Rich Habits Podcast - Q&A: How to Invest $700K, Bogleheads Strategy, and Diversifying Away from Real Estate

Episode Date: April 11, 2024

In this episode of the Rich Habits Podcast, Robert Croak and Austin Hankwitz answer your questions!How do I put $800K of "dead equity" to work?Am I invested properly as a college student?Should I build a $200K ADU in my backyard?How should I save / invest $7,800 per month?Why don't you all implement Bogleheads strategy?How should we invest a $700K windfall?---Save your seat at our FREE webinar all about Direct Indexing, ⁠⁠click here!⁠⁠---⭐ 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⭐ ⁠⁠⁠Listen to Public's new daily podcast, The Rundown – ⁠⁠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]---Options are not suitable for all investors and carry significant risk.  Certain complex options strategies carry additional risk. Options can be risky and are not suitable for all investors. See the ⁠⁠⁠⁠⁠⁠Characteristics and Risks of Standardized Options⁠⁠⁠⁠⁠⁠ to learn more.For each options transaction, Public Investing shares 50% of their order flow revenue as a rebate to help reduce your trading costs. This rebate will be displayed as a negative number in the “Additional Fees” column of your Trade Confirmation Statement and will be immediately reflected in the total dollars paid or received for the transaction. Order flow rebates are only issued for options trades and not for transactions involving other assets, including equities. For more information, refer to the ⁠⁠⁠⁠⁠⁠Fee Schedule⁠⁠⁠⁠⁠⁠.All investing involves the risk of loss, including loss of principal. Brokerage services for US-listed, registered securities, options and bonds in a self-directed account are offered by Open to the Public Investing, Inc., member FINRA & SIPC. See ⁠⁠⁠⁠⁠⁠public.com/#disclosures-main⁠⁠⁠⁠⁠⁠ for more information.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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Forever. I just love my job. Get tickets now. The Devil Wears Prada 2 in theaters May 1st, directed by David Frankel. Hey, everyone, and welcome back to the. Rich Habits Podcast, a top 10 business podcast on Spotify. Today's episode is our question and answer addition, which means we take your questions from Instagram or from our email, Rich Habitspodcast at gmail.com, and we answer them. We give you our candid feedback, our real-time thoughts,

and just our perspectives in general. If you want to ask us a question, you can always DM our Instagram account, Rich Habits Podcast, or again, send us an email at richhabitspodcast at gmail.com. With that being said, I'm eager to jump into this episode, Robert. Yes, but before we jump into this episode, I want to personally thank each and every one of you that attended the webinar the other week. We had over 700 people join us live and another 1,000 people who watched the replay. And if you haven't yet watched the replay, there's a link in the podcast description below. And now back by popular demand, we're going to host another webinar on April 24th at 4 p.m. Eastern Standard Time. This webinar is going to be all about the tricky subject matter.

No one is talking about direct indexing. Essentially, direct indexing allows investors to wholly own the underlying companies of the indexed funds we all know and love. For example, to a directly index into the S&P 500, you would own shares of all 500 companies in your portfolio. The reason people do this is for tax loss harvesting, allowing you to save a lot of money come tax season. We'll cover all of this and more in our webinar, so be sure to use the link in the description below to register. Tax loss harvesting is a way that a lot of people, specifically the rich, are able to save on taxes. And we actually found a company that's going to help all of us do this very simply, easily, and automatically. It's a company that I've been researching and working with

now for a while, so they're going to be joining us as sort of these experts on direct indexing. I'm not going to pretend I'm an expert on this subject matter. Robert, I'm sure knows more than I do, but bringing in these industry experts to talk about the subject matter that no one's really talking about is why we value the Rich Habits podcast so much. To talk about these specific strategies that can all help us learn more about building wealth and hopefully saving a bit on taxes. So be sure it'll use the link in the description below to register, learn more, do all the fun stuff for the webinar, and we look forward to hanging out with you guys just like we did last time on April 24 at 4 p.m. Eastern. Now, we always talk about it's not what you make, it's what you keep.

This is so incredibly important. And that's what defines what the rich people do better than others is understanding these advanced strategies to help you keep more of the money you make. And we'll be covering that in the webinar. Dude, I am so, so excited. Like, I'm so pumped. We're going to be able to talk about this from an educated perspective, right? Like, I've always thought about different ways of tax loss harvesting, but this is the real

deal. And it's going to be a lot of fun. Now, if you're an option trader, however, I need you to listen to what I'm saying right now because I want to talk to you a little bit about public.com. But first, have you actually ever thought about all the fees you're paying to trade options? Aside from the regulatory fees, there are commissions and most platforms charge per contract fees as well. But that's what makes today's sponsor public.com so interesting. Public doesn't charge commissions or per contract fees on your trades. In an industry first, they offer a rebate of up to 18 cents per option contract traded. So keep it. that in mind no one else is doing that. So check it out. If you trade a thousand option contracts on public, you'll get up to $180 in rebates. If you trade 10,000 contracts, you would earn almost $2,000. So more importantly, the rebate means you can maximize your profits and minimize your losses using public. So to give everyone a quick recap, Robert, there's no commissions. There's no per

contract trades. And up to 18 cents on every contract traded is the rebate you could expect. So see why nerd wallet recently awarded public five stars for options training. And to start earning up to 18 cents per contract traded yourself, head on over to public.com. This was paid for by public investing. Options are not suitable for all investors and they do carry significant risk. If you want to read the full disclosure, that's going to be below in the podcast description. And this is for US members only. Yes, you know Austin and I love public, not just because we work with them, just because they have so many great tools within the platform. So I love being involved and working with public and they just do a great job for everyone listening.

Same here, man. I've been a public user since I think it was April of 2020 and I never looked back. It is incredible. All right. So our first question comes from D-Tov-D. He says, hey guys, I love the podcast and I'm eager to ask you all my first question. I'm 45 years old and I recently inherited my childhood home in San Diego. It was appraised at $800,000 and is entirely paid off. I have great tenants living there today who are paying me $3,400 a month. However, I'm worried about all this dead equity. I'd love to retire in the next 10 to 15 years, and I'm wondering if I should sell the home and take all the proceeds, which would be most of the $800,000 given the step-up cost

basis with inheritance and invest it into index funds. At the moment, 80% of my net worth is tied up in real estate. I'd love to hear your feedback. Robert, you want to kick this one off? I would love to. I think this is a great question, and congratulations on the 800K. that is awesome. So here's my takeaways. You have options. You could sell the property today. The markets are pretty high right now, especially in San Diego. You could take that money and make a lot more gains with it

in the markets with the VOOs and QQs, maybe some cryptocurrencies using these more traditional equities markets. Or you could take your chances in four, six, eight months when interest rates come down. But the only thing there is with us being in such a really good market space right now, not only with the S&P 500, crypto markets and all of that. I just feel you'd be leaving money on the table. So if it were me, I'd sell it right now because it's the best of both worlds. We have a strong market right now and you have a strong housing market as far as pricing goes. That's what I would do. But if you're unsure, you could always wait, see what happens and see if you get more capital appreciation once the interest rates come down. That would be my take on it. Either way, it's a win-win

for you. You just have to look at it that for the $3,400 a month, that makes a lot. That makes a makes you about $40,000 a year in revenue. But if you were to take that same $800,000 and put it in the markets and even make only 10%, you would make 80K. So you're doubling right out of the gate with very little risk or concern. So those are my takeaways on this question. Yeah, I think it's even something that he mentioned, which gets me even more excited than what you talked about, Robert, which was the step up basis with this inheritance, right? Because it was an inherited property and the step up cost basis there. You know, he could sell this $800,000 and his cost basis, quote unquote, is $800,000. So he wouldn't exactly have to pay taxes on these inherited assets, which is really, really exciting. So here's my

perspective, right? It seems like you like this $3,400 a month. That's cool. If you want to feel like a landlord, if you want to get that passive income and really expect those rent checks to hit every single month, you could, one, sell the property and take $300,000 of this. 800,000. Put it into the ETFs we talk about in our last episode, QQQI and SPYI. That $300,000 would generate for you about $3,500 a month. That $3,500 would be much more tax efficient than just this ordinary income you're getting from your tenants at the moment. Plus, you would have another $500,000 to do what Robert said. Put it into the VOOs, the VGTs, the QQQs, these index funds that over a long period of time, we know double in value every seven years. So if your goal here is to retire in,

let's call it 15 years, that $500,000 would double to a million in seven years on average, and then double again to $2 million on average at year 14. So you would have $2 million at that, call it 14, 15 year time horizon, as well as an asset that's paying you $3,500 a month, which are these ETFs we talked about. So kind of the best of all the different worlds, man. I mean, you can really set yourself up here, DTAV, for a healthy and prosperous retirement. Now, our next question comes from Hutch. Hutch says, what's up, Boston and Robert? My name's Hutch. I'm 20 years old and I love the podcast. I just began my investing journey after a few months of research and I couldn't be more excited. I managed to save $5,800 to start and it's invested across large cap, small cap, immediate U.S.

Treasuries and international equity securities. I left roughly 5% of my initial investment to put into Bitcoin, which I'm a firm believer in. Currently, I'm in college and I work a part-time job, which pays my rent and other expenses. I bring in 700 to $1,000 to $1,000 per month, and I plan to save about $100 a month of what I earn. So here's my question. What do I do moving forward? I want to continue to grow my portfolio, but I'm unsure if I should be buying more shares of these current ETFs or buying new ETFs. And if they are new, what should I get? Should I also be buying individual stocks? I just don't know what to do. What a good question by Hutch. Okay, let me kick this one off, Robert.

First off, shout out to you, man. You're 20 years old and you're trying to build wealth. That is incredible. 5,800 bucks is a great place to start. And having 5% of that in Bitcoin and cryptocurrency is also incredible. I didn't see you mention the Roth IRA here. You might already be doing that automatically. But if it is just in a normal taxable brokerage account,

I want you to move that to a Roth IRA. We want to have our Roth IRA maxed out every single year. Like, that's the goal because we want to have that nice, prosperous, comfortable retirement. And 5,800 bucks is a great start toward that 7,000 that you can contribute every single year now. So, congrats hutch on that one. The second thing, don't get me wrong, large cap, small cap, international equities, U.S. Treasury, all this fun stuff. Cool, man. Like, sounds to me like you've done your research. In my humble opinion, I believe that 95% of people can just stick to the index funds we talk about and will outperform whatever you've got going on

right here, and here's why. When you begin to look at the performance of some of these international securities, small cap indices, U.S. Treasury, sure, you can have some treasuries, but also like, why do you need that? You're 20 years old. This money is invested for the next 40 years. You don't need to keep it in cash. You don't need that. You want growth for the next 40 years. You don't care about cash. So what I'm trying to say here is if you look at the historical performance of some of these subcategories in your portfolio, they're trash. You can look at VT, which is a great indicator, sort of ETF their index funds of the international markets, it's underperform the S&P by over a hundred percent in the last 10 years. Small cap. We all saw what happened to the Russell 2000 in

2023, and it's underperforming still in 2024. So that's your small cap portfolio right there. I guess I'm trying to get at Hutch is you may have like overcomplicated things. Not in a bad way. Good for you for doing the research and trying to understand this stuff. I love that for you, but it's a lot simpler than you might think. So what ETFs would we recommend? The same ones we've been talking about for the last 87 episodes now. V-O-O-Q-Q-Q-Q, V-T-V-T-I, and M-O-A-T. Those are the top five ETFs that anyone can just grab in their portfolio. It's got a little bit of all that stuff in there for you, and it's going to outperform, in my humble opinion, what you've created yourself here. And again, that's because we want to be tracking and outperforming the markets. M-O-A-T

is an ETF that's outperformed the S&P 500 for the last 10 years, not like your international fund that's underperformed by 100%. QQQ is the NASDAQ100. That outperform the S&P and tends to over a long period of time, right? We want to put our money and funds that are going to do really, really well into the future. Maybe not so much of these like diversification, you know, U.S. treasuries. I need to be all over the place. Like, sure, we love diversification.

But when it comes to stocks, I want the S&P 500. Like, that's really what I want. So for me, I did a bet. Hutch, great job getting where you're at today. and I love seeing Austin go down this rabbit hole of nerdiness. And he's right. I coined this little phrase last week in a bet that I told this, let's call him fake financial guru,

that I can outperform him and 95% of all the gurus and financial advisors out there with five stocks, five ETFs, and five cryptocurrencies, and I bet him $10,000 that over the next year I could outperform him. And what does that mean relative to this question? it means sometimes keep it simple stupid. You don't have to get so crazy.

You know, we talk about when in doubt zoom out. And in this instance, you want to zoom out and compare all of these other asset classes and funds against what we talk about each and every day. The goal here is to optimize your gains over a long period of time. So you don't want to be so spread out that you're not optimizing your money. You literally can do all of this with the five indexes. funds that we talk about, five stocks and five crypto. So Hutch, I think it's amazing you're at where you are at 20 years old, but don't overcomplicate it. Don't think it has to be this

endorphin-filled ride filled with complexity. You can keep it simple and still crush the markets. And I think Hutch that mentioned something pretty interesting, which is like, what do I think about single stocks, right? Should I own individual stocks? Now, you guys have probably heard us say phrases like own the companies you know and love. And we believe in that, right? We want to make it really easy for as many people as possible to do those things, including Hutch. That's why we recommend Griffin. Griffin is an app that allows you to turn your real-time spending into real investments. Every time you swipe your card somewhere, call it Starbucks, Target, Walmart, Amazon, Spotify, Netflix, whatever, Griffin will automatically take $1 from your bank account and invest it into that

individual stock. So Hutch, if you're thinking about what individual stocks do I need to be buying, if I were you, I would just download the Griffin app and let them figure it out for you. Yeah, I love the app. And whether it's your buying groceries, your Spotify subscription, an Amazon order, or any other purchase from a publicly traded company, Griffin will automatically invest $1 into the company you're shopping at. You hear us talk about this all the time. And Griffin really nails it of giving us a platform to be able to do this.

And the main point is you want to be shifting your approach from a consumer-based mindset to an investor-based mindset. And that's why we love Griffin. All you have to do, download the Griffin app, connect a credit or debit card that you use to purchase things from different types of companies. And then it will begin passively investing into the companies that you are a customer of. They don't charge monthly fees. They don't have commissions. They don't do anything like that. And be sure to use the link in the description of this podcast episode because when you sign up and use the code habits,

you will get an additional $5 of free stock. So Hutch, looking for that $5 right there? Come on, man. Pop it into whatever you're buying. If it's Amazon, if it's Netflix. like that's how I think you should be thinking about individual stocks. Not so much of let me try and find the next NVIDIA or find the next, you know, Microsoft or whatever, these little penny stock ideas you might have because you're in college.

You're curious, man. You guys are talking to your friends and you're in the group chats and the discords. Leave it to the Griffin app. Just do what you're spending your money on. Put a little bit of money into those companies. And that is how you should have individual stock exposure in our humble opinions. So Hutch, you and anyone else listening or watching, just keep in mind that our friends at public recently launched their own podcast called The Rundown. So if you're on your way to school,

on your way to work, just finished up listening to one of your rich habits episodes. Keep in mind. A new rich habit you can work into your daily routine is listening to the Rundown, Public's new financial podcast. It's only five minutes long and you'll walk away caught up on which stocks are making the biggest moves and the economic stories that matter most for your portfolio. So check out the Rundown wherever you listen to podcasts. We'll be sure to share. share a link in the description below, but it's something I always used to do in college. Like you, Hutch, I was walking around campus. I was listening to my favorite podcast, some music, whatever, getting caught up. It is a really awesome habit that you can add into your daily routine.

And we wouldn't share it with you if we didn't listen to it ourselves and think it provides great information and value to you each and every week. And Zaid Admani, the co-host is a rock star. And he's pretty funny. So I think you guys are going to like him. All right, Robert, this next question is for you. You're going to love it. It's coming from Layla S. Laila says, I love the podcast. It is so helpful. I bought a house seven years ago. I've paid it off and now I want to buy another. I got approved for a $400,000 loan and I live in California. However, I've heard of tenant horror stories and I've heard about squatters. I am terrified of becoming a landlord. So instead, I'm thinking about building a 1,200 square foot ADU additional dwelling unit in my backyard.

Something like this would cost me about $200,000. I could rent it out on Airbnb or even peer space for potential photo shoots and commercials. What do you think about this? Layla, absolutely love it. I think this is an incredible strategy and more people should do it. And one of the cool parts about your question and your situation is California just changed the laws quite a bit to the advantage of the homeowner putting ADUs in California properties. So it's really amazing. Just a few key pro tips here. Make sure you work with a professional that understands all the rules. What's the distance from the property line that you have to? be. Make sure that you have parking on property parking because you can't have an ADU with street

parking. There's just a few key rules like the size of it. You mentioned 1,200 square feet. You need to make sure that that's doable because I believe in California, the ADU can only be up to 50% of the square footage of the primary home. But I love this strategy. Just make sure you know all the rules and regulations before you get started. And look, instead of building from scratch, Look at some of these modular homes. Look at some of these prefab companies because then you can get this up and running much faster with a prefab because all of the regulations and all of the things you would normally have to deal with with inspections will be handled by them.

So it's really important. So I think it's a great idea. I think peer space is a great addition in case you don't have enough daily bookings. Peer space can be great. So I love all of this and I wish you the best of luck. And I think it's a great idea for long-term. passive income. I think Layla, when Robert and I were talking about this beforehand, the only like red flag that went up in my brain was, I mean, you mentioned this is going to be in your

backyard. So just like, you know, be prepared to have people in your backyard and just get comfortable with that, right? Maybe during a photo shoot, they might knock on the door and ask for a bottle of water or, you know, maybe something, I mean, might happen with someone living there. Like your tenant or Airbnb person is if something goes wrong, they're going to knock on your door, right? They can say, hey, this is wrong. I need you to come fix it. So just be prepared to have sort of that vulnerability when it comes to this. But if you can get over that hump and you think that you're ready for that, like this is a wonderful idea. I'm all about it. And maybe on this $200,000, you could generate an extra $2,000, $4,000 a month in cash flow. That is a crazy cash on cash return

of over 10, 15, 20%, depending on how profitably you can make this business, which is unbelievable. Great idea, Leila, and wishing you're the best. Yeah, I love it. And keep in mind with peer space, A lot of times your day rate on PeerSpace might be for four or six hours, and you're going to get two, three times the nightly rate for someone that would want to rent it for an Airbnb. So that's why I like that you're looking at both options here, because I think you can just crush the bottom line doing this strategy. And Robert, for the people listening, what is PeerSpace? Peer Space is a site similar to like an Airbnb, but you can book it just like she mentioned for photo shoots. You can book it for studio time. You can book it for meetings and it might be four to six hour windows.

And generally, those events cost more money to book in peer space than it would if you were just going to stay in the property. And something that a lot of people don't know, you can book peer space and not even allow people to stay in the property. So if you didn't want to use it as that additional dwelling unit for people to do short term rentals and come borrow water from you or coffee or sugar, peer space is great because they're not spending the night. They're literally using it for their allotted time during the day. And then they're gone. They're not using the bedrooms. They're not doing the wear and tear on the property. So a lot of options here.

I love it all. Great question. Let's go, Leila. Our next question comes from Digital Nomad. He says I'm 42 years old, single, have no kids, and my current net worth is negative $23,000. I own a fourplex that cash flows $3,500 per year. My mortgage on the property is $294,000. I also have a personal loan on this property with the balance of $7,500 at a 15% interest rate,

as well as $11,000 of credit card debt. Additionally, I have a $30,000 emergency fund, $27,000 in my 401k, $49,000 in a Roth IRA, and I make $154,000 per year, but the best part is I live on nearly nothing. I'm able to save and invest $7,800 a month. That's such great news. Okay. He said, $135,000 in student loans, wow, at 6.6% interest rate. I'm not required to make payments on these

loans right now, but next year I will and they will be gigantic. I have a plan, and if all goes according to my plan, I should have a fully funded emergency fund and a paid off credit card by the end of June. After June, what should I do next? Should I pay off my student loans? Should I invest more money? Should I focus on buying my next investment property? I don't know what to do. All right, digital nomad. Good news, bad news, my friend. Good news is you are a really good saver, allowing us to have a lot of flexibility with our options. Bad news is you're 42 and you're still in the hole. But that's okay. We all have to start somewhere and I'm really glad that you're here listening to the podcast because we're going to get you out this hole really, really quickly.

Like really, really quickly. So here's what I'm thinking, right? You said your plan is to have a fully funded emergency fund and pay off your credit card debt by the end of June. Yes, do that. However, you didn't mention that you're going to pay off the personal loan with a balance of 7,500. You should also do that. So if you're saving 7,800 a month and this loan is for 7,500, then by the end of July, right, one more month of squirling away the 7,800, use it to pay off the property loan at that 15% interest rate. Congrats. You now have a fully funded emergency fund. You have no credit card debt, and you have no personal loan. So you are now debt free. There's no high interest debt. The only debt you have are the student loans and the mortgage. That's a really good place to be. Now,

in my humble opinion, you don't have enough invested into the markets at your age. especially with this wonderful income. So until your student loans kick in next year, I want you focused, laser focused, on taking $7,800 and just squirling it into a Roth IRA or a public.com taxable brokerage account. You're going to max out that Roth IRA literally in one month's worth of investing, which is great.

So everything beyond that, I want you putting it in public.com, and I want you to be investing into the index funds that we talk about, V-O-O, V-G-T, V-I-Q-Q-Q-Q-Q-Q-Q-Q, M-O-A-T. I want you to just put as much as you possibly can into that up until your student loans start kicking in there. I mean, you need this first $100,000 invested desperately. You're 42. You're in the negative. We're going to get you in the positive. I am so optimistic. Now, here's what I'm thinking, Robert, and we can walk through this together. But what I was thinking is once the student loan payments kick in next year, I would kind of do a half and half approach,

right? You want to be investing. I don't want it to be so black and white as Dave Ramsey puts it where all of your thought and all of your money, all of your focus has to go toward paying off the student loans, or all of your focus has to go to investing, I think you can kind of do a half and half, right? So if it were me, I would take, call it 24, maybe 36 months to pay off the student loans, assuming your income remains just as high and you're able to squirrel away the same $7,800 a month, while simultaneously investing the difference. I think you should not stop investing, right? Do not stop investing to pay off the student loans. You can do both That's totally fine. It's a good way to approach this, especially at your age, because if you fast forward two or three years, you're going to have all of your student loans paid off. You're going to have a cash flowing fourplex. You're going to have probably $200, maybe $250,000 invested. And you're not going to have any high interest debt. You're going to be sitting pretty at 45 years old, sitting better than 99% of your peers. And you're now going to have the opportunity to make a choice. The choice of, do I want to keep the cash flow? Do I want to sell the property?

Do I want to take the proceeds invest more? Do I want to pay down the property? You didn't mention the interest rate. But we're giving you options here, man. And you are going to be doing just fine. You just have to be vigilant, disciplined, and intentional with your money. I couldn't agree more, Austin. I think you nailed it.

And the cool part about this is, with the student loan being it right around that 6% mark, I still believe there's positive arbitrage here. So I like that you broke it down of taking that $7,800 and splitting it in half. because that way you're still getting positive movement in your savings to get you to that first 100K that we already talk about. But you're also staying on top of the student loans because you're right. I wouldn't just take all that money and dump it into student loans because I still believe the current state in the market, whether it's the S&P 500, the NASDAQ cryptocurrency, is still

going to outperform 6% a year over that next two or three years. So I love splitting it in half, getting rid of the high interest debt and moving forward to a cash flow positive situation. I think you nailed it. I'm excited for you, man. I mean, really, 45 years old with a quarter million invested, that'll probably double another three or four times before you're ready to retire. And you're going to retire with hopefully now this cash flowing property plus about $2 million if you follow this plan. We're both really excited for you, man, and thanks again for the question. Okay, so earlier in the show, you heard us talk about the investing platform public.com. That's where you can trade options with no commissions or no contract

fees and you get a rebate of up to 18 cents per contract trade it nerd wallet recently gave public five out of five stars for options trading so if you want to see why go to public dot com and start getting a rebate of up to 18 cents per contract traded paid for by public investing options not suitable for all investors and carry significant risk full disclosure and podcast description and for u.s members only all right our next question comes from Shane a Shane says I love the podcast and I recommended the podcast to my closest friends and family. I really appreciate the advocacy for the S&P 500 ETFs you all talk about, but I'm curious, why don't you all talk about the Boglehead approach with ETFs like VT? Do you all have any allocation to global equities? Cheers to

building wealth. Cheers back to you, Shane. Thanks so much for the question, man. So how I understand the Boglehead sort of three fund approach that Shane is alluding to here is you have a investment in the total stock market, which is American. You have an investment in the total international stock market, which is international. And you also have your portfolio allocated to the total bond market. So let's call it 33, 33, 33, between U.S. total stock market, international stocks, and the bond market. Now, the reason why Robert and I, well, I'm not going to speak toward Robert Beer, but the reason I specifically have a lot of my portfolio inside of the S&P 500 is you look at the total return. We just talked about that actually with Hutch here, because the total

return in VT to your point, underperform the S&P by over 100%. You know, don't get me wrong. Should you have diversification into international markets? Sure, if that's what you want, it's not what I want. I want to be in U.S. markets. Over the last several decades, they've outperformed international markets. So why the heck do I want international markets? You know what I'm saying? Bonds are cool. Don't get me wrong. I like bonds. Bonds are part of the Boglehead sort of three fund approach. BNDI is how I was able to add some bond exposure to my own portfolio in 24. We had Troy from Neos investments on, I want to say a couple months ago, talking about BNDI and how they sort of approach bonds. But, you know, I'm not an international guy. Robert, are you an international

investment guy? Yeah, let me take a stab at this. Shane, great question. But again, I think it goes back to my goal with investing is to extrapolate as much gains as I can for myself. And so I think so many people try to overcomplicate how to invest and what to invest in. And like Austin mentioned, when you look at VT versus VO or VT versus QQQQ, there's no comparison as far as the amount of gains we would make not having VT versus having VOO or QQQ. So for me, yes, having some international exposure can be really good like AIQ. That is one that is international in the AI sector. And And I love that and I think it's going to do great. But for me, it's never about what looks cool on paper or sounds good.

It's about how can I make the most gains with my money over time tax efficiently. So that is why I will have some international exposure every single year, but it's going to be a very small percentage until I am shown that these international markets are going to outperform the good old S&P 500 or the NASDAQ. And to date for the last, let's say, five or 10 years, that hasn't been the case. So, Shane, that's my takeaway. The Boglehead method sounds cool on paper, but it just doesn't work. The math ain't math in right now. So that's why we stick to what we know and what gets us the most gains over time. But that's what's so cool, Robert, about the stock market.

I can be really bullish on a company or an ETF or a strategy. And someone can be really bearish on the same ETF. Every day. And because it's a free market, we get to vote with our dollars. So, Shane, vote with your dollars, man. I hope that you are able to add a little bit of diversification of international markets to your portfolio. And I hope it does well for you. But like, that's your choice.

Right, that's the choice we all make with our money is like my choice is I want more American exposure. I want that S&P 500. Give me the NASDAQ, right? I like that. I like the MAG 7. I don't care for international exposure. Therefore, I don't have to take my money and invest it. It's a free market.

And I love that about not just the NASDAQ. the conversations we're having, but the opportunities that we can all make with our money using the stock market to do that. So really good question from you here, Shane, and we appreciate it. Our last question comes from Michael T. Michael says, hey Austin and Robert, my name is Mike and my wife and I are huge fans of the show and we listen to every single episode. What's up, Michael? And shout out to your wife for listening. We are so, so humbled. Mike says it's really changed my mindset and I can't recommend this show enough to our friends and family. So here's my question. We recently had a windfall of $700,000, and we've

want to know what's the best way to put this money to work. Currently, we have 580,000 of it parked inside of T-bills on public.com until we can come up with a game plan. We've already put 120,000 of it into covered-call ETFs like SPY, QQQQQI, GEPI, JEPI, and JEPQ. We're 39, and we make $320,000 as a household income. Prior to this windfall, we had about $160,000 sitting in T-bills and high-yield savings accounts while we actively looked to purchase a second investment property. We own a four-unit condo complex with my siblings and we generate $5 to $600 a month of net profit from our share. We live below our means and have zero high-interest debt. We own our home. We have equity of $500,000. Inside of that home, we have two small children, six and three.

We've invested $6K total toward their $529s and have about $14,000 in each of them. We have about half a million combined in our 401ks. We max those out every single year, and we started following a stricter budget so we could put an extra thousand a month toward V-O-O-V-G-T and VTI in our public.com taxable brokerage accounts. Our goal is to retire in our early 30s, but I don't know how realistic this might even be. Ooh, Robert. What a great question. See, whenever we talk about the Rich Habits podcast community as just like getting smarter and more excited, this is what we're talking about. Like Michael T and his wife, I'm not sure how long they've been listening to the show, but I'm just flabbergasted. Crushing it. Crushing it. Yeah. Man. Oh my gosh. Okay. Let's kind of

break this down into some different sections here. The first one is I want to talk about the covered call ETFs. You said you've got 120,000 in SPYI, QQQQQI, JEPI and JEPQ. I would completely get rid of Jepi and Jep Q because both of those covered call ETFs use equity linked. notes to generate that income for their shareholders, which are very tax inefficient. They're very expensive from a tax perspective. It's tax as ordinary income. Compare that to section 1256 contracts that SPY and QQQI use to generate income for their shareholders. It's much more tax efficient, like way more tax efficient. And it also underperforms. Like go look at JEPI last year versus SPYI and JEPQ. It's they underperform. So take that out, sell that and use that and put it back into

SPYI and KQQI. That's the first thing I would do immediately. The next thing is I'd also consider using some of this windfall to beef up that 529 account for your kids. You know, it might be a good idea to put an extra 10, 20, 30, 40,000 even into that. And letting that grow over time, we all know that college tuition's only getting more expensive. I would also encourage you to review the performance of that half a million in your 401Ks. Robert says this all the time. The 401K is not an investment strategy. The 401K, people have this, you know, notion, in their brain that, oh, if I invest to my 401k, I can retire, I'm going to be great, all as well. Sure, like, you're investing, but what are you investing into? Do they have you in a target

date fund that has it 30% bonds for some reason? Are you in these international stocks that underperform? Like, what are you invested into? So Michael and your wife, I encourage you to just print out the last one, three, five, 10, 15 year performance of your 401ks. And if you have the autonomy to sort of change those, if it is underperforming, certainly do that. And the last thing is, I didn't see anything in here regarding a backdoor Roth IRA. You guys obviously make more than the income limits. You're going to have to do a backdoor Roth IRA. It's very simple.

Just Google it. I would start maxing that out every year as well. That's going to be a supplement to that retirement account of a 401k you guys already have here. So those are a couple quick callouts I've got. I know Robert has a couple ideas too. Yeah, I didn't see anything about cryptocurrency. And I think with as much as you're making and what you already have now, that it's important for you to really consider having that five to 50s.

15% of your net investable income and cryptocurrency. You can do that on public.com. It's a great place. You know we work with public and we love it. And I just think it's not the best time to try and find cash flowing properties right now. They're just the math isn't there for it. So I would rather see you beef up on everything that Austin mentioned, add in some cryptocurrency in a nice balanced portfolio there with some Bitcoin and Ethereum, you know,

ChainLink, XRP, some of these tried and true projects that we love and really do that. then also build up the Roth IRA holdings with those traditional funds like VO, VGT, and QQQ. I think that would be a great strategy to give you more diversity, more balance, and not worry as much about getting another cash flowing property because tying up that much capital to make $4,500, $600 a month to me just isn't worth it right now. And so that would be the strategies that I would do and to give you more diversity. So we're taking some of the 580 and we are beefing up the 529. We are also getting rid of the JEPI and JEPQ and we're putting that into SPYI and QQQI.

We're taking some of the 580. We're maxing out the Roth IRAs. We're going to continue to do that in perpetuity at 7,000 a year, backdoor, of course. Even if you want to also take more of this 580 and beef up the 120,000 you have in these covered call ETFs, because you mentioned you want to retire early, right? You want to retire in your early 60s. You're well on your way. You got half a million dollars.

between the two of y'all at 39 years old now, and you're making 320 a year, of course, you can retire early. But I think what's interesting about this notion of retiring early is people make the mistake, and Dave Ramsey kind of alludes to this mistake a lot and encourages people to make this mistake, is they want people maxing out their retirement accounts, their retirement accounts, their retirement accounts. You've done this very, very well, right? Don't be wrong, you're contributing $25,000 a year toward your 401ks, you've got half a million dollars. Like, that's wonderful. That's a great place to be. And as you continue to contribute, you $2,500 a year each, so let's call it $50,000 a year total, I mean, your retirement accounts are

going to be in the millions in your late 40s, early 50s, which you could easily, quote, unquote, retire on, but you can't touch it because you're not 59 and a half. So what I want to encourage you to do, Michael, is take some of this $5,800 and start building your bridge account. The bridge account is a normal, taxable brokerage account that's going to act as the bridge of this little honeypot, income-producing portfolio that's going to help you retire early and sort of bridge that five-tenure gap before you can touch your retirement accounts at 59 and a half. So maybe for you, that's $300,000 or $400,000 of this $580 that gets invested into the ETFs we've talked about. You're 39 years old. As we know, the stock market doubles every seven years, which means this

$400,000 of this bridge account that we've kind of alluded to here that's invested into the ETFs that you've mentioned would be worth about 1.5, 1.6 million at 53 years old, right? You could easily live off of $1.6 million from 53 to 59 over that six-year period before you have the opportunity to access these retirement accounts, which will be millions and millions and millions of dollars in value considering how aggressively you'll be investing in that time period as well. So I would encourage you guys to learn more about the concept of building a bridge account, especially for high earners like yourselves, and give yourself a pat on the back. as well as thinking about we don't have to retire in our early 60s.

We could probably do it in our early 50s. I mean, you guys are really well on your way here. So that's Robert and I's perspective on this. And you guys are crushing it. Congrats. I want to thank each and every one of you for following along with the Rich Habits podcast every single week and just really engaging with us through all these questions and DMs and emails.

We love it and we appreciate it. And just always remember it helps us if you share the podcast with someone. We get those five-star reviews and keep some. us at the top of the charts. So thank you all so much. And also quick reminder, we do have an Instagram account, Rich Habits Podcast, where we get our DMs of questions and things like that. But Robert and I are going to start posting stories over there, some questions, some Q&A, some other ways to involve the community and all of our followers. So be sure to go check out the Rich Habits podcast Instagram account. Engage with us over there because we're really,

really excited to communicate with you guys, foster an awesome community and get things rolling here in Q2 of 2024. There's a link below to check out the next webinar on April 24th about direct indexing. It's going to be happening at 4 p.m. Eastern Standard Time. So be sure to check that out and register. And a quick reminder, the Money Mindset Wealth Building Summit. There still are some tickets available, both virtually and live. Austin and yours truly will be there presenting and hosting. We have a lot of great speakers on April 26 and 27. So there's a link below as well as in my bio to check out all the details. Hope to see you there. And as always, have a great rest of your week.