Rich Habits Podcast - 76: Markets Are Crashing.. What NOT To Do

Episode Date: August 5, 2024

In this episode of the Rich Habits Podcast, Robert Croak and Austin Hankwitz explain what NOT to do during market corrections. The stock and crypto markets are experiencing a healthy correction, with most indices down by -5 to -10% over the last few weeks. Over the long-term, this correction will simply be a blip on the radar. ---👉 Register for our free angel investing / pre-IPO investing webinar, ⁠⁠Click Here! ⁠⁠---👉 Join over 43,000+ other investors who read the ⁠⁠⁠⁠Rich Habits Newsletter!⁠⁠⁠⁠ We're growing by +150 subscribers every day and can't wait for you to join us :)---In our opinion, income-focused ETFs, like the ones developed by NEOS Investments, are a great way to offset volatility in your portfolio. SPYI, QQQI, and IWMI for indices + CSHI and BNDI for cash and bonds. ---⚡️ Skip the waitlist and invest in blue-chip art for the very first time by signing up for Masterworks: https://www.masterworks.art/richhabitsPurchase shares in great masterpieces from artists like Pablo Picasso, Banksy, Andy Warhol, and more.See important Masterworks disclosures: https://masterworks.com/cd---⭐ Download our FREE Budgeting Template – ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⭐ Earn 5.1% on your savings with a High-Yield Cash Account – ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⭐ Trade stocks, options, music royalties and crypto on Public – ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⭐ Get a $35 bonus when you start saving & investing with Acorns – ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⭐ Automatically buy stock where you shop with Grifin – ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⭐ Protect your family with term life insurance from Suriance – ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⭐ Use code “Spotify” for 15% off our 4-module video course – ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⭐ Optimize your portfolio with Seeking Alpha – ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠---👤 Explore everything Austin does – ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠👤 Explore everything Robert does – ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠❓ Ask us questions for our Q&A episodes – @richhabitspodcast on Instagram📬 Inquire about working together – [e-mail]---Hankwitz Group LLC has an existing business relationship with NEOS Investment Management LLC. The opinions expressed are those of the author, and the author owns several NEOS ETFs.

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Find your advisor at IG Private Wealth.com. Hey everyone and welcome back to the Rich Habits podcast, 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 under his belt 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 advise 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, 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 this episode of the Rich Habits podcast, we're going to break down the three things you shouldn't do in uncertain market conditions. In recent weeks, you've heard us talk. about the Fed cutting rates, the political ping pong match happening with the presidential election, and how that affects the overall markets as well as the rise in unemployment rate. So in this episode, we're going to walk you through what not to do to ensure long-term

wealth building, peace of mind, and continued financial success despite uncertainty. You're right, Robert. There is a lot of uncertainty in the markets right now, to your point, if it's with the presidential election, if it's with the Fed cutting rates, if it's with oil, if it's with war, there is a lot of uncertainty, which is causing a lot of volatility. So, yeah, let's talk about what you should not be doing. I love it. So let's get into talking point number one. Do not listen to headline news. We're talking to you, CNBC. Don't get us wrong. Tuning into CNBC or Yahoo Finance or other financial focus news outlets can be very beneficial in staying up to date on what's moving the markets.

However, for 80% of you listening right now, the daily news cycles will cause you to overreact and underperform. And that's why this episode is mission critical for everyone to take notes and make sure to understand these three talking points so you don't have any crazy knee-jerk reactions with what's happening. The business news outlets make their money from clicks and eyeballs. And the only way they're getting those is by stating clickbait type content and headlines. These clickbait headlines will cause you to get emotional, have a knee-jerk reaction, causing you to sell your investments, or even worse, invest in something you don't understand because you're getting all hyped up and letting the emotions get to you.

And that's why we're here today to calm everybody down, and make sure you zoom out because we don't want you to have these knee-jerk reactions. Don't get me wrong. I love me some CNBC, but if I have it on in the background all day long and I see the up, the down, the left, the right, this stock's up, this stock's down. Jim Kramer's telling me to do this and this person's telling me to do that, I just get overwhelmed, man. So it's so important for people to turn off the CNBC, turn off the Yahoo Finance, turn off the Schwab Network, whatever you're watching all day long. And just let your portfolio exist, right? Because just last week, the S&P 500 broke a 356 day streak where the indexed, did not experience a single day drop of 2% or more. And so what I'm saying is we experienced that single day drop.

And now small cap stocks are on track to deliver their best month against the S&P 500 in over 24 years. This is definitely irregular, which means everyone's portfolios are probably seeing some crazy swings right now, both to the upside and to the downside. However, to Robert's point, it's important for everyone to zoom out. The S&P 500 is still up 15% year to date, and we're up 55% since the lows of 2022. The NASDAQ is up 17% year to date and up 80% since the lows of 2022. We as investors need to continue to keep our cool and enjoy the ride. This means do not freak out because some talking head on CNBC or wherever else is saying that the sky is falling.

That is one of the biggest issues I have with the internet. like, you know, back in 2022 when everyone was saying, crypto is dead, crypto is over, the markets are down, AI is a joke, you know, it's for gamers only. These talking heads are going to get to you. They're going to have all this clickbait content and your job is to ignore it. You should be looking at. You're here watching the Rich Habits podcast. So we know you're looking for great information and up-to-date information. And we just always try to break it down in a way that you understand with no clickbait, nothing behind it other than the facts and our opinions of what is the best move for you at that given time. Because remember, if markets went up and to the right always,

then everyone would be rich and it's not quite that simple. So our goal today is to get everyone listening and following along around the world to understand to just chill out. The markets are always going to go up and down and not fall victim to all this clickbait from these talk heads in these news channels because it will do more damage than it will do good. I promise you that. So talking point number two, do not, I'm going to say that again, do not stop dollar cost averaging. If you're like us, your heart skips a beat when you see your portfolio in red. However, staying disciplined and continuing to dollar cost average into the ETFs and index funds we know and love allows us to sleep at night. We always talk.

about that. You have to make money while you sleep or you'll work until you die. And that is what we're here for is to help all of you make money in your sleep. So the worst thing you can do is to allow fear of losing money or going backwards financially inhibit your ability to continually dollar cost average. The only people who get hurt on the roller coaster are the ones who try to get off halfway through the ride. Don't let that be you. You got to strap in, Robert. All right, So let's all just make sure we're on the same page about this, right? Because the beauty of dollar cost averaging into a stock or an ETF means that you are smoothing out your entry price by purchasing lots of shares over a long period of time, averaging out the prices, right? So when stocks are green

and you continue to buy, your average cost per share rises. When stocks are red, your average cost per share falls. We feel FOMO because we're human beings when they rise, so we feel comfortable buying green. Oh yeah, I got to buy more. I got to buy more. It's going to keep going up. But for whatever reason, we don't feel as excited when they fall. The lower your average cost, the more profit you make mathematically speaking. So it is a good thing, Robert, to be buying prices in the red and when they're low. Yeah, and it doesn't matter if you're starting out with 10K or you have $10 million in your portfolios. I want you to understand. It is human nature. I get it. Austin gets it. Everyone gets it, that you get these moments where you're like, oh shit, what is happening? But I assure you it is okay.

If your thesis on a sector or a stock or an ETF or an index fund is really great one day and then it dips 5% the next day and you're ready to sell it, that's not investing. You're trying to gamble. you're trying to time the market and you think you know more than the rest of the world. It is so, so important to get that mindset that you are a long-term investor. The markets go up and down over time, but they always end up up into the right and that you just need to stay calm. And like we said, don't get off the roller coaster midway because if you're trying to get in and out, it's just not going to work. You know, Robert, the first really interesting way that someone explained

the stock market and stock prices specifically to me is think about it like you're selling your house. Let's say, for example, that you had your house for sale for $500,000 and you knew it was worth $500,000. The comparables up and down the street, neighborhoods everywhere, your house is worth $500,000. And you can think of the stock market as every day someone coming to your house, knocking on your door, and saying, I'll pay you $400,000 for your house. I'll pay you $415,000 for your house. I'll pay you $385,000 for your house. Right, it's these offers.

People are offering you money for your asset, right? Your stocks, your house, things like that. People are saying, I'll pay you this amount of money for that thing that you have right now. And they're offering that to you and you could take the offer, but people confuse the offer with its intrinsic value. And as an investor, we have to always understand what the intrinsic value of our assets are. if it's our house or if it's our stock portfolio. I mean, right now, I've got a stock portfolio of 20, 30 names.

And every day, the stock market is offering me money for those names. I think they're worth much more than what it's offering right now, which is why I'm an investor and I believe in them long term. So I want people to understand, like, you know, as prices fall or go up or in circles in the stock market, they are just offers. They are not reflective of the intrinsic value of that company. Yeah, I remember when the markets were really down during COVID and the video was down 60%. And I had other stocks like draft kings down 70%.

Some of these other names and companies that I love and I still hold. I, it was very difficult not to sell and think, man, am I an idiot? Am I wrong? I believe in the long term thesis of these companies in these sectors. So I did what every really smart investor does. I bought more. And that's one of the things that really freaks me out a little bit. And I think it's a mindset issue that I want everyone listening to understand is ask yourself,

do I deserve these 300% gains from Navidia over the last 18 months? If I'm willing to then sell it the minute it retracts 10%, because I think that's a really good way for people to look at it. We're always saying when in doubt, zoom out. And so every time someone calls me or DMs me and says, what should I do about Navidia? What should I do about meta? What should I do about Google? When there's a retraction, I just go click on the stock. I click on one year, five year. I send those two screenshots and say, that's what you do. You add more because if you still believe in the company, you should not be selling on these retractions. You should be rejoicing. It's like if you walked into a Nike store or an Apple store and you want to get the new iPhone. If all of a sudden you got a text message from Apple saying, we're selling all the phones for 30% off today, you would rush into buy that.

But when the stock is 30% off, you don't do the same thing. That is the mindset that most people have backwards. And that's why the real investors and the people that listen to the Rich Habits podcast and all of the information that we put out, that's why they win because they understand. It is very difficult to watch your stuff during a red day, a red week, or a red month. But I assure you over time, the right move is exactly what we're describing. Couldn't have said it better myself. we jump into the last talking point of the episode, I do think it's important to share that this

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An investment in Nios ETFs involves risk, including possible loss of principle. The equity securities purchased by the funds may involve large price swings and potential for loss. Past performance is no guarantee of future results. Okay, so let's jump into talking point number three. thinking you're a genius and that you can time the market. You hear Austin and I talk about it all the time. It's not about timing the market. It's about time in the market.

All of you should make a post-it note of that quote. Put it up in front of your desk or wherever you're making your adjustments. Put it as a note in your phone to remind yourself of this. Because when we see markets like this, so many of you get caught up thinking all of a sudden, you can figure out when to sell and when to buy. is a falsehood that will end up leading you to low upward potential and even further downward potential and risk because no one can time the market I promise you no one can do it correctly so much of this comes from analysis paralysis and fear as soon as the markets get rocky so many

of you think oh no and start thinking it's time to sell and over time you learn that as we said above dollar cost averaging and sticking to your thesis will serve you much better than living in fear and always trying to time the market. Robert, I think it's really funny that you say this because, you know, during 2022 and we had a lot of that market volatility, and in 2020, of course, but like, you know, whenever we have a lot of volatility, people begin to think their geniuses. They were able to, oh, I'm not going to listen to Austin and Robert. I'm going to sell my stocks at the top. And then maybe the market does go down five or 10 percent. And they're like, heck yeah, these guys don't know anything. I can time the market. I'm good at this. And maybe they buy. And

maybe it goes up the next day and then they start getting this like false sort of confidence right and they start kind of trading a little bit here and there maybe they're swing trading they're playing games and then they start losing a little bit then that winning streak begins to disappear and then maybe they sell and the socks go up so they have to buy them higher and so then it's this sort of cascading effect of well i thought i was a genius in the beginning because i think i can time the market but turns out if i had just held onto everything i would have been better off over this longer period of time. Can you outperform the market on a one week period or a two-month period by guessing and trying to buy up and down the left and right? Sure, a monkey throwing a dart probably could too. But as you continue to try and do that, over a long period of time, years and years, if not decades,

it is impossible, right? And I've realized that. Roberts realized that. And so have so many other incredible investors, right? We've realized you cannot time the market consistently over long periods of times therefore we don't even try which brings me to the data robert we love data facts are our friends if you had missed the 10 best days in the s&p 500 over the last 30 years right just 10 days over a 30 year time horizon your investment games would have been cut in half so to put that in perspective here 30 years ago the s&P 500 was trading at 458 points today it's over 5,550 points which is a 1,110% return if you had just ridden the wave the whole time. You did the whole up and down, left and right for the last 30 years, right? Over a thousand percent return in your portfolio.

But if you were trying to then time the market and you had missed those 10 best days from your investment portfolio, just 10 over that 30 year period, your returns would have been cut in half to only 556%. And now get this one, Robert. If you missed 30 of the best days, over the last 30 years. Something very easy to do if you're trying to time the market. You are losing out on over 1,000% of those gains, right? Your total returns would have just been over 150% over 30 years. And for perspective, the S&P is up over 150%ish over just the last eight years. So you are sacrificing 22 years of continued discipline and patience because you missed 30 days trying to time the market, right? That is how important it is to stay invested and

ride the wave up, down, left and right, and in circles because we don't know when the next best day in the market is going to be. And I want to speak to everyone's practical side for just a moment. And I love the math in that illustration, Austin, but the practical side is think to yourself how easy it is when Uncle Bill tells you, well, you should sell Apple because it missed earnings or the guy at the barbershop said oh you should get out of big tech because AI is dead guess what I hear that stuff every single day it is so easy to sell a position because you made money then you sit on the sidelines think about that we said if you missed the 10 best days and the 30 best days over 30 years it's so easy to sit on the sidelines watching

and watching and watching thinking you're going to be able to time it perfectly to jump back in and then all of a sudden months go by where you sat on the sidelines You didn't dollar cost average in. You did nothing. And then all of a sudden it jumps back up. The stocks you love or the stocks that we love jump back up and you didn't get in. So what do you do? In your brain you say, I'm going to wait until it comes back down.

Then two years goes by. And all of a sudden in that two year period, Navidia did a 300% return or Apple had 180% return. Even the NASDAQ, I think in 2023 did 44% return. You missed all of that because you felt you could time the market. And that's why I'm just telling you, as someone that's been doing this for 35 years, you cannot time the market. I can't even time the market. And that is why you have to stay consistent, stay in the market, and get rid of that philosophy because you will be way better off in the future if you do. So to give you all the recap, the three things you should not do during uncertain market volatility is one.

listen to that headline news, CNBC. It's going to cause you to go crazy, buy, sell, who knows what's going on, just turn it off. You don't need it. Just ride the wave with us. The second thing is to do not stop dollar cost averaging. We need you to continue to buy the dips, ups down, left and right. That is the only way you will have a well positioned portfolio over a long period of time is if you continue to dollar cost average every week and month into the markets. And then the third thing not to do is to think you're a genius because maybe you're up a couple weeks or you know, you're outperforming. or whatever and you think you can time the market you can. No one can. We're all just here riding the wave together, trying to build wealth over a long period of time. Robert, before we jump in the Q&A portion of this episode, New Deloitte data has found that nearly 58% of wealth managers' clients consider their art collections as part of their overall estate planning strategy. And UBS released a report that nearly 40% of ultra-high net worth collectors are allocating 30% of their wealth to art. Well, I guess it's a good thing that we're partner with Masterworks, then isn't it?

We're not saying that any of you need to allocate 30% of your wealth to art investing, of course, but we love, love, love diversification on this show. And Masterworks currently has over 950,000 users and nearly $1 billion in assets under management for a reason, because diversification into art makes a lot of sense for a lot of people. That is correct. And it makes sense for Robert and I as well. We've invested with Masterworks. And I've personally been a user on the platform for many years now.

Since Inception, they've had 23 exits, each of them individually delivering a profit to their investors. And not counting works still in holding, they've distributed over $55 million total back to investors as proceeds. Yes, Masterworks gives you the chance to invest in shares of multi-million dollar paintings by artists like Banksy, Bosquiat, and more. And in honor of the relationship that they have with rich habits, they let our subscribers skip the wait list by going to masterworks.com. Front slash rich habits. That's masterworks. Dot art front slash rich habits, which is also shown in the show notes of this episode. As with any investment, past performance is not indicative of future returns.

Investing involves risk. Important regulation aid disclosures can be found at masterworks.com front slash CD. I think what's so important about this, Robert, is a lot of people are listening to the podcast that have built their base, right? We have a lot of people whose questions are going to get answered in this episode that of like, yeah, I'm a millionaire. Yeah, I've got hundreds of thousands of dollars invested. Like, yeah, I'm already there.

If you identify as one of these people and you've built your base, you've got hundreds of thousands invested, allocate one or two, maybe five or six percent of your total net worth to alternative asset classes like artwork, like gold, like real estate, like cryptocurrency. right we've always tried to introduce ways to diversify fine wine and whiskeys right that's something we really like is diversifying our portfolios into these different types of asset classes so give masterworks a shot i've been a user of masterworks now i think since 2018 2019 been really satisfied with my relationship with my specific investment manager i mean they're awesome so go check them out couldn't say enough great things about the company yeah i love you know touching on diversifying assets and

investments just because so many people will trumpet to the top of the mountains that you should be all in on one thing. You should be all in on real estate. You should be all in on this or that. I totally disagree 100% because I remember and I'm old enough to have gone through several bear markets. And I can tell you this. I had a lot of friends in 2009, 10, 11, and 12 that went broke and started over because they were all in on real estate. I love real estate. I think everyone should real estate, but I also think you need to have other alternative asset classes in your portfolio mix to make sure that no matter what the market conditions are, you're going to be fine and you're not going to start over again because trust me, I don't want anyone on our watch

to go broke. With that being said, let's jump into the first question of the episode. Our first question comes from Daniel S. Daniel says, hey Austin and Robert, I love the podcast. It was about time to start listening to something new, and this podcast was it. My wife and I are real estate investors. We currently own seven investment single-family homes. We rent six of the houses furnished as medium-term rentals. We're doing very well, bringing in about $4,000 per month in cash flow after paying all expenses. However, we missed the chance to refinance when interest rates were lower. We have about $85,000 in credit card debt, and it's not consumer debt because it is expenses for the renovations on these houses. My wife has about $420,000 invested in the stock market.

I have $20,000 in my Roth, and my wife makes about $120,000 per year in her day job. The equity in our real estate portfolio is worth over $1.2 million. This credit card debt is really killing our cash flow. So what would you do in our situation? Would you sell a house to pay off the credit cards? Would you just get aggressive and pay them off? Should we sell our stocks? I know it's a long question, but any advice would be appreciated. Robert, I'll let you take a first stab at this with maybe starting by defining what a medium-term rental property is. Sure. So Daniel S. and wife, congratulations. You guys have done a really good job getting you to where you are. What are medium-term rentals? You hear the term short-term rental all the time, so it's just kind of literally the opposite.

A medium-term rental is what you would consider a rental that has a term of 30 days or greater. So if you think about it, you hear traveling nurses, doctors, other service providers that go to an area and they need something more long-term than an Airbnb but don't want to sign a long-term lease. That is basically what a mid-term rental is, a medium-term rental. And so Daniel, I hate to break it to you, though. It is credit card debt. it is consumer debt. Now, you spent it on a good purpose and it had a good reason, so you weren't frivolous

with your money, but it doesn't matter because the bill coming in every single month does not know the difference. All it knows is it wants its 25 to 30 percent interest every single month on that money. So I'm pretty sure Austin and I are going to have different takes on this, but I'm going to give you my take. I'm torn between just take the lump out of your savings that's invested in the stock market. and just pay it off all in one chunk. But then it's a little bit of a slippery slope because we never want to take from your

future to pay for your past. But in this instance, the math is a little tricky on the best case scenario because the high interest debt is really hard to out earn. You always hear us say you can't out earn high interest debt and you are in exactly that situation. And the 85K will eat you alive so you have to come up with a plan that is not paying the minimum. So, Austin, I want to hear your take and then I'm sure we can come up with a combined solution that makes sense. You're right. You cannot out-invest high-interest debt and you guys are investing as if you can.

This $85,000 of credit card debt might be at 25, 30 percent annual interest rate, which means you're paying about $2,500 a month just in interest by carrying this balance. So your monthly payments, yeah, to your point, this is really eaten into your cash flow. I mean, it really, really is. I'm on the boat where you guys have seven single family home investment properties with $1.2 million in equity across all seven of them. I'm sure one of them has at least $85,000 of equity inside of it. I'm on the side of the equation where it's like, what of these seven properties has given you the most headaches? If it's the neighborhood it's in, the clientele that kind of comes in, maybe it is the bones of the house. Maybe it's the appliances or go, I don't know, but I'm sure one of these. is a headache and you just hate it. And if that exists for you, I would find a way to sell that one. And hopefully there's $85,000 of equity inside of that,

allowing you then to take the proceeds of that sale and use it to pay off the credit card debt, then allowing you to cash flow. I would imagine now another $2,000-ish thousand dollars a month because you don't have this payment anymore, which I would also imagine is more than the cash flow of that original property that you sold. So unless you're somehow some way just really milking the, appreciation or some tax benefits or something with some crazy way you've convoluted this real estate investment property, I would think it would make sense to probably shave off one of these seven, the biggest headache, right? The one that you just really are not that fond of and using the

proceeds there to pay off the credit card debt, allowing you now to cash flow another two or $3,000 a month across the other six properties. The thing, though, Robert, that Daniel didn't specify was where this $420,000 of his wife's money was invested. He said it's in the stock market, but it could be in a 401k. It could be in a Roth IRA or something of that nature that'll have a penalty if he takes the money out. So just make sure that if you do go with Robert's recommendation, which again is great because you can't out invest high interest debt, that you are not pulling money out of a retirement account that will penalize you for taking this money out because that's just as bad. So definitely don't do that. If that is the case, if it is in some sort of retirement account that prohibits you

from taking the money out easily, then I would probably say selling off one of those heads. I think properties is the best way to do this. Get out of this debt. It was so silly for you to take on 85K for renovations. Now, Austin, is there a world where instead of selling the troublesome property, find the one with the most equity, get a HELOC to pay off the 85K? Because the HELOC's going to be 8 to 8.5% and the high interest debt is going to be 25 to 30%. So at least you're shaving off, you know, 15 to 20% in interest rate every single month that's eating your cash flow alive. Is there a world where you think that could be a great solution to this problem? Yeah, that definitely could be a solution. But I think for me, if I was in their situation, considering all other variables of like,

I mean, at the end of the day, it's like, if you are cash flowing so much money and you have so much money invested in like, you're obviously a millionaire status here, right? Why haven't you yet? You just, you keep playing around with debt in a way that's irresponsible. And I just feel like Daniel S might have a bad habit of some slippery slope of going into a little bit more debt than the numbers originally had anticipated. And I feel like maybe Daniel would take the HELOC out for not just 85, but 185, and then use the next 100 to go buy his next property and do something crazy like that. So I'm down for you to, you know, lower your interest rate to this 8.5, 9% with the HELOC. It's a great way to consolidate that. I would at least do that, right? Like that is at least

That's what you should be doing. But on the same token, I feel like if there's a world where you can completely get out of this debt and get out of a two or three thousand a month payment, even with a helock, I mean, maybe the payments are on $1,200 or $1,200 too, right? It's like if you really care about that cash flow, just shaving off one of the properties might be the best way to do that. Sounds good. There you go. You've got options. Our next question comes from Andrew. Andrew says, hey, guys, I'm Andrew and I live in Canada.

I love the show and I haven't missed an episode since finding out about you. I'm in my early 30s and I just sold one of my investment properties I owned in cash and will be receiving a very large sum. I wanted your advice on where to invest it and over what period of time. I already have over half a million invested in the markets, including the ETFs and index funds you'll recommend over various retirement accounts. I have multiple other investment properties with very small mortgages on them paying very little cash flow. I also have a limited partner in a multi-residential in the United States. I would argue I have a great income in the real estate business, but it's not always that steady. Looking forward to hearing your advice.

I'll click this one off, Robert. So I, of course, you know, you didn't give us the number as to what that large sum is. Let's say it's a quarter million dollars, maybe $300,000. That would definitely be a large sum of money, especially since you had this paid off in cash, maybe it's even more than that. If it were me, I think the first thing I would do, regardless of this situation, is just make sure that you as an LP and a multi-residential in the U.S., like those, contracts and those agreements are ironclad. I'm sure you've already gone through the process. You've

hired the right lawyers. You've done your diligence and you're protected. But Robert and I always talk about how important it is to structure yourself and position yourself accordingly whenever you do these types of deals because we all know the only ship that doesn't sail is a partnership. All right. Now to the money business. You mentioned I have a great income in real estate, although it's not always steady. You wouldn't have mentioned that if you didn't care about steady income. So maybe it would be a good idea to take a portion, if not the majority or all of this windfall that you're about to receive from selling an investment property and parking it into some sort of investment that will pay a steady stream of income. As you know, three of the best ETFs to do that right now are SPY, QQQQI, and now recently IWMI. Those three ETFs will get you the large caps, the tech stocks, and the small caps.

And with the Fed cutting rates here a little bit, we all know IWMI is performing. pretty well. So if you're focused on the income and you're looking for tax-sufficient, passive income in your portfolio, that could be a great way. You just open up a normal brokerage account. You're not getting any sort of retirement accounts involved here. It's just a normal brokerage account you'd invest this money through so that when that money is deposited, those proceeds, those monthly dividends are deposited back to your brokerage account. You can take the money out and enjoy it without any taxes or penalties or things like that that are going to get you in trouble like retirement accounts would. Robert, do you have any other ideas here for

Andrew? Yeah, I mean, whenever I see something like, this early 30s, my mind always goes to diversification. So many people, you know, I have this argument daily, if not weekly, where people say real estate, real estate, real estate. And we love real estate. I own real estate, Austin owned real estate. But it doesn't give you the income you need. You know, so many people talk about retire with your real estate. Takes a lot of real estate to retire from. So I think to someone like this, Andrew, you need diversification. I would look at getting some money, maybe into some other alternative asset classes like cryptocurrency. Maybe you could look at some different other options that are out there that we invest in. Maybe you could do some angel

investing, et cetera, et cetera, to try and find some balance here. You alluded to the fact that the cash flow is not always steady and it sounds like you need that steady cash flow. So definitely listen to what Austin said with these funds we're talking about SPYIQQQI. Those are great. And I just think it's a good place, but you want to make sure you have diversity. That's all. We want to make sure that diversification is there, especially as young as you are, because you can let that grow while also offering you monthly income. I think what's really important too about diversification, Robert, is the allocation of total net worth of, you know, how much money you have in these alternative assets, including Masterworks, including fine wine and whiskey, including cryptocurrency,

and including these sort of high-income ETFs like SPYI and KKQAQI and IWMI, I think that once you've built your base and you're like Andrew here with hundreds of thousands of dollars invested in the markets, having 20% of your net worth diversified into some cryptocurrencies, some farmland, some artwork, some high-income ETFs, I think that's a great place to be. You know, you still have enough exposure, especially at this early age of early 30s, to the index funds we know and love to have that long-term capital appreciates. that we're looking for while also being able to say, okay, the markets are turbulent, my artwork is doing fine, my crypto is doing great, or, you know, this income I'm getting from

these ETFs or offsetting any sort of potential losses. Right, I think that's what's so important about diversification is at the end of the day, it acts as a way to provide some smoothness against the volatility, which is, of course, what a lot of this episode was about, right? Market uncertainty. So really good question, Andrew, and we appreciate it, man. Our last question comes from Marius P. Marius says, hey guys, first off, I'm an immigrant, so I'm still getting to know all the financial products you have talked about. My first question is this. Now that the Federal Reserve is going to cut rates and high-yield savings account interest rates will begin to drop, where would you guys recommend we go to store our money for six or 12 months at a time? So let's start there. You can still

store your money in high-yield savings accounts. They'll just pay what they've paid historically, right? two, three, four percent. You know, we saw the fastest rise of interest rates in like 42 years or something and interest rates on your savings have never been higher, right? It's kind of hard to explain, but I guess what I'm trying to get out here is like, this is the norm. High yield savings accounts for as long as I can remember have always been two, three or four percent, right? So five percent or, you know, five and a half percent is insanely high. So, you know, as rates come down to that two, three, four percent for these high yield savings, like, it's still a great place to park your cash because it allows you to continually have velocity with your money. Yeah. And also, you've got to

remember when you're worried about losing that 5, 5.5% in high yield savings when the rates do get cut, there's always the old faithful VOOQQQ and some of these other funds that we talk about, which generally are going to outperform 5 or 6% anyway. So even in turbulent markets over time, we're going to see a greater return in the S&P 500 and in the NASDAQ. So don't shy away from those as a protective mechanism because over time they always go up into the right. And so that's just something to think about Marius is it's okay to have those safety nets in the, you know, high yield savings and in the treasury bills. But as those go down, there's always other places to put your money to make up the balance and the difference. I also want to remind you, though, Marius, that even if you had,

let's say $25, $30, $40, $50,000 in savings. Think about it like this. Are you going to have a $25, $30, $40, $50,000 emergency? Probably not, right? Think about this as if you lose your job or it's always good to have that emergency fund. But also, over a year's time, if you had $20,000 parked in a high-yield savings account paying 5%, we're talking about $1,000. And I'm not over here saying $1,000 is not a lot of money.

I know it's a lot of money. It's a lot of money for a lot of people. But I just want to remind you that if you are in a financial position to have $20,000 sitting in a savings account, making $1,000 versus making $400 or $500, right, if it gets cut to 2% or 3%, that $400 difference, $500 difference is not going to move the needle for you because your existing financial position. $500 is great. $400 is great. But it's not something that you should be spending all your brain calories on trying to optimize for if that makes sense. The second part of your question is this. You talk about public all the time, especially with their T bills.

But why does public state that fractional investing in T bills is higher risk than just T bills themselves? So this is a really great question. It all comes down to liquidity. It's kind of hard to explain, but at the end of the day, public is sort of the middleman between you, the person who wants to buy the T bills and the bond market, right, the T bill market. So public is over here taking your 1,000, 2,000. $4,000, $10,000, $20,000, and they're going to the market on your behalf and they're buying these T bills and they're kind of giving you the opportunity to get that exposure. But if you're only

buying $744 worth of T bills, right, public has to kind of figure out, okay, wait a second. They're only sold in allotments and it's not in a $744 lotment. How can I kind of figure this out, right? And so the reason they say it's a little bit higher risk is because the liquidity aspect of it. And you might not get exactly $744, you might get $742 or $743 or something weird like that, right? So when they say it's higher risk to have these sort of fractional T bills, it's because the liquidity against this market is not perfect. But it doesn't mean that it's risky in the sense of you losing your money. That will not happen. T bills are treasury bills and they're backed by the full faith in credit of the U.S. government.

And unless the United States government defaults on their debt, which, by the way, was something Robert mentioned in our newsletter last, week. We're now $35 trillion in debt. So fingers crossed, that doesn't happen. But unless they do, you're going to be just fine. So don't think about this riskiness as a way to lose money. Think about it as like the liquidity not being perfect. Great question, Marius. And thank you all for joining us on this episode. I am so excited for this one. I hope you guys enjoyed it as much as I enjoyed producing it with Austin. And we just have so much great news. We hope all of you listening are sharing the episodes with a friend. Getting them on the newsletter, I think we have the best newsletter in the country and it gets better every single week and just all of the excitement

around what we're about to launch with the Rich Habits Network. So much great news and we appreciate each and every one of you. Yeah, everyone, don't forget, we have a webinar coming up on Thursday, August 15th. If you've not yet registered and saved your spot, then you should definitely do that. We only have 1,000 seats and there's already 600 and some people who have registered their seats. And Robert knows this. There's about 700 people that come in the last like 20 minutes. So don't be one of those and get upset when you can't get a seat. Save your spot right now so you can get a guaranteed seat here on this webinar. We'll be talking about angel investing and pre-IPO investing,

sharing the cool companies Robert and I have invested into over the years and how we've been able to just multiply our portfolios because of this opportunity and the opportunities that we get presented all the time. And then finally, we're going to show you how you can invest into pre-IPO companies alongside of us. So literally invest in the private companies that we invest into. You guys are going to love it. It's going to be an awesome webinar. and we can't wait for you guys to be there.

So August 15, 4 p.m. Eastern Time, and we'll see you guys there. Thanks, everyone, and have a great start to your week.