Rich Habits Podcast - 124: Our 2025 Mid-Year Update + Bonus Predictions

Starting point is 00:00:00 Hey everyone and welcome back to the Rich Habits podcast, a top 10 business podcast on Spotify, brought to you by public.com. Today's episode walks through our 2025 market predictions, as well as what we're seeing for the second half of the year. So be sure to stick around for some of those. My name's Austin Hankwitz, and I'm joined by my co-host, Robert Croke. Robert is a seasoned entrepreneur with lifetime revenues of over 300 million, and I'm a multimillionaire in my late 20s with a background in finance and economics. As the show name might suggest, every episode, we talk about a seasoned entrepreneur. We talk about. rich habits as they relate to business, finance, and mindset. So, Robert, what are we going to be talking about in today's episode? Before we jump into this episode, Austin and I have a very

Starting point is 00:00:40 special announcement to make today. You have all asked for more content and episodes and we're delivering. Debuting on August 1st, we're so excited to announce the introduction of a new Friday episode that we're calling the rich habits radar. We're super stoked about it. These new Friday morning episodes will be Austin and myself breaking down the biggest headlines that impacted your portfolio of that week. New episodes every week starting Friday, August 1st, every single Friday. Right? That means every single Friday going forward. We'll be walking you all through the most consequential market moving headlines and happenings. We want this new episode to become your go-to weekly summary of the stock market, economic news, and the headlines that matter most to you

Starting point is 00:01:31 and your money. And we cannot be more excited about it. We are so excited. We all know that Dave Ramsey's entire message is paying off debt, but we're doubling down on our identity and messaging, and that is of earning more money. So the Q&A section of these New Friday episodes, we're going to be answering your questions from side hustles, solopreneurs, small business owners, and anyone else out there trying to earn more money. If you are earning money on the side, if you're earning money through your business, if you're earning money as a solopreneur or whatever going on and you've got questions about earning more money, questions about expenses, question about your business, question about how ever you are earning money and you have questions about it, send us a question.

Starting point is 00:02:12 We are here for you on these Friday episodes. We love earning more money and we want to help you guys do it. So Robert has earned hundreds of millions. I've earned millions and we want to help every single one of you do the exact same thing. So if you have a question to ask us for the rich habits radar, send it now via email at rich habits podcast at gmail.com or DM it to us on Instagram at rich habits podcast. Make sure that you are subscribed to our podcast on Spotify as a little plus button. So you do not miss out on these new Friday episodes starting on August 1st. So make sure you turn on those notifications because it's on like Donkey Kong. We are bringing you these new episodes.

Starting point is 00:02:52 They are going to be so fire. We're super stoked because we always cover mindset, personal finance, and now we're expanding our knowledge and sharing more and more about what we believe can help all of you with these new rich habits radar episodes. So we're super excited. Make sure you tune in every Friday. So with that being said, Robert, what are we talking about in today's episode? In this week's episode of the Rich Habits podcast, we're going to be reflecting upon our 2025 market predictions from episode 100, published the second week of January, as well as looking ahead at the second half of 2025.

Starting point is 00:03:29 We're also bringing on our favorite guest, Troy and Garrett, from Neos Investments, to share their predictions as multi-billion dollar ETF issuers. More on that later. So, Robert, let's kick off this episode by reminding our audience what our three market predictions. were from episode 100 back in January. Prediction number one was that the IPO market will begin to heat up. And after a sluggish few years, let's call it 22, 23, maybe 2024, right? The IPO market felt poised for a comeback in 2025. The Federal Reserve was expected to cut interest rates, which we're still waiting on,

Starting point is 00:04:05 and investor sentiment was certainly improving. So, Robert, how have we done on that prediction thus far in 2025? Yeah, I'd say we definitely knock that one out of the park by a moment. Mile, by June 24 of this year, there have been 158 IPOs on the U.S. stock market, which is nearly an 80% increase from the same time last year of 2024. Corwe went public in March and now has a market cap of around $84 billion. Chime went public in June and is worth about $10 billion. And just recently, Circle went public in June and is worth over $50 billion. And these are just a few examples of the IPO market.

Starting point is 00:04:45 So the bottom line is seeing these types of positive reaction to new IPOs means retail investor sentiment is definitely risk on sending markets higher over time. Especially with Circle, that IPO is nuts. I mean, it's what up? Like four, five, six, seven, eight hundred percent or something. It's crazy. That was crazy. So it's really cool that we saw that coming. And I hope you guys are not surprised to.

Starting point is 00:05:12 see a hot IPO market here in 2025. Now, the next prediction we made was that volatility was going to be coming in a very big way. Specifically, we predicted multiple double digit pullbacks in the stock market throughout the year with the S&P 500 finishing the year up in the single digit percentage points. On average, the S&P 500 experiences about a 14% pullback every year somehow, some way. That's just like reality. But with 2023 and 2024, having been much smoother years than we're expected, we were very confident that we were going to see some meaningful volatility in 2025. To prepare, we mentioned how NEOS ETFs could be a great way to use that volatility to your advantage. They, of course, have QQQH and SPYH, which are their hedged equity income ETFs that quite literally

Starting point is 00:06:02 have a built-in hedge against the NASDAQ and the S&P 500. So really, really, really, interesting to see that prediction take place as well. Yeah, I mean, from mid-February through early April, the S&P 500 dropped 19%. And then essentially, all of those losses were erased in the coming months following that big retraction. And the NASDAQ 100 is now back to new all-time highs. That does not mean we're done with volatility, though. We're still going to see some shake-up. There's a lot of uncertainty out there. But that is why we love these NEOs funds and everything that we've been talking about. So our final prediction, this one's been a little bit difficult, was that crypto bull market would peak sometime in 2025 or early 2026. Now, our first two predictions

Starting point is 00:06:49 have clearly already come true, but this one we can't be certain of for another six to nine months. If I had to guess, I think we'll have a fantastic second half of the year in the crypto world, but who knows, there's so much going on with all this geopolitical unrest and everything that's that's happening with the governments and wars and all this other stuff, it's hard to tell where we're going to go. Yeah, I totally agree with you. I will say, though, right, through all the tariff drama, Middle East conflict and everything else that the market has thrown at us, it is clear that institutional investors still want to

Starting point is 00:07:21 own Bitcoin. They still want to own Ethereum. And they're becoming more and more comfortable with cryptocurrency and blockchain technology, specifically stable coins, right? The Genius Act was past. That was major. But now that we've given our own little mid-year check-in on our past predictions, we're We're really excited to have Garrett Pailela and Troy Cates back with us to share some of their own predictions for the back half of 2025.

Starting point is 00:07:44 Now, before we introduce Troy and Garrett to this week's episode of the Rich Habits podcast, I got to tell you guys about public.com. Public is an investing platform for those who take investing seriously. Not gambling. They're not day trading, which means if you're serious about investing toward your financial future, it's time to learn about public.com. On public, you can build a multi-asset portfolio of stocks, bonds, options, crypto, and more. And that's not all. Public's artificial intelligence isn't just a feature built into the platform. It's woven into the entire experience. From portfolio insights to earnings call recaps, public give you smarter context at every touchpoint of your investing journey.

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Starting point is 00:08:57 Roll it over into public, get a 1% match, and it's going to be just fine. This was paid for by public investing, full disclosure, in the podcast. podcast description. Troy, Garrett, thank you so much for joining us. How are you guys doing? Doing well. Thanks for having us today. Yeah, doing great. So guys, as a quick refresher for the listeners who might not be familiar with NEO's funds and your ETSs like SPY and QQQQI, what is NEOS? What makes you different? And why are you guys here? Yeah, thanks, Robert. So Nios really focuses on issuing tax efficient income-based strategies. And so as you mentioned, SPYIQQQI, those are some of the most well known that would track exposure to the S&P 500 or the NASDAQ 100, but ultimately we have

Starting point is 00:09:38 about 12 products that make up all sorts of different asset classes so people can espouse their individual views, beliefs, opportunistically make investments and leverage those types of asset classes like a gold or real estate, equities, fixed income in the way that that helps them generate tax efficient income for their portfolios. Well, those strategies obviously set you guys apart from your competition. You just won the best active ETF Award for 2025 for your ETF QQQI. That's pretty different if you ask me. Yes. Now, the team was really excited about this. So when we got the nomination, everybody was really excited, but then actually going to the award show and having the team there and actually winning the award was really special. We have a number

Starting point is 00:10:19 of people working here over 25 people on the firm now. And it was nice to bring home that award for the team. And really, it shows all the work we put behind QQQI. This is our NASDAQQI. This is our NASDA 100 high-income product. It really is not only raising assets, which we of course want, but the performance has been incredible compared to the peers and even compared to the underlying benchmark reference index. Most definitely. So before you guys jumped onto the show with us, Robert and I were reflecting upon our 2025 market predictions that we had made from episode 100. I think it was published in like January 13, something like that second week of January. We had predicted that IPOs were going to make a big comeback this year. We predicted that

Starting point is 00:10:59 volatility was around the corner. And we also predicted that the crypto market will peak sometime in 2025, maybe early 2026. As multi-billion dollar fund managers, what have been your main takeaways from the first half of 2025? And did they actually match your expectations? So yeah, I think we talked early in the year. And one of the big things that we had thought was coming was definitely looking at volatility. Thinking about volatility, last year was very muted. coming into this year, started to move higher early Q1. And then, of course, we all saw what happened in April with the tariffs and now different headline risks, different geopolitical risk.

Starting point is 00:11:37 And volatility is definitely back. And as you know, with our products, with the way we manage our ETS, they really thrive when there's some volatility in the market. It allows for our products to do a number of things, either bring in additional income, sell calls out of the money further out of the money than on the high income products. But for us, having a little volatile. in the market, we look at that as a good thing. And it's really thinking back of how this quarter kind of progressed over this first half of the year. And we look back and, you know,

Starting point is 00:12:06 with something that always amazes me is how quick the turnarounds. You know, we have this big sell-off volatility spikes to levels we haven't seen since COVID with the VIX going up to 40, 50 and seeing these closes up there. But then you look back and you see how quickly one little headline or one change in a stance from the administration can turn this market around. And it always amazes me how quickly the market can turn like that. And thinking back over my 25 plus years of actually trading and managing money in these markets, you know, it seems like it happens quicker and quicker. And that, you know, kind of goes along with how quickly the news comes out now, people listening to different podcasts or wherever they get their news to kind of react to those

Starting point is 00:12:46 news stories. But that's one of the things I always look at. You could kind of see that in April. If you blinked at the end of March and open your eyes at the end of April, you're like, Yeah, maybe the market didn't do much, but we all know that a lot happened during that month. Yeah, I think it really speaks to two things. Austin and I allude to pretty much every day of our lives. And that is when in doubt, zoom out because so many people are focused on the headlines and so worried about the daily volatility or weekly volatility of the markets. But number two is thinking like long-term investors. Because once you get it out of your head and you start thinking more long-term, then this volatility is happening just doesn't really.

Starting point is 00:13:24 affect you at all. I'm the old guard on this call, but there used to be kind of a joke that the best performing portfolios are for dead people and people that lose their password because they can't have knee-jerk reactions. Yeah, so one other thing we looked at the beginning of this year and kind of some of our expectations is how is the Fed going to manage interest rate cuts? I think most people coming into January are expecting upwards to five plus rate cuts throughout the year. And that vastly changes. We came into February, those expectations. were cut pretty significantly. They actually swung all the way back down into the one or the two rate cuts over the course of the year. And so I think that has been one main area focus for investors

Starting point is 00:14:05 and one thing that we saw as a key area to be watching within your portfolio is because as we know, inflation and the interest rates managed by the Fed could be one of the most key drivers in your overall portfolio, whether those be allocations to real estate or to small caps or just how that affects your bond portfolio, even the housing market. There's just a lot that ultimately is a derivative following what the Fed is going to do in interest rates. Yeah, I love that breakdown. And I really want to hear your thoughts about the rest of 2025, especially because you guys

Starting point is 00:14:37 have three ETFs right now that are in my wheelhouse. And our listeners know that I've always held and will continue to hold three main asset classes besides stocks. That's Bitcoin, precious metals, and real estate. now all of a sudden Nios has the Bitcoin high income ETF, the gold high income ETF, and the real estate high income ETF. So first of all, get out of my head, wherever you have the hidden cameras in my house to figure out what I'm thinking about. We got to get rid of those. No, I'm just kidding.

Starting point is 00:15:08 I love it because everything that I've been preaching for years and Austin's been preaching for years about these other diversified asset classes, you guys are crushing it with these new products. So walk us through these three products, the sectors and what you love about them and what trends you see. So I'll start, I think I'll start with gold. I think thinking about our newest ETF, IAUI. This is a product that Garrett and I really wanted to get out in the market place. And think about what gold is done, even the past year, the past five years, how it's performed against the S&P 500 and the broader markets. And it's really went from this, you know, this asset class that a lot of of people kind of had a small allocation to. And now people are really looking at it and saying,

Starting point is 00:15:55 I can invest in gold, I could have great returns. But also, we've been hearing people wanting to see if they could source income from it because you're not really earning any income off of your goal unless you're trading it around or doing something else with it. So for us to get a product like this out in the marketplace where you could earn some income off of the volatility of gold and be able to get a monthly distribution off that while still holding that core asset has been really, really nice for us to get that out in the market. And I think we, you know, we'll continue to see this chop around. And obviously people look at it more as a defensive play, but it's really performed well against the equity markets. Specifically this year, you think about gold's up over

Starting point is 00:16:34 25% this year with the S&P up 4%. So really looking at it as a place that you can invest your money and actually earn, but also from our perspective, earn income on a monthly basis. Yeah, and I'd also like to mention and piggyback that silver as well. If you look at gold being up 94% for the last five years and silver's up 91% and silver's up 22.2% this year, you know, I've been saying for years and telling people probably since 2009, I think, was when I first heavily invested in precious metals, is that I think it's a mistake not to have a portion of your portfolio in these precious metals. So I love the fact that you've addressed that now with an income producing product to be able to hold this asset class, but make income with it because, you know, it looks cute and it's fun at a party.

Starting point is 00:17:23 You know, I got some 10 ounce silver bars right here. But at the end of the day, you want to be producing income from it as well. So I really, really love that strategy. Thanks, Robert. Let me follow us through with Bitcoin. I think that's another one, right? As we think about year-to-day performance, right, Bitcoin being up over 13 percent, has certainly outperformed equities, fixed income.

Starting point is 00:17:41 And so as we kind of roll through, what we wanted to do with Bitcoin is, as I'm sure most of the audience and listeners, No, Bitcoin's volatility is significantly higher than that of even equities. And so for us as volatility managers, finding ways to incorporate income opportunities, we created BTCI, the NEOS Bitcoin high income ETF, really to take advantage of that volatility. And a quick frame of reference is average equity volatility kind of sits in the 15 to 18 range. Bitcoin sits in that 58 to like 65 range now. And so you have a massive uptick in what the volatility.

Starting point is 00:18:17 is relative to equities. And this is even if you believe that Bitcoin has been institutionalized over the last few years versus where its historical volatility is. But that volatility allows us to really create a high income portfolio. If you're willing to take the high-actane investment in Bitcoin, but you'd like to do it with a little bit less volatility and have consistency of monthly distributions, we're excited that BTCI is able to produce that right in an ETF wrapper, not having to deal with, cold or warm wallets or crypto custody platforms right right in your regular account the publics.coms, the robin hoods, the Schwab finalities, whatever they might be, you can just buy the product, have exposure to spot Bitcoin and be able to generate a obviously a high degree of income from it.

Starting point is 00:19:01 And I think beyond that too, you know, IYRI what's so exciting with the real estate play is the idea that the Fed will begin to cut rates, right? That's just fingers crossed. Hopefully that begins to happen sometime soon. Once that does happen, I could imagine and see a world where mortgage rates begin to come down, which of course helps commercial real estate, residential real estate, things of that nature. And IYRI is very much exposed to the commercial side of the real estate sector. So I think all three of those, Robert, you did a great job calling them out. And yes, Bitcoin, precious metals and real estate as ways to diversify a already diversified portfolio. But I love those three categories. They're very approachable. They're easy to understand. And it's

Starting point is 00:19:41 really cool that you guys have sort of built income strategies on top of these core portfolio. Holdings. Yeah, thanks, Austin. Totally agree. I mean, it's been great to be able to allow investors other ways to expouse their portfolio views and income generation across more than maybe just equities or fixed income where they traditionally have been and now having a portfolio of alternative investments to enhance that or diversify their portfolio for long-term holdings. Now, of course, you guys can't predict the future, as Robert and I can't either. And we don't expect you guys to. We're not asking you to. But I do want each of you to share one thing that you are watching like a hawk right now. Maybe you're really focused on tariffs. Maybe you're

Starting point is 00:20:18 really focused on interest rates. Maybe it's bond yields. Maybe it's earnings. Maybe it's geopolitical conflict. Whatever, but I want to know, what are the multi-billion dollar fund managers watching right now as we head into the second half of the year? And why are you paying so much attention to whatever that thing is? Thinking about the back half of the year, one is kind of going back to the interest rate cuts that we discussed earlier. I think that's something we're keeping an eye on. We're looking at that. not only for products like IYRI, but also our fixed income products, what does that mean for a product like CSHI as rates come in? So that's something we're always watching. And of course, we're always looking at the headline risk of geopolitical events. Tariffs, they seem to be maybe

Starting point is 00:20:59 sorting themselves out. We'll see how that goes as all these different delays or 90-day windows kind of expire. But for us, it's really more about the fundamentals of our products and understanding how they'll react in different interest rate environments. I got to agree with Troy. I think the interest rates are still the big tail that's wagging the dog, right? I mean, I think you got Fed Powell that has held off and his biggest excuse or reason lately has been the potential of tariffs impacting inflation and then wanting to ensure that they don't get on the back half of cutting rates when inflation is going higher. I think once you see that clarity of what ultimately is going to happen, whether the tariffs were mitigated through a lot of different structuring in ways or if the Fed's

Starting point is 00:21:43 going to start to cut rates, I think that gives a little bit more clear path for investors to start positioning their portfolios a little bit differently. As we talked about before, right, those interest rates are main key drivers to many areas of portfolios, certainly fixed income, but even if you think about what you had mentioned earlier, Austin, right, just on real estate, right, interest rate cuts and that producing helpful reductions of costs for leverage and debt on real estate. you know, there's just many areas that you can see that interest rates, even for the U.S. government, right? We have a tremendous amount of debt, and that's getting rolled this year, right? So rolling that at a lower interest rate is going to significantly, you know, help and impact where the Treasury is today

Starting point is 00:22:23 in the amount of interest, you know, that we're going to be paying as a country. So I think that's going to be the key driver. These other geopolitical, these other short-term events have seemed to play out as buying opportunities. So, I mean, if you think about the recent war, even the tariff announcement, which of course scared everyone, a down 20 plus in the equity markets, was so fast and tended to be a buying opportunity of more of a short-term knee-jerk reaction. It's the interest rates that I think are going to be the more longer structural play. And hopefully we get some clarity on that. That's the biggest thing, at least I think I'm watching.

Starting point is 00:22:52 So when it comes to watching these interest rates, what's like a best-case scenario and what's like a worst-case scenario, right? I'd imagine best-case scenario, we begin to cut interest rates a couple times more this year. Maybe we see a bunch of rate cuts in 2026. Like, do you think that positions the market for further, you know, multiple expansion, earnings growth that gets the U.S. consumer spending more money again because they're borrowing, they're swiping the card, whatever? And then on the flip side, maybe we do have higher for even longer than that was expected?

Starting point is 00:23:21 And then do you think that is going to maybe cause things to see some turmoil? I mean, what's like the big excitement of why you think interest rates are so important? Yes, I think you kind of hit the nail on the head there. I think best case scenario, we get one or two cuts going into the end of the year, which is kind of where the market is thinking things are going to go. Think about what the market does when there's uncertainty. If the Fed doesn't cut going into the end of the year, that leaves more uncertainty looking into next year and what's going to happen. That leaves more headline risk around, you know, whether it's tariffs and future Fed rate cuts. And so that's when I think the market would start to react, at least the equity markets would start to react negatively.

Starting point is 00:24:03 thinking about there's more uncertainty. Are we going to stay higher for longer? I think in a better case scenario, there's a few cuts. They indicate that there may be cuts next year and the market could take a little bit of a breath and understand. And people looking to buy that first home or try to get a mortgage or looking at that car loan will be a little easier, which inherently helps the economic environment. Yeah, I got to jump in. I think one of the main things for investors to be watching is in a rate cut environment, you don't want it to be too hard and too fast. That's signals, right, weakness in the economy and a need to really spur the economy and concern from the Fed. You also don't want to see no rate cuts and hire for longer. So in a perfect world,

Starting point is 00:24:43 if the Fed is ever going to actually give us that soft landing that everyone who had been talking about for the last 18 months and in their hopes, right, you want to just see gradual rate cuts, 25 basis points, another month or two, maybe another 25 basis points, right, showing that they're strength in the economy, strengthen the job market, but also at the same sense, you're reducing just interest rate and more cost or the entire country. And I think those are the more things. So like as just a regular investor watching, like what's the most important? You actually want to see this gradual reduction and nothing too severe on either side because that signals one thing or the other. And I think that's what more the institutional managers are watching for is like

Starting point is 00:25:23 what are these, you know, really quick impacts going to be? And hopefully it's the Fed guiding lower that tariffs weren't much of an inflationary environment and that they could just slowly, ease and that's going to be positive, you know, to continue a growing economy and no major shocks. Yeah, I think that's an incredible insightful takeaway because the real estate market has been very adversely affected by the lack of rate cuts. And there was a graphic that circulated last week. I don't know if you guys saw, I think Realtor.com or somebody put it out that there were 500,000 more homes for sale than there were buyers currently. And that was just shocking to me that it is that bad. And I've been pushing the message along that I think it's a great time to buy

Starting point is 00:26:04 real estate because there's no competition. It's a buyer's market. So I think it's really timely that you're bringing this up. And I'm learning, obviously, you know, just from all of your insightful takeaways on that. But I want to go into Austin and I also came up with our bonus predictions, if you will, and I'll go first. We didn't mention precious metals in our original market predictions for that episode. But we've been talking about precious metals for years. And my prediction, my bonus prediction is I think the asset class will continue to experience momentum into the back half of this year, especially as geopolitical conflict remains. Because like you guys mentioned earlier, gold and silver are both up 22, 25% for the year,

Starting point is 00:26:49 up like 90, 91% over the last five years. I think we're going to continue to see that along with Bitcoin for the back half of this year because people, when they're not sure of what to do, they always kind of go to these safe haven assets, which I think precious metals are. I totally agree. And, you know, my bonus prediction is actually going to be about broker dealers. I think more volatility equals more trading that's taking place, which means broker dealers like those inside of the IAI, ETF. Again, that's IAI. They will benefit most. And again, Robert and I, we can't predict the future. Neither can Garrett, neither can Troy, but it's always fun to share some timely ideas with you all. So before we ask Troy and Garrett, our final question about what's behind the

Starting point is 00:27:34 corner for their company, let's take a moment to hear from Masterworks, this episode's sponsor. Robert, get this. Half of financial advisors are now allocating to alternative investments and strategies to manage portfolio risk. And over two-thirds of millennials are investing in alternatives. Over 67%. Two-thirds. That's pretty crazy. Now, two of the big reasons these advisors are saying that they're diversifying to alternatives are to reduce exposure to public markets and find alternative sources of returns. Now, of course, with alternatives, there's a lot of options out there, but one that we've actually invested in ourselves is fine art, the valuable paintings by iconic artists such as Picasso, Warhol, and Banksy. And we're not art experts, but that's

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Starting point is 00:29:03 Now, join over 1 million Masterworks users at masterworks.art, forward slash rich habits, which is also in the show notes of this episode. Again, that is masterworks. Dot art forward slash rich habits. And as with any investment, past performance is not indicative of future returns. Investing involves risk. Sale of returns are not inclusive of unsold works. An important regulation A disclosures can be found at masterworks.com forward slash CD. If you've not yet added, find artwork to your own portfolio, we highly recommend checking out Masterworks to learn more about why it could be a good fit for you. Now let's jump into our last question with Troy and Garrett. Troy, Garrett, thank you all again so much for joining us on this episode of the Rich Habits podcast.

Starting point is 00:29:46 What is next for Neos? Right. This year, you've introduced a ton of ETFs, including your gold high-income ETF, the real estate high-income ETF, some awesome hedge income products as well. What's around the corner for you guys? So we did just file, which is out there, the Neos International High Income ETF. So we're excited about that one. Hopefully get that out in early fall sometime. And then we do have a few others that we're looking to file. Nothing we could talk about now, but the international one, we're really excited to get out in the market. That's amazing. Guys, thank you so much again for joining us. And we look forward to having you back very soon. Thank you very much for the opportunity. So Robert, what's your take on the interest rate conversation we just had, right? Do you think that

Starting point is 00:30:24 interest rates truly are the cream of the crop as it relates to what people should be focused on at the moment? Yeah, I definitely agree. I loved Garrett's comment about the tail wagging the dog because I feel like right now we've been in this holding pattern forever waiting for Powell to cut rates. How many times is he going to cut rates? Is it going to be too abrupt, too little, too late? And I think it is one of the most important factors around the real estate market stalling, around people sitting in the sidelines sitting in cash and just really causing a lot of people to be fearful of the markets. So I love the conversation. I feel it's very insightful.

Starting point is 00:31:03 And I enjoy the fact that they're kind of on the same page as we are about why. And so, yes, I loved it. I thought it was a great conversation and very helpful to everyone to kind of understand the bigger picture of what's going on in the markets right now. Yeah. And it's kind of funny because it feels like interest rates have been like this long, boring, stale story now for the last three years because it's been around for three years, right? We raised interest rates at the fastest rate in history. I think it was starting in March of 2022.

Starting point is 00:31:34 And then we started to flirt with the idea of cutting rates in September of 2024, cut rates a couple times, but we're still here. And so I agree. I think that, you know, it's definitely what's going to be what either spooks investors. Whoa, why is the Federal reserve cutting rates so fast. Are we going into a recession? Or encourages investors to stay steadfast and confident in the economy, which is a nice gradual cutting of the interest rates so it can stimulate and keep moving us forward as a country. So major shout out to Troy and Garrett for joining us on this week's episode at the Rich Habits podcast. Robert, we've got some questions to answer. Yeah, let's get started. So our first question is from Ken T. A big fan of the podcast.

Starting point is 00:32:17 My employer offers a Roth 401K, which I take part in. Can you explain the difference between a Roth IRA and a Roth 401k and which would you prefer thanks in advance. Austin, this is all you. You are the Roth King and break it down for our listeners and I'll see if I have any takes on this. Good question. Ken, so, you know, can you explain the difference between a Roth IRA and a Roth 401k? A Roth IRA is a Roth individual retirement account, which means it's tied to your social security number. It is something that you own, that you control, and that you have complete autonomy over. A Roth 401k is an employer-sponsored retirement account, which means the only way that you will have access to this retirement account is if you are an employee at a company that

Starting point is 00:33:04 offers this as a benefit for their employees, right? I think the stats, like 70-ish percent of companies offer their employees 401K. So the majority of you listening probably have a 401k or access to a 401k. Now, because both of these are Roth retirement accounts, that means that the contributions that go into them are after-tax dollars, but it also means that the profits that are realized in retirement are realized tax-free. So you could go make $100, $500, $500, $1 million in profits in these accounts, and you want to have to pay any federal income taxes on those profits. Now, in my opinion, and Robert, we talk about this phrase all the time, match beats Roth, beats taxable. So if you are out there and you are able to get a match at your 401K, go get that match.

Starting point is 00:33:51 free money, right? You get to go get that 100% return essentially, immediately. And then above the match, assuming you do not have autonomy in your 401k, you then go max out the Roth IRA, not the normal IRA. You do a backdoor or you do the Roth, but it is a Roth IRA and you put it in those index funds and ETFs we talk about. And the reason why that's important is because, again, back to the differences between the 401k and the IRA, the 401K, you might not have autonomy over the investing strategies. They might just park you in some underperforming target date funds and say, congrats. You're now invested in your 401k. See you later by.

Starting point is 00:34:25 Whereas with the Roth IRA, you get to choose everything. So match beats Roth, and then that beats taxable, which means if you've maxed out your Roth IRA and you still have money left over to invest, Robert and I always encourage people to go open up what we call a bridge account on public.com. Go invest that money into good index funds and ETFs as well. You took the words out of my mouth. I was going to say the only thing I would add would be that traditional broker. account because with the Roth component of you owning it, you controlling it, you can make sure that

Starting point is 00:34:56 retirement account performs well and you can make the changes needed as you want to do those changes, but also the traditional brokerage account is great because you can have that account to make sure you're investing alongside your Roth and alongside your Roth 401k, but it gives you more freedom because you can move that money in and out if you want to buy a house, if you want to remodel, house or whatever you want to do, that is why we like to see you have both the traditional brokerage and the Roth account. So you have that freedom of both aspects of what those benefits are. So our next question comes from Marisol V on Instagram. She says, hi, first of all, thank you so much for the incredible content and podcast, which I have just

Starting point is 00:35:38 started listening to in the last few weeks, but I absolutely love it already. I have a question and would really appreciate it if you could help me answer it. What are the key top three to five variables to take under consideration when I analyze a stock before investing in it. Thank you so much in advance. Robert, you want to kick this one off? Yeah, and I know what yours are going to be, so I'm going to go a little bit different route. For me, I really want to look at number one. What is the secular growth trend that it could be in? Is it AI? Is it humanoid robotics? Is it solar? Is it nuclear? So I want to keep an eye on these newer sectors that I believe have a lot of growth opportunities. So I'm always watching the stocks and the market leaders in those secular

Starting point is 00:36:22 growth trends. Also, I want to look at just the tried and true kind of boring companies that I've done well with for years, like Amazon and Home Depot and lows and stuff like that. But then also, you might want to look at dividends. If you're looking to earn income, you might want to have some dividend stocks as well. So you want to find those good earning dividend stocks that'll set you up well. your portfolios and really understand that. And then I would say one kind of little pro tip that Austin can allude to as well is understanding the Tam. What is the total addressable market for that stock and that indy that it's in to understand is it growing or is it shrinking? Because like a lot of what Austin and I have been investing in over the past, let's call it two, three years, like with

Starting point is 00:37:09 AI and nuclear and solar and stuff like that, is growing secular growth trends where there's a lot of opportunity because you're early in that sector. So I would say those would be three of my top ways of analyzing a stock or a new secular growth trend. So I'm looking for the leaders in that category. I would say my key three to five considerations when I'm analyzing a stock. The first consideration is their historical stock price. Has the company for the last three, five, and ten years stock price been trending up into the right? If it has been, that means that the company's management team has been able to deliver shareholder value in the form of profit growth, free cash flow growth, and they have a track record of doing so. If they have a track record of doing it, chances are

Starting point is 00:37:55 they can continue to do it. So that's probably the first thing I'm looking at is has this company stock price been trending higher over the last decade or so? The second thing I'm looking at, what has their revenue been doing and is that revenue expected to grow in the future? You want to be investing in companies who have revenue that grow every single year. That means that company's a growing company, right? The only way a stock price goes up is if more profits get paid up to shareholders via a dividend, earnings, earnings per share, things like that. And the way to increase profits pretty easily is to grow your revenue, right? So if you are growing your revenue, chances are those profits are growing as well. And I'd say another thing to consider is what those

Starting point is 00:38:34 profit margins begin to shape up as, right? Look at their operating income, look at their net income, look at their gross margins, look at all these different types of specific margin profiles a company might have that will give you more clarity as to, wow, okay, this company really isn't making much money talking about McDonald's or Walmart or, wow, this company is making a ton of money, talking about Nvidia or Apple or Microsoft, right? So better understanding a company's margin profile can give you a lot of clarity as to like how efficient and how in demand that company is. And then I'd say the last thing, which is what Robert already talked about, is this company operating in a secular growth trend. To define that word, that phrase rather, I would say a

Starting point is 00:39:16 secular growth trend is a general theme that is taking place over the next five, 10, 15 years that will inevitably propel this company further. AI is a secular growth trend right now. Cybersecurity is a secular growth trend right now. Robotaxis and autonomy is a secular growth trend, right? And so thinking about cybersecurity, for example, we know that people will spend tens of billions of dollars more on cybersecurity next year than the year after, then again next year and then the year after that, then they did 10 years ago or 20 years ago because of internet, cloud, AI, things like that. Which means that if people are spending money on this product, I want to be investing into companies who will be receiving that money for, you know, offering their cybersecurity services.

Starting point is 00:40:01 Cybersecurity is like a secular growth trend that's going to be here for 5, 10, 15 years. And I want to be a part of that. I want to be on the right side of history when it comes to those trends. And I want to say one last thing. that I really enjoy that you talk about a lot when you break down a stock is getting people to really understand that margin profile because I don't think people talk about it enough. They don't quite understand it or they just don't talk about the free cash flow that I think you're really good at uncovering and unpacking.

Starting point is 00:40:28 So I'm really glad you mentioned that in your breakdown. So I love that. So our final question comes from Isaac C on Instagram. Isaac says, hey guys, I'm a longtime listener and big fan of the podcast. My question is about the different strategies. for low-risk investments. I recently heard about an investment strategy that included using a brokerage account to invest your money into treasury bonds like SGOV, which pay a 4 to 4.5% APY on your money. What are some of the differences between doing something like this versus putting

Starting point is 00:41:00 your money in a high-yield cash account on public or any other high-yield savings accounts? Are there certain tax implications that I should take into consideration as well? Thank you so much for your help. So I'll kick this one off, Isaac. So just so we're on the same page, how does a high yield savings account work? How does a high yield cash account work? How do any of these things actually work? Public.com or wealth front or wherever else you have your high yield savings account, so far, ally financial, right? They take your deposits. They use your deposits to go buy treasuries. Those treasuries pay them for four and a half percent. They take 0.1 to 0.3 percent for themselves and they pay you out the difference. So they're making money. You're making money. Everybody's happy.

Starting point is 00:41:39 Where it gets tricky, to your point, is the tax side of the equation. The interest you earn in these high yield savings accounts, high yield cash accounts, things like that, is taxed at ordinary income. That is interest, you're earning, you're making money on it, therefore you need to pay some taxes. However, there are vehicles that exist that are maybe invested into municipal bonds, different types of things and investment vehicles out there that are very, very low risk that will make it so you don't owe taxes on some of that income depending on the state you live in in your tax bracket, of course. So it really depends on what you're trying to accomplish. We think

Starting point is 00:42:16 it's a fool's errand to try and optimize for 0.2% in your portfolio. It's like, unless you've got a million dollars that's being set aside here, which I hope none of you have a million dollars sitting in a savings account. That's just a terrible idea, right? Go invest that money. But unless you have numbers like that, you're stepping over quarters to pick up pennies, right? So don't worry about any of that stuff. But if you are truly someone trying to like crazily optimize your taxes, go check out carry.com's smart yield. They just came out with this new product that automatically puts your money into some of the most tax efficient vehicles out there. So you can earn like 5.2% compared to the 4.6 or whatever's going on right now. So that could be a solution for you.

Starting point is 00:42:56 But at the end of the day, a high yield savings account, high yield cash account, or just using an ETF like CSHI from Neos funds to earn a little bit of interest on your money. is always a wonderful idea. I think that's a great breakdown, but Isaac, just make sure you understand one thing. You want to have low risk investments, but you also, we don't know your age, you didn't provide the age,

Starting point is 00:43:16 but you also want to make sure you're not sitting on the sidelines being a scarity cat, where you're only trying to make 4% or 5% and you're worried about the tax implications. You need to make sure that you have proper portfolio management, so you're optimizing for growth as well, because you can still grow and be safe and not being super volatile investments, but just don't be so scared and so risk off that you're

Starting point is 00:43:41 worried about keeping it super low because you're just not going to have the growth. That's my main takeaway. Austin, I love your breakdown. But I don't ever want to consider, hey, I'm only going to make four or five percent with my money because I want to optimize for growth. But it just all depends on your risk profile and what you're trying to accomplish. But for me, I wouldn't worry so much about the tax. implications as I would making sure you have a balanced portfolio of growth and low risk so you can

Starting point is 00:44:10 benefit the most. Everybody, thank you so much for joining us on this week's episode of the Rich Habits Podcast. Do not forget starting August 1st, the Rich Habits Radar, Friday episodes are coming at you live. All you have to do is make sure that you're subscribed here to the Rich Habits podcast on Spotify and you'll be notified when that first episode drops on August 1st. We are so excited to be covering the most. consequential market-moving headlines and happenings every single week, every Friday, straight into your ears via Spotify. Yes, I'm so excited and so proud.

Starting point is 00:44:44 You guys have been pinging us for a while. Give us more. Give us more. Well, your asks have been answered because we are so excited and ready to produce these Friday episodes. And like Austin said, they will be up to the date. They will be everything that affects your money, our money, what's happening in the news.

Starting point is 00:45:01 And we are so stoked. Everyone, thank you so much for joining us in this week's episode. If you learn something, consider sharing it with a friend or leaving us a five-star review. Thank you so much, and we'll see you on Thursday.

Rich Habits Podcast - 124: Our 2025 Mid-Year Update + Bonus Predictions

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