Rich Habits Podcast - Q&A: Lump Sum vs. DCA Investing, Losing $25K in Meme Stocks, & Mid-Term Rentals

Starting point is 00:00:00 Hey everyone and welcome back to the Rich Habits Podcast question and answer edition. In these Thursday episodes, Robert and I sit down and we answer your questions. You ask us questions inside of the Rich Habits Network. You also ask us questions inside of Instagram DMs at Rich Habits Podcast, or you email us questions at Rich Habitspodcast at gmail.com. Y'all always figure out a way to get in touch with us, as you should, and you do a pretty good job of it. We've got, I think, eight questions this episode, Robert, to answer. A ton of them came through emails, a ton of them came through DMs, and others are also from inside the Rich Habits Network.

Starting point is 00:00:35 We can't wait to dive into some of these. And Robert, how are you feeling, man? It's the second to last real week inside of December. Have you started making your new year's resolutions yet? What is on the horizon for you for the next couple weeks? Wow. I would say for me, the best part about, let's call it, this holiday season, the Christmas season for me, is that I feel like why everyone else is winding down. I can play catch up.

Starting point is 00:01:01 And that's one of the best parts because everyone kind of like starts to wind down, spend time with the family, do their Christmas shopping. And for me, it's all about getting that mental clarity ready for the new year. Because we have tens and tens of thousands of people that count on us for the best information and guidance out there in what's happening in the markets, what's happening in the economy, what to do with their business in the new year. So for me, I get really excited about this two, three week period of downtime. because I feel like I can really get ahead of the curve to figure things out for the new year.

Starting point is 00:01:34 So I'm super stoked. I'm right there with you. I think it's a cool time to allow us the ability to reflect and think about what's happened throughout the year. What do we want to change? What do we like? What did we not like? And more importantly, too, you know, we were talking about doing a portfolio performance

Starting point is 00:01:49 review. This is a great time to do that. I mean, if you're someone who has that, call it seven to ten days of downtime here in the holiday season, spend 24, 48 hours of that sitting down. and actually looking through your portfolio, if that's inside the 401k, your bridge account, maybe your crypto, maybe your real estate, maybe your alternative investments.

Starting point is 00:02:08 There's a ton of different portfolios that we know you all have. Sit down and do the homework. Compare it, benchmark it, see what's working, what's not, and make the changes necessary so that you can start 2025 off on the right foot. I love that and it really comes down to, and we've been talking about this a lot lately,

Starting point is 00:02:25 of knowing where you're at, is it time to take profits, and really doing that thorough research on everything you're invested in to see where you're at. And I really like what you said about like having that year-end inventory. And I just spoke to one of the people in our Rich Habits Network this morning who DM me and said, I'm up 230 percent on my Palantir. I'm thinking about taking some profits. What do you think?

Starting point is 00:02:49 And I was like, I totally agree. It all depends on your risk tolerance and your thesis for that individual stock. And so I think it is just a great time. reflect on all of our bounties, all that went well, the things that didn't go well, and then start off the new year with real defined guidance of what you want to do, because so many people make these New Year's resolutions. That lasts about two weeks. That's why the gyms are so busy in the beginning of the year. And then by March or April, they're back to normal. And so I just think it's really smart for everyone to just dial in, really take a look at their money. And then they have an overview and an

Starting point is 00:03:27 understand of exactly where they're out going into the new year. And the last thing I want to encourage people to do during this downtime is, Robert, we all make the monthly budget. We all see, okay, I've got this much for the month. Here's how much I'm spending. Here's what I'm allocating to specific categories. But something I also like to do is look back at my annual budget, right? I like to sit down for a couple hours and say, I understand what I made every single month. I understand what I spent every single month because I use the honest budget, link in the show notes below. I understand the categories. how much was invested, look back and now look and review your annual budget.

Starting point is 00:04:02 How much did you invest in 2024? How much did you spend on groceries in 2024, eating out and, you know, splurging. How much was that in 2024? How much did you make in 2024? How much of that was side hustle money or maybe your earned income, right? There's a ton of different things to review. And it really puts in perspective, Robert. Sometimes I remember in 2022, I was very upset with myself for not investing what I thought

Starting point is 00:04:23 I had invested. I looked and I was like, wait, I only invested that much. And so in 2023, that. That's when I've turned on the gas and said, I'm going to start building this investment portfolio from scratch publicly so people can hold me accountable. So there's a bunch of different things that we encourage people to do around here. First and foremost is get control of your money. You're listening to the Rich Habits podcast because you want to do that. And we're answering your questions because you guys have questions from that.

Starting point is 00:04:45 So, Robert, let's jump into the episode. Definitely. Well, heads up, folks. Interest rates are falling, but you can still lock in a 6% or higher yield with a bond account at public.com. It's a pretty big deal because when rates drop, so can the interest you earn on your investment. A bond account allows you to lock in a 6% or higher yield with a diversified portfolio of high yield and investment-grade corporate bonds. So while other people are watching the returns shrink, you can sit back and collect regular interest payments. But you might want to act fast because your yield is not locked in until you actually invest.

Starting point is 00:05:23 That is a key point here. The good news, it only takes a couple of minutes to see. sign up at public.com. Lock in the 6% or higher yield with a bond account only at public.com forward slash rich habits. This advertisement was brought to you by public investing, member FINRA and SIPC. As of December 9, 2024, the average annualized yield to worse across the bond account is greater than 6%. Yield to worst is not guaranteed. This is not an investment recommendation. All investing involves risk. Please visit public.com slash disclosures slash bond dash account for more. information. All right, Robert, our first question comes from James L. James says, in January,

Starting point is 00:06:02 I plan to roll over a traditional IRA from Edward Jones, which has been underperforming the market to no surprise, into a new IRA where I will have full autonomy over my investments. I plan to invest the money into VTI, QQQ, VUG, and Ibit, and maybe a little bit into ETHA. My thought is to deploy the first $25,000 immediately into these ETFs, and then dollar cost average $2,500 per week or $10,000 a month throughout the remainder, which should have me fully invested in about six or seven months' time. The money not invested into those index funds and ETFs will be earning 4% while parked in T-bills. Now, with the equity in crypto markets being where they are today, I think I prefer this dollar-cost average approach so I can buy the ups and the downs.

Starting point is 00:06:51 But Robert and Austin, would you all think differently? should I just lump sum this all in January, would love to get your perspective. Wow. James, I love this question. It is, in my opinion, spot on. I personally never lump sum invest unless it's something like an angel investment where I'm required to. I just love the dollar cost averaging strategy and I will fight anyone on any hill about it because none of us can time the market. And so when you dollar cost average and I love that you pinpointed like this six months window because you don't know what's going to happen in the markets. We don't know where they're going on a day to day or a week to week basis. So I don't really see a reason to just

Starting point is 00:07:32 lump some all of this into the market because the biggest thing is what if you did that? And then there was this, you know, downgrade in the markets and we saw some pullback for two, three, four months. And then you happened to do it right at the top. That's why we like dollar cost averaging. Spread it out, even it out to make sure you're not buying. at the top and you can really, really get that cost basis where you want it. I couldn't agree more, Robert. I think what's really important about this is to understand sort of that mechanism, the difference, the true number where it's like you can lump some versus you should not lump sum.

Starting point is 00:08:08 And for me personally, if it is worth more than 15% of my net worth, I don't want to lump some. I want a dollar cost average, right? So for example, my net worth is between one and two million dollars. Thank you cryptocurrency for that, right, all over the place. So for the last couple weeks here. But let's say my net worth was between $1 and $2 million. If I'm investing now $100,000 to $200,000, like that's really the cutoff for me where it's like I really should be thinking about dollar cost averaging this money. Now, if I had $12,000 to invest, sure, I'll throw that in the markets in one day. I'm not worried about that because I'm young,

Starting point is 00:08:43 I have a long period of time and it's a small section of my net worth. But if it starts getting up between that 10, 15, 20% of my net worth, I just don't want that type of negative exposure that could happen to my net worth by accidentally buying the top because again, no one can time the markets. So I love how you're approaching this, James. I would also add VO to the ETFs and index funds you're talking about here. I don't see that included. So absolutely add that. And again, we encourage you to have sort of this core satellite portfolio approach when it comes to investing, which essentially means you want to have the vast majority of this money. invested into the index funds and ETFs we know and love. Think the S&P 500. Think the total stock market. Think the NASDAQ, right? These big, longstanding blue chip investments that have been around for decades and decades. And then the other call it 10, 15-ish percent into the more speculative things like you alluded to VUG, Ibit and ETHA. VUG is a bunch of growth stocks, so they're

Starting point is 00:09:45 very volatile. So just know what you're getting yourself into there. And then we all know what Bitcoin and Ethereum is. Just don't bet the farm on those specific asset classes without understanding what you're getting yourself into there. The market at the moment is frothy. We know this, right? The PE ratio is above 22. Normally it's around this 18 to 19 range. Essentially, the higher it is, the more expensive it means to be an investor. The lower it is, the less expensive. So back in 2022, it got down to 13 when we saw that sell off and now we're back up to 22, which is right where it was before it sold off. The dot-com bubble were at similar valuations,

Starting point is 00:10:22 price to sales, price to book as we were back then as well. So I like this approach, and the only reason I'm telling you guys all this information is because it's of Robert Nye's opinion that as we enter a new year, especially after the inauguration, expect volatility. I mean, we're still in this euphoria deregulation, 100% made, AI,

Starting point is 00:10:43 all these things are getting people still excited about the end of the year. And we think that's going to continue through the next, call it several weeks here. But it's of my opinion in Roberts as well that as we begin to turn the corner into the Trump administration in the January, February, and March segments here, we should experience a little bit of volatility. Yeah, I love it. And this really, that is a great, great breakdown. That was incredible. People really need to take note.

Starting point is 00:11:08 One thing that I take away from that is you talk about the percentage of your total net worth as far as how you determine. how much and when to dollar cost average. And I guess the two takeaways for me that are so important, I've been seeing a lot of people because we're in this crypto bull run right now, saying that you shouldn't be investing in the S&P 500 and the NASDAQ, and it's not worth your time to make 10, 12, 15% a year. Please, please, please do not listen to those people. Because at the end of the day, you can't have everything in these highly volatile risk

Starting point is 00:11:43 on assets. You want to have that exposure. to all the different markets that we talk about to give you the diversity, but also give you that stable base. Because guess what? That all sounds great when we're in a bull market and you're making 30, 40, 100% on a cryptocurrency, but you still want to have your tried and true base like the VO and the QQs that we talk about to make sure that you're always growing your retirement funds. So just please be careful of that. And number two, really understand and research what dollar cost average means and implement it into your weekly, monthly investment strategy.

Starting point is 00:12:21 So many people just kind of gloss over what dollar cost averaging means, and they don't really understand the importance of it long term. And it's really all about automating your investments as much as possible, because I see it every single day where people are really good for like six months or a year, a year and a half. But then something happens and they fall off the rails, and they don't invest again for like two, three years because they're trying to time the market. the guy at the barbershop said that we're going to have a crash. You don't know what to do.

Starting point is 00:12:50 Don't do that. That's why we like consistency, dollar cost averaging, because then that way you are not forced to try and figure out when to time the market because no one can do it, not even us. So our next question comes from RIS. Ari says my dad passed away about six and a half years ago and my family friends have been helping my mom out with the life insurance money she got, putting it in various investments yielding high returns,

Starting point is 00:13:15 but not very liquid or generating frequent returns, rather only after long periods of time. I started to review with her all the investments and working to get things more in her control. The biggest outlier I found was $60,000 sitting in a traditional savings account she is saving to help my youngest brother out when he's ready to buy his first home. This is quite a few years away. I got it transferred to Publix high-yield cash account and it's earning interest now for the first time, but I was wondering her thoughts on if there's a better place to put it. She does want it to be liquid, but she doesn't want it to be invested into something risky

Starting point is 00:13:48 because she absolutely wants to ensure that it's around for when my brother is ready to purchase the home. This is a really great question, and I'll take a first stab at this one. Robert and I always think when it comes to saving for a down payment or saving for a big purchase or whatever this might be, right, saving money. If you plan to make the purchase in the next 18, maybe 24 months, high yield savings account all the way, right? Just grow it up. You'll be fine. It's really hard for us to predict what the stock market or any markets are going to do in 12, 18-ish months. But if you're going to make a purchase in five years, if you're on track to finally have this down payment ready or, you know, this new car, whatever you're trying to save up for, if you're on

Starting point is 00:14:27 track to make that in five years from now, then it's a good idea to park it in the markets because we know, statistically speaking, that after five years time, Robert, no matter where you bought, and especially if you continue to dollar cost average saving more and more money, you're going to be in the green after the end of five years. That's just history, that's mathematics. That's just how the stock market has worked throughout its 10 years. So if this is a purchase that you think your brother's going to make in four, five or six years, maybe encourage your mom to park it into a V-T-I or V-O-O or S-P-Y-I, right? Something that's going to consistently deliver returns and allow you to just ride the wave of the stock market up into the right over that long period of time. Now, if this

Starting point is 00:15:12 is a purchase your brother plans to make in 12, 18 months. Leave it in the cash account, let it earn its four and a half, five percent interest and have it be. Yeah, I couldn't agree more. Great question. So cool to see you there helping figuring it all out. And I agree with Austin. The way we look at it is this. You have to make your money work as hard for you as you work to get it. And in this instance, if you were to even look at gaining five percent per annum in return by getting it out of that high yield savings account at 4% and you were to get it to 9, 10, 11, 12%, over 3, 4, 5 years, which by you saying

Starting point is 00:15:49 this is quite a few years away, to me sounds like it's probably five years away, you're leaving 25, 30, 40% on the table by not having it invested in something like VO, which is the U.S. stock market. So keep that in mind. You want to always make sure that your money is working hard for you and I like that you did move it into a high-yield savings account, but I think there's more money to be made,

Starting point is 00:16:14 especially if it's years down the road. Yeah, I just said the math here, Robert, and that 5% difference comes out to be about $20,000. So yeah, you could be talking about an extra of $20,000 when it comes to your down payment here, assuming, right, you keep this into the S&P 500 versus a high-yield savings account, and we're talking about four, five, six years down the road.

Starting point is 00:16:35 So you have the playbook. Now be sure to actually implement it. So our next question comes from Jared H. Jared says, on a recent episode of the podcast, Austin mentioned in his own IRA that he's investing 90% of it into V-O-O and 10% of it into Ibit, aka Bitcoin. Would you all recommend something similar for us? And should we sell target date funds to reallocate to these funds instead? Robert, you want to take this one? Yes, I love this question. And it's just really, really good thinking and management of your money. You know that we don't really like target date funds many times and by looking at your picture,

Starting point is 00:17:13 you look very young. You're just going to underperform the market so badly over 5, 10, 15, 20, 30 years that these target date funds are going to really hurt your chances for that financial freedom that you desire. And that is why we tell people that we don't think target date funds are a great way to go for their retirement accounts. So in this instance, I'm not saying that. I'm not saying that that you need to be all V-O-O and all Bitcoin in yours, that is Austin's choice. But he also has his bridge account and many other investment strategies all bundled into that.

Starting point is 00:17:49 But I do think, and I know mathematically, you would outperform by a mile if you were to take the target date funds just versus V-O-O, the S&P 500, over a longer period of time. So I would definitely look at migrating it out. And if you're fearful of just having V-O-O and I-BIT, you could always add some of the other funds in that we talk about to give you

Starting point is 00:18:13 exposure to maybe the Russell 2000 or the NASDAQ or some of these other indices that we like and feel are great for your portfolio balance long term. I'm right there with you, Robert. Yeah, so the reason that I have 90% into VOO and 10% into Ibit, to Robert's point, is because I have hundreds of thousands of dollars invested into other single stocks and other ETFs and index funds and everything else across the broader portfolio that I have, right? If that's my solo 401k, if that's my set by array, if that's my bridge account, if that's whatever else that exists.

Starting point is 00:18:46 So for me, with the Roth IRA, it makes the most sense to have the S&P 500, right, consistent 8 to 12% long-term returns, as well as a little sprinkle, a little dash, if you might say, of Bitcoin on top or some moderate outperformance when you look at Bitcoin in years like we've seen in 23 and 24. I love it. So our next question comes from Elena S. Elena says, Hi, Austin and Robert.

Starting point is 00:19:08 I found your podcast a couple weeks ago, and I love it. Thank you so much for creating these episodes. I wanted to ask you a question as to what you'd recommend in my situation. My brother and I own a condo in Miami that my parents used to live in. We own it free and clear, and the market price is around $300,000. It's been sitting empty for the last few months, and we're paying HOA and taxes on the condo. It needs a full remodeling, which will cost at least $110,000. I'm trying to decide between remodeling.

Starting point is 00:19:37 remodeling it and living there myself, but if I did this, I'd have to buy my brother out of his 50% of the condo, or try to sell it as is and then invest my half of the money from the sale into the stock market. I'm in my 50s. I only have a little bit of money invested in a cryptocurrency in the S&P 500, and I'm renting right now. I don't own a home. And for the remodeling and giving my brother his part, I will need to take out a mortgage. Robert, we're to think about this situation and what would you recommend to Alina? I would say Alina, I would probably sell as is. Miami is a hot market.

Starting point is 00:20:13 You're going to be able to sell it. And then you and your brother could do the split. However, it's supposed to be 50, 50 or whatever is determined that you're supposed to do. And then I would get that money invested right away. So you're earning some income while you sleep, giving you a little more peace of mind going into retirement. Because at the end of the day, does it really make sense for you, especially given your age and the situation you're in financially is Miami is a very expensive market to live in.

Starting point is 00:20:41 And I don't know where you live now, but I assume moving to Miami would increase your cost of living 10, 12, 15% a year. So that also puts pressure on your retirement and your ability to get ahead looking into retirement. So for me, I would sell it as is, move on, take the money, get it invested, and you'll be in great shape. I love that, Robert. That's exactly what I would have said. Now, the only caveat I'm seeing about this is she mentioned that she is going to have to spend over $100,000 on a remodel. I'm assuming, and you probably know more about this than I do, Robert, the remodel she's alluding to likely means hurricane-proofing it and using cement and all these other different things so that next time Miami sees a meaningful storm like we saw this summer, it won't, you know, damage the condo. I know a lot of people that own condos that are kind of going through that process right now of like, I got to remodel this where it's not up to code, right? Or maybe the HOA fees are going up a lot.

Starting point is 00:21:41 So like, do you think that plays us, you know, into this scenario at all? Do you think that that might hinder her ability to sell it? Yeah, it could because with the new rules in any of these waterfront areas in South Florida, there is a lot to be concerned with. I don't know the exact name of the new rule with regards to HOAs, but a lot of people are getting priced out because the building owners have to make the upgrades themselves on the building. And I believe that's probably the situation here. And she might be alluding to the fact that it's an older condo that hasn't been updated in 10, 20 years because her mother lived there. And so I think

Starting point is 00:22:18 the way to look at it is either way, you don't want to be getting a mortgage, getting yourself into all of this unless you felt you wanted to be in Miami and you felt the upward trajectory of those condos was there. I don't see the math working out here. So for me, whether it is the exterior part making it bulletproof for the hurricanes, the interior part, or both, I just don't see a financial way that this makes sense for you right now. And I would take the money and run. And Robert, just like we talked about earlier with this dollar cost averaging, it seems like this $100 to $150,000 that Alina will receive is going to be a large portion of her net worth. Therefore, it'd be smart for her a dollar cost average that into the markets. Let's give her the quick playbook as to what we think.

Starting point is 00:23:04 So as you know, we're big believers in the following process. Match beats Roth beats taxable. So Alina, if you have a 401k at your job, invest up to the match so you can get the free money. Once you do that, now it's time to max out the Roth IRA. Now, what's interesting about the Roth IRA, it's the Roth individual retirement account. It's after tax dollars that get contributed here, which means when you're in retirement at 65 years old, you can take all the money out of it without paying taxes on it. And because it's invested, it's going to grow tremendously over the next 15 years for you.

Starting point is 00:23:39 So what you want to do is you want to go to public.com or vanguard or fidelity and open a Roth individual retirement account, contribute $7,000 if you are doing this before April 15 to 2025, and make the contribution year be 2024. then contribute another $7,000 into this account and select the contribution year of 2025. You now have $14,000 from this $130, $40,000 from the sale of this property that has been contributed now inside of your Roth IRA. You should now go invest this money into V-O-O-V-T-I-Q-Q-Q-Q, things of that nature. Just go listen to some old episodes, How to Build a Portfolio from Scratch is a great one for you to listen to there.

Starting point is 00:24:25 and then after you've done that, it's time to take the rest of your money. Go to public.com, deposit it in there, and begin dollar cost averaging $10,000, $15,000 a month into the same index funds we just talked about. V-O-O-O-V-T-V-G-T, M-O-A-T, things of that nature. So that's what you do, play-by-play when you have all this money after the sale to condo. I love that takeaway, and the only thing I want to add, and this is for Alina and anyone else watching or listening, is you can't out-invest high-interest debt. So please make sure all of your high-interest debt is paid off in this process first because we want to make sure you're not making the minimum payments on any of those

Starting point is 00:25:08 student loans or high-interest credit card debt or maybe an auto loan that's high-interest. We've got to figure those out first because we want to make sure that you are on stable grounds when you're building for retirement. So keep that in mind. So listen up, folks. Time could be running out to lock in that 6% or higher yield at public.com. You can lock in a 6% or higher yield with a bond account right now.

Starting point is 00:25:31 But remember, your yield isn't locked in until the time of purchase, so you might want to act fast. Lock in a 6% or higher yield with a diversified portfolio of high yield and investment-grade corporate bonds, only at public.com forward slash rich habits. So our next question comes from Dave R. Dave says, I have a question about cryptocurrency and diversification. I'm already dollar cost averaging into the S&P 500, and it's currently the only investment I have in my portfolio. I like the sound of XRP and Bitcoin, but also I think I should probably have a few more

Starting point is 00:26:07 ETFs in my portfolio as well before I begin to own those cryptocurrencies. I'm only able to allocate about $240 a month, so what asset classes do you think is most suitable for me at 20 years old? My goal is to increase cash flow and gain passive income. the podcast and appreciate all the advice that you guys share. Thank you all so much. What do you think about this one, Robert? I love it. And just the fact that Dave is 20 years old, he's on the podcast and he's asking a question this thorough just makes everything we do every single week on the podcast and in the Rich Habits Network worth it. And here's my take. I love it at 20 years old. I think it's okay to diversify into some of the cryptos because you're young. You can be risk on,

Starting point is 00:26:52 have a little bit of, you know, volatility won't affect you as much. But I also like the fact that you're really looking towards building the base. Because I do think you should own more than just the S&P 500. But the one thing that I want to talk about first and foremost, and this is for anyone listening, is you saying only $240 a month. $240 a month is a great start to your investment journey. So I would not even consider it being this lowly amount that's not going to make a huge difference because I promise you it will. And so just keep that in mind first and foremost. It is a

Starting point is 00:27:27 great start, especially for 20 years old. Most people at 30 years old aren't even thinking about their financial future and you're already on the go and doing the right things. So what would I do? Right now at 20 years old, if I were you, I'd probably put 140 of that per month into QQQQ, maybe VUG, VTI, some of those tried and true funds that we love. And then I would take the other $100 and I'd probably put that in a well-balanced cryptocurrency portfolio, which you can do right on public.com. We just talked about them. And I would get that into chain link. I would get into Bitcoin. I would get into Ethereum, maybe some Salonah, maybe some XRP and get four or five of those cryptos and just buy those small portions every single month so at least you have some exposure to it now before we fully get into this bull run that's

Starting point is 00:28:22 happening right before our eyes yeah i would say not even before we're well into it robert i think we're in the late cycle of it for sure but to your point about the 240 per month like i agree it's a lot of money for someone so young it's a great start i did the quick little back the envelope math for you and it's about five million dollars at 240 a month at that call it 8 to 12 percent annual return range from 20 to 65 So Dave R, you're going to be setting yourself up for success. I'm right there with you. And I think that because Dave called out his goal to increase cash flow and gain passive income, I would add SPY to that bucket.

Starting point is 00:28:58 It is the S&P 500, but it'll also allow you to collect about 12 or 13% annual yield. And then maybe if you want some of that Bitcoin exposure, BTCI is another great way to get it with also gaining some passive income. So great question, Dave. Definitely, definitely, definitely don't chase meme stocks. Don't chase meme coins. Build your base. Stay out of debt.

Starting point is 00:29:19 Build your credit. Everything in between, you're going to be just fine, my friend. Our next question comes from James H. James says, Gentlemen, I bought a bunch of stocks during COVID, and I did not put in stop losses on them, so some are nearly worthless now. With a max of $3,000 as a tax write-off per year

Starting point is 00:29:37 against my earned income, what should I do? It appears that I just have to dump $25,000 of this, worthless stock and I don't look back. What do you guys think I should do with this? So just to make sure we're on the same page, it seems like James took $25,000, invested it into a bunch of meme stocks during COVID, and they all went to zero. So now he has $25,000 of capital losses inside of his brokerage account. Now, yes, to your point, James, you could sell all 25,000 of those here before the end of 2024 and realize 3,000 of that loss against your earned. income. So you will be able to write off $3,000 against the taxes of your earned income, which will come out to

Starting point is 00:30:21 probably about $800, $1,000 maybe. But what I think might be a little bit more advantageous for you, James, is to think about how you can offset a large capital gain with this large capital loss. So James, I would argue you've learned something over the last couple years of listening to the Rich Habits podcast. Maybe you got into a Navidia or a Palantir. or a Bitcoin or a Tesla or something of that nature over the last, call it 12 to 18 months now that you've been a listener, and you've got now some capital gains to show for it. So maybe James, the way to do this is to sell one of these big winners in your portfolio. That's up 10, 12, 15, 20, $30,000 of profits and then sell the $25,000 of losses and use that as a way to offset. Right? So you'll

Starting point is 00:31:13 completely be able to offset $25,000 of capital gains with your $25,000 of capital losses. That's how I'd try to approach it. Don't feel like you have to do that before the end of the year, but we would encourage you if you're up some crazy amount on a single stock or some investment you've made to consider that strategy. Yeah, I think that's a great breakdown. And the only thing I want to add is people, if you're new to investing and you're just getting started, be careful.

Starting point is 00:31:38 Do the basics. Get your base built. make sure you're not out there researching right in the beginning trying to find the high flyer stocks or the meme stocks or meme coins or whatever it is find something that is tried and true like the VOOs, the QQs of the world and build the base. Too many people, as soon as they get their hands on money, they immediately want to go take all these high risk investments because they think they're a genius because Bill or Bonnie or whoever told you about this insider deal that's going to make you all this money.

Starting point is 00:32:10 90% of the time those investments are not investments. They're gambling and they're going to go to zero. So please build the base. Do the things we talk about in the rich habits podcast and in the rich habits network. And don't find yourself in this predicament. And something else I want to mention too is, yes, James, dump the stocks. Every day that you own these losing stocks is a day that money that is still invested in these losers, which I'm sure is not that much. but I'm sure there's something there, right? It's probably down 97, 96%. So there's still a little something left. Every day that the money is invested into these losers is another day that you're not earning money in the markets.

Starting point is 00:32:49 InVidia is up 100-something percent. Palantir is up 300-something percent. But more importantly, the S&P 500 is up about 25 percent. The NASDAQ, 25 percent. All these index funds and ETFs that we've been preaching about from the mountaintops for the last several weeks, months, and quarters now are all doing. incredibly well for the year. So by keeping your money in the losers, you're not reaping the rewards and the benefits of investing in the winners. So get out of the losers, put it in the winners, and then take this $25,000 of capital losses and use it as a way to offset $25,000 of capital gains somewhere else

Starting point is 00:33:25 in your portfolio, either this year or next year, and you'll be just fine. 100%. I love it. So our next question comes from Angie H. from inside the Rich Habits Network. Angie says, I moved most of my cryptocurrencies onto my Treasurer wallet. It makes it a little bit more tedious, though, now to dollar cost average out of my positions. When I want to start taking profits, is it best to send the money back to the exchange to sell it, or do I keep it inside of Treasor and swap it using their platform? Doesn't that defeat the purpose, though, of a protected cold storage wallet? What are your thoughts, Robert? Yeah, Angie, this is a very complicated, but great question, and I'm going to do my best to knocking out of the park for you. Number one, so many people are focused on cold storage that they

Starting point is 00:34:11 forget that if they want to keep investing with this money, that it's very difficult to do when you've got it in cold storage. So you're absolutely right. Cold storage is to get you offline, keep you protected, and make sure you have your keys to your crypto. But when you want a dollar cost average, you're absolutely right. It's difficult. So in my opinion, you just want to be careful that you don't have so much on cold storage that you don't have active money that you can be swapping and trading within the platforms. That's why I leave a decent portion like probably 20% of my total crypto holdings on platforms and the rest is in cold storage. So just keep in mind anytime you're swapping or trading, whether it's on Treasor or it's on Coinbase, this is going to be a taxable

Starting point is 00:34:58 event. So just be wary of that. And that's why I'm always telling people, Leave enough on the exchanges so you can do the trading and the swapping you want to do and everything else in cold storage. Leave that B. Don't touch it. I don't even look at my wallets. I don't trade in and out of those. So I think that's the best strategy overall. Yeah. So how I approach this, Angie, for myself, is I've got a ton of money in cold storage. And I've got clear price targets, right, sell prices in my brain that when my cryptocurrency hits those prices, I plan to sell And when I plan to sell it, I plan to move it off my cold storage and into an exchange to sell it. I don't keep it in the exchanges as we're kind of going through this cryptocurrency market cycle.

Starting point is 00:35:45 I keep it in my cold storage wallet. But I do know that I'll have to take it to an exchange to actually sell it. So to your point of being more tedious to DCA out, that's fine. I mean, it's the price to pay knowing that you have complete control over your coins. you own your keys, you own your coins, everything in between because of that with your wallet or any other hardware wallet that might be out there that someone's using. If it's tedious, I'm sorry, cryptocurrency is kind of tedious, I agree. But if you keep it in exchange, again, it's not your coins at the end of the day. So I think you just kind of ride the wave,

Starting point is 00:36:19 do your thing, and have this more tedious approach to dollar cost averaging out when it's time to take profits. So our last question comes from C-Rob. C-Rob says, Hey, Robert Nostin. Do you all have any experience? of purchasing property for the purpose of using it for midterm rentals. How's your experience been so far to now? Any lessons that you've learned that you could share? What's the best type of property for a midterm rental? Is it a single family, a duplex, or something in between?

Starting point is 00:36:46 What would be the best property type in case of a need of an exit strategy? My personal focus is to build a strong real estate portfolio of at least 10 properties, and I prefer them to be turned key. My goal is to have both a solid monthly cash. ROI as well as good overall appreciation year after year. Thanks so much. Robert, I'll let you answer this question. Yeah, I like this. And let me first determine what is a midterm rental. You have to look at it differently than an Airbnb and differently than a long-term lease. It's exactly what it says, midterm. So think traveling nurses that are going to be working at a hospital nearby and they need

Starting point is 00:37:25 somewhere to stay for one month to six months. That's kind of the sweet spot of a midterm rental. so you want to start your research when looking for locations. Where is there a big need for this? Are you in a growing area? Are there brand new hospitals in this area? Like where I came from in Colorado, I lived in an area called Arvada and it was very new, a lot of new hospitals and doctors offices at dental offices. So they had to bring in quite a few employees from other parts of the country on these short-term contracts. That's the sweet spot for a midterm rental. So that's what I would do. As far as cash flow, it's going to all depend on did you do a really good site selection? Are you marketing it well as a midterm rental because you're going

Starting point is 00:38:11 to have to do some work to make sure that it's marketed correctly? And otherwise, I think midterm rentals are great because you can always swap out of it being midterm if it's not working well and make it a long term rental because not all areas allow VRBO or Airbnb like right here in St. Petersburg, we're not allowed to do short-term rentals, but there are areas that you can do mid-term rentals and, of course, long-term rentals. So that's what I would do when selecting the sites and considering if this is the best strategy for you is to really understand, are you building this portfolio in an area where there's a lot of growth for this type of tenant? So what is the best type of property for the mid-term rental and what would be the best property type in case of

Starting point is 00:39:00 in need of an exit strategy. Yeah, I think that is a really tough question to answer. A lot of midterm rentals are going to be single family homes, but it's also fine to do condos, multifamily, if you wanted to buy a duplex, triplex, or a quadplex. It really comes down to what is the best strategy for the individual investor? Because they might be somebody that's a first-time buyer to where they could buy a duplex and make one side of the duplex a midterm rental and they live in the other side, which could be a very profitable strategy. But it also could be in this instance where they're looking for cash flow.

Starting point is 00:39:36 And the better cash flow might be in a four unit versus a single family home. So like you always say, Austin, personal finance is personal. And in this instance, it's really just all about the area. What is their current situation from a how are they going to pay for this scenario? And then also, is it the right area? Because we always want to try and start our investment journeys, in my opinion, concentrically near us because you know you have all these fake gurus that tell people you can buy properties anywhere and it's going to be fine you just hire a manager and do all this it's not that simple trust me people you want to be able to have your hands on the property if need be because then that way you're not doing like i do i have properties all over the country and it is a lot

Starting point is 00:40:21 harder when something goes wrong and you're relying on someone that's a thousand miles away rather than 10 miles away. So that would be my take on this. Sounds good. Yeah, I don't have any perspective on this. Unfortunately, I've never done midterm rentals. But I would argue that the exit strategy for it is less like any other rental property, right? You realize, hey, I like this property and it's made me a lot of money. It's time for me to cash out. Or this property is a headache and it's, I don't want it anymore, time to cash out there. I think it doesn't really matter, in my opinion, if it's a duplex or a triplex or a single family rental or a four unit, they all sell just the same.

Starting point is 00:40:55 just depends on, of course, the overall real estate and housing market, which at the moment is kind of in a weird spot considering interest rates. But I think it's a great time to be a investor. It's a great time to be a buyer because you can argue lower prices and negotiate for lower prices considering the lack of demand currently. Everyone, thank you so much for joining us on this week's episode of the Rich Habits podcast. We are so close to 2025. Again, review your budget, review your portfolio, make your new year's resolutions. You are going to be the best, of yourself in 2025. Speaking of being the best version of yourself, Robert, if you've not yet listened to Monday's episode with John Who, the CEO of Stan, we highly recommend it. During the episode,

Starting point is 00:41:36 we pretty much give you the playbook as to how you can begin to earn your first thousand dollars on the internet in 2025 using the Stan store. You can do affiliate links. You can sell coaching. You can make a course. You can sell digital downloads. There's a ton of different things to do there. Over 11,000 entrepreneurs have already started earning money. on their platform with as little as 2 to 3,000 followers online. So don't think that you've got to be some big, crazy person to start making money. It is so much simpler than that. I love that episode, and it really illustrates.

Starting point is 00:42:07 We're always talking about if you're not getting ahead in your financial journey, there is nothing wrong with having a side hustle that makes $500 or $1,000 a month, because if you pretend that money doesn't exist and it goes into these investment accounts we talk about, it is going to grow, grow, grow over time. And that is why people need to understand. We are giving you the playbook. We're giving you all the tools. We're bringing on great guests to help all of you figure out what is the best strategy for your personal finance journey?

Starting point is 00:42:36 Because as we always say, personal finance is personal. And we want to make sure you all have all the tools to do it well. So thank you guys for stopping by. We love all the support. We appreciate you guys keeping us at the top of the charts on Spotify. And just we are so excited moving into 20. Thanks, everyone. And have a great rest of your week.

Rich Habits Podcast - Q&A: Lump Sum vs. DCA Investing, Losing $25K in Meme Stocks, & Mid-Term Rentals

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.