mattress. So our next question comes from meta inside of our Instagram DMs. She says I'm 32 years old. I'm married with a baby on the way and I've paid off all my student loan debt of $180,000. And my husband has about $25,000 left of student loan debt himself. Now, We have roughly 185,000 sitting in a high-yield savings account earning about 4% because we thought that we'd be buying a house soon. However, New York City is becoming too expensive and we're considering moving to a different state in the next five years,

Starting point is 00:49:50 give or take depending on our child care situation since all of our family does live in New York City. Now, my husband has $17,000 in a 401k. I've got $50,000 in a Roth IRA, as well as 30,000 in my bridge account and $45,000 invested in a city pension plan from work. We're currently renting a one-bedroom apartment in New York City for $2,300. And with maternity leave coming up, we anticipate a huge pay cut this year since I make double my husband's salary. What should we do with the cash sitting in this high-yield savings account? I'm afraid to invest it short-term and have the markets go crazy and lose some as well as like consider my taxes and all that fun stuff that comes with investing. So I'm trying to figure out what to do. Do we set ourselves up for

Starting point is 00:50:34 retirement more by investing this in a long-term account? What do we? we do here. So Robert, I want to take a first step at this one. I love where you guys are at, and I think it's fantastic at your age, how you're looking at money and what you're doing, but I do think you're on the right track. Having that much money in a high yield savings account, whether the markets are turbulent or not, I think is just too much. I would rather see maybe 50 in the high yield savings account, get the other $135,000 working in the markets, especially at your young age, because then it is working towards your retirement. getting it into some of the index funds that we talk about,

Starting point is 00:51:11 getting good balance, getting more diversity for the long term, because are we going to see volatility for the rest of 2025? Probably. Maybe we'll see some downturn through this year and into 2026. Maybe. But over time, you need this money making more than 4%. And you need it active in the market. So I think you're on the right track.

Starting point is 00:51:31 I'd get a bunch of that money out and get it activated and then go from there. I think that would be the best plan long term for you, especially because you have a 30-year investment time horizon ahead of you and plenty of time to weather any storms in the market. So it seems like meta here has about between her and her husband, a hundred-ish thousand invested toward their retirement accounts and their bridge account. And then they've got this 185 that I'm sure they've been saving aggressively for as a down payment on, you know, 800, $1 million, $1.5 million. dollar piece of property in New York City, which makes a lot of sense. If I were you, I would probably

Starting point is 00:52:13 want to, one, not make any money moves until after your baby has arrived. I pray for a happy, healthy baby, but who knows what could happen. So making sure that you have some of that financial flexibility in case a medical bill that is unexpected comes for something crazy, right? Let's hope it doesn't happen, but no one can predict the future. So I would want to make sure that like you're neck high in cash when it comes to making sure that this baby is delivered properly and all as well. The medical bills come. You pay them. You're off to the races now. And then I'd say with what you have left over, you mentioned you'd be making a lot less because of the maternity leave. I would also probably consider using this money to supplement your

Starting point is 00:52:58 lifestyle while you're home with your baby. I don't know if that's going to be three months or four months or five months or six months, but you should not go into like debt or credit card debt or anything like that to supplement your lifestyle while you're on maternity leave. Like use this money. That's what it's for. And then once you're back working and your husband's working and, you know, maybe the family's helping with the baby, right? It's like it's not really, you know, things are back to normal, quote unquote.

Starting point is 00:53:24 Now it's time to make decision of like, one, do we really want to stay in New York for the next five years. And if that's the case, like, 2,300 a month sounds pretty reasonable for an apartment in New York, depending on, like, how your situation is there. So maybe you stick it out for a couple of years and continue to save some money for a big down payment or a decent size down payment. If you end up moving somewhere else in the country with lower taxes and a lower cost of living. But in my opinion, if you do plan to stay in New York for at least five years and you don't plan to buy for the next five years, putting this money to work in the markets by investing into the S&P 500 and like, you know, VTI, VO, things like that that are just going to be longstanding up into the right for a long

Starting point is 00:54:09 period of time is a really, really great way to make sure your money's growing for you, assuming you're not going to spend it for the next five years. And you also like have this long-term vision of what owning real estate could look like in your late 30s and maybe early 40s and like really flourishing as a family somewhere else in the country that might give you more than, you know, a small backyard and whatever comes with buying in New York. I don't like New York City, Robert. It's cold and it's expensive. Yeah, I don't like New York either. I like to visit. The commerce part of it is great. We've had some really fun times there. But yeah, I just don't think I would ever want to live in a market where parking is tough and you don't get a yard and there's just not a lot of

Starting point is 00:54:51 room and really, really high cost of living because a lot of times the increase in wages doesn't meet what the increase in living costs. So it's kind of difficult, but love the question. You guys are doing great. And Austin, I think your takeaway was perfect. Betta, Michael and Teresa, thank you so much for asking a question or just providing your feedback, Teresa via Instagram DMs. Feedback is always welcomed. Questions are always welcomed. I mean, Rich Habits podcast on Instagram is where you can ask us these things, as well as emailing us at rich habits podcast at gmail.com and then also inside the rich habits network now robert what's really fun right now is anyone i don't want to like emphasize this anyone can go and start

Starting point is 00:55:35 a seven day free trial inside of the rich habits network completely for free right so like we've already had i don't know 30 40 50 people do this trial in the last like three weeks so it's been really really cool to see that so many people are like actually utilizing this but seven day free trial like put in your credit card info but you can cancel it it won't charge you like like set a reminder on your phone if you hate it no hard feelings but that'll give you the time to join a live stream at least once watch some of the video content ask some questions get acclimated and see if being a part of this community is right for you so there's a link in the show notes below to give the rich habits network a free trial like what do you have to lose

Starting point is 00:56:16 seriously go join one of these free zoom call live streams it'll be so much fun watch a play. Like, there's nothing to lose if you just set a reminder on your phone and cancel if you hate it that much. So join us in the Rich Habits Network completely for free, seven-day free trial. Like, we'll see you there. The Rich Habits Network is definitely one of the coolest things I've ever built and been involved with you, Austin and Christians. So really, really incredible. And for anyone that's looking to step up their game in finance or business or mindset, I think it is the best money they could spend. So I definitely love the free trial. always. Thank you all so much for tuning into this week's episode of the Rich Habits podcast,

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Rich Habits Podcast - 108: How We're Approaching Volatility in 2025

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