170: Our New Favorite ETFs

18:27Troy Cates:It's really the concept that if you're selling away some of the upside, you got to add some leverage back into the portfolio to get that upside back. There's no way to perfectly have your cake and eat it too by generating the income without using leverage to get more upside. So just that thought in summary is you're taking some leverage to get about one and a half exposure to the core covered call of SPYI, or you pick the SPYI version. And then of course, we also have a hedged version that we won't go through today, but it's allowing investors to pick what their risk return level is that fits them best.

19:01Robert Croak:Okay. So as we talked about in last week's episode, I give an example of selling covered calls against my Tesla position. You buy shares at 220. You have a strike price at 250. I get the ability to earn some premium income to sell my shares at 250. But if it blows past that 250, and it's trading at 300, that$50 per share gap is like that cap on the upside. And what Garrett's alluding to here is that you all have sort of built in using a little bit of leverage here, 50 % leverage, where the cap, I guess, has a little bit more flexibility in how you can really participate more into the upside there with what you've built.

19:39Robert Croak:So like, maybe Troy, walk us through, do you have like real numbers or real example we can use? Because as you think about the lows of March 30, if you sold a covered call, you know, call it 5 % above, like we blew through, I'm sure what that cap would have been, which means these covered call ETFs might have left a lot of money on the table relative to their underlying indices. But I'm curious how the boosted ETFs maybe participated in that upside more.

20:05Garrett Paolella:Sure. Now I can give you a real example. So thinking about the S &P 500 from the, we'll use numbers from the March 30th low to May 11th and looking at that data. So the S &P was up just under 17%. So massive rally in the S &P 500 during that timeframe. SPYI, the core product that Garrett was walking through, was up 12.6%. So nice upside capture, still moved higher, but had to give some of it away because of that quick, sharp rally. Now, when you think about as how Garrett walked through what the boosted version would look like, so XSPI, that during the same timeframe was up 18.7%. So even exceeded what the underlying S &P 500 did.

20:47Garrett Paolella:So if you think about from a total return perspective, what that could do potentially for your portfolio if you're willing to take, as Garrett walked through, that extra risk because the leverage works both ways. But thinking about it off the lows to where we are today, it's a significant upside capture and even surpassing the underlying reference in this example.

21:07Robert Croak:Something I hear, and I don't know the answer, which is why I'm asking it right now. Something I hear a lot when it comes to using leverage in ETFs is like nav erosion, right? Like over time, the price just like goes down or like there's like drag or volatility drag. There's these weird like terms and erosion. Are you guys optimizing for that? How does that play into what you've built here? Because if you're telling me that I can have my cake and eat it too, it's just a little bit of leverage. That sounds like fun, but I feel like there's something I'm missing.

21:37Garrett Paolella:So we built these a little differently than you might look at a lot of levered products out there that are more built with swap contracts. And that's where you might kind of see some of that decay that you're talking about. We did this with all option strategies. So it's very easy to kind of open up our holdings, go into our website or anybody's ETF website and see the underlying holdings. But if you go into our website and pull up the holdings of one of these products, you'll see as Garrett walked through all 500 plus names of the S &P 500, you'll see the short calls, and then you'll see that long call short put combo that gives you that synthetic long.

22:08Garrett Paolella:And you can kind of understand how that works. And we built it more thinking about that long-term leverage, not thinking about it for an overnight trade. We build all our products to think about more what they could look like over the long term for your portfolio.

22:21Austin Hankwitz:And I just have one more question on this. What is this product for? When we're talking to our audience, we have hundreds and hundreds of thousands of followers that trust us to give them the best information. But they're all at different levels of their financial journey. So who would these boosted products be for? Because we don't want to tell people, hey, it's your first$20 ,000 you're investing. Go to NEO's funds and do these boosted products. But then also we need to know where along their journey and where should they be before they start entertaining these boosted products over the other ones like SPYI.

22:55Troy Cates:Yeah, it's a great question, Robert. These are typically from the more sophisticated investor or the investor that has much more experience in their investment careers, right? And so as you think about that, understanding leverage is a really important part because like I used the example before, if the S &P is down 10 and SPYI was down 5, our boosted could be down between 7.5 and 10. So you're going to take more risk. So these are for the investors that understand having more pure equity exposure or even slightly greater exposure than just investing in that core S &P 500. So as you think about it, it's higher octane.

23:36Troy Cates:It's going to fit in that more risk on part of your portfolio. Yes, it's producing income, but these are driven off of total return and income as opposed to maybe SPYI, right? That's really seeking a slightly lower volatility profile than the equity markets, monthly distributions, a little bit of downside protection from the income you generate. So if you're newer in investing, stick more with an SPYI and definitely a diversified portfolio to understand that you're not putting too much of your portfolio in any one investment. And as you get comfortable with how the markets move and what the risk is, always feel comfortable.

24:12Troy Cates:You can track an investment. You could watch an investment and see how its history has performed and just make sure that that's matching up with your expectations during different market cycles. I would definitely tell the audience this is more sophisticated or if you're more comfortable with investing, then take a look at it and see if it fits your own individual financial profile.

24:29Austin Hankwitz:That is incredible. Thank you so much for that insight. I just want to make sure we're clear on each sector of your products to make sure people know what fits within their risk tolerance and their buy box. Thank you.

24:40Robert Croak:So let's now wrap up the episode talking about the title of the episode, which is this gold high income ETF that actually won an award from ETF.com. Congratulations again on receiving that award. Walk our listeners through how you're able to pay double digit yields on things that don't actually pay dividends to investors like a stock would, right? Apple pays me dividends. So I understand how that looks like I get my cash deposit to my brokerage account. But you all are creating dividends distributions for things like shiny rocks, like gold, or Bitcoin, or oil. Last time I checked oil is a liquid that's not paying me a cash distribution, right?

25:21Robert Croak:So how do you guys do that? Because I think it's really fascinating that you've been able to enable and I do this strategy myself, I can implement now a strategy of buying IAUI or BTCI, I get those monthly distributions, I reinvest it back into the ETF itself. And now I'm buying more shares of these ETFs for more distributions. And now it's just this really cool snowball effect. So walk us through how you all are creating yield for things like gold, and maybe even talk about your new silver filing for a silver ETF. That could be interesting as well.

25:54Garrett Paolella:Sure. Now, love talking about shiny rocks, thinking about our gold product that we launched just almost a year ago. So coming up on the one year track record there. So very excited about that. But this was something, as you're saying, we talked to a lot of advisors who have these static one, two, 3 % allocations to gold. And they'd love to be able to figure out how they could do more than just hold that position and maybe earn some income off of it and turn what is a non-income producing product into potentially an income producing product. So Garrett and I and the team spent a lot of time looking at the options market around gold, the volatility levels around it, understanding what kind of premium you could source from selling calls on some of the ETPs that are out there.

26:34Garrett Paolella:And we designed IAUI to do just that, where you have this long exposure to gold via some of the ETPs and via an option strategy. And then we're selling those calls. And the nice part about it is while we're using flex options, which we've talked about before, and using those different ETPs that are out there, we get that 1256 treatment, that tax efficiency from having it be 60 % long-term and 40 % short-term cap gains from that option strategy of the selling the call part. So that was important for us as we kind of designed it. And now we're able to source that distribution, that income from the volatility around gold and be able to distribute that out in a monthly basis.

27:15Garrett Paolella:And so for us, it's very exciting. And we saw the adoption very quickly for it. We talked to a lot of people around these products and continue to see growth there. And so it was kind of, as you mentioned, the silver filing. So we just filed for a NEO silver high income ETF, kind of using the same strategy and the same thought process behind the gold product. And we wanted to kind of move over to another commodity and continue to grow our alternative space. And when you think about our solutions that we provide here.

27:43Robert Croak:Yeah, I mean, like seriously, famously gold, right, between the end of 2013 and the beginning of, you know, 2018 did nothing. right? It just traded sideways for a long period of time. And if you had 5, 10, 15 % of your portfolio in this thing for that five-year period of time, four-year period of time, you would have not made anything, right? And so I think also the stat is like 70 % of the total return from the S &P 500 since World War II has come from dividends and reinvesting that money back into dividend reinvestment plans and things like that. And so being able to create And IAUI, I'm not even going to guess what the silver one is, but like creating those things and allowing people to have exposure to these commodities that don't pay, historically speaking, like any sort of distributions because it's not a business, right?

28:31Robert Croak:It's a commodity. But being able to generate that income and allow your investors to reinvest that income or do whatever they want with that income, I think is so, so powerful.

28:39Troy Cates:Yeah, Austin, you're right. I mean, it's really exciting for the opportunity to produce income on really what has historically been non-income bearing assets. We're talking about gold here. We're excited about our silver filing and bringing out another product on precious metals. And it just allows investors to take advantage of those times that you had brought up. It was really just around trading sideways, not really going anywhere for year after year. And as you think about kind of historical portfolio diversification, usually you have these non-income bearing asset classes or investments like gold, like silver, like oil.

29:11Troy Cates:And now you're able to leverage the opportunity of generating income from the volatility that it gives you, right? If people think volatility is a risk, here at NEOs, we're trying to harness volatility as a means to help aid your income part of your portfolio. So excited with IUI and obviously, you know, new products to continue to expand the suite in these non income bearing, you know, investments for individuals.

29:31Robert Croak:Incredible conversation, gentlemen. Again, thank you so much for joining us this week. After last week's episode, I mean, literally our comment section was flooded with top five episode. I love NEO's funds. I make 120 bucks a month from SPYI. It's the coolest thing ever. like all of these incredible comments we got from everyone and just being so eager to jump on the show and further explain what you all are building and how it's not just the equity component, right? Not just the index funds, but it's also the gold, the energy, the real estate, the Bitcoin, BTCI, it's the boosted, right? It's all these cool things that you all are building.

30:07Robert Croak:So no matter what type of portfolio someone wants to build, what they want to optimize for, if it's for less volatility with the hedge products, if it's for commodities and what you all think about what that is, like you all have built suites of ETFs here for people to really tap into and lean in on for whatever they believe the market's direction might be. And so again, thanks so much for joining us.

30:27Troy Cates:Yeah, thanks for having us. Appreciate the opportunity as always. And great to see you guys. Thank you.

30:30Robert Croak:What a top tier conversation with Troy and Garrett. Super excited that they're so willing to jump on the show. It's such a quick notice to add more color to last week's episode. Again, we talk about passive income and it's literally like it's this phrase these people say online and you get so excited about the idea of just existing and earning money. You know, we had this episode, Robert, I think it was 168, our personal seven streams of income, right? The seven different ways our money works hard for us. And one of those is dividends, right? You make passive income as an investor and having a portfolio and things like that.

31:02Robert Croak:But the hard part about having consistent dividend income is a lot of these stocks pay quarterly. Think Apple and NVIDIA and Microsoft. And the yield is like 1%, 2%. Sure, you can get a Verizon that pays maybe 5 % or 6%, but that's not going to grow over time. And it's also buying a stock. It goes like crazy. So having these covered call ETFs that truly pay passive income to my portfolio, like I've said before, Robert, I've got six figures in NEOS funds. I'm so grateful to making thousands of dollars every month for my NEOS funds investments. They are incredible covered call ETFs that are so tax efficient.

31:37Robert Croak:And it's so impressive to have people like Garrett and Troy on the show to talk about how it's not just the equities, it's gold, it's silver, it's oil, it's real estate, it's Bitcoin. Or if you want equities, it's boosted equities. So when it comes to that cap, right, talking about like the strike price and sort of the cap, you know, that we talked about with like Tesla 250 versus the 220 and things like that, and it goes to 300 to share, they've got a little bit of sprinkle of leverage inside of that. So when we do have the markets rip, like we experienced between March 30th and May 11th, you see outperformance in the S &P, outperformance against the NASDAQ and things like that.

32:16Robert Croak:They're so thoughtful with how they built these. And I'm so excited to have so much in these funds.

32:21Austin Hankwitz:Yeah. One of the cool things I see with NEOS for ourselves and for the audience is just how quickly they get these products out. Every time there's this new idea or sector or growth trend. It seems like they just have a product ready so quickly to let us take advantage of it. And that's what I love about everything they're doing. And now they've added these boosted products and all of these other things, these commodity ETFs. It just seems like they've got everything covered for us and our audience.

32:50Robert Croak:Completely agree. And funny enough, the sponsor of today's episode is public.com, the investing platform for those who take it seriously. And if you go on public and you try and purchase or invest in an ETF, SPYI is a top 10 most popular ETF on their platform, which is really cool to see as well. So a lot of you are not only using public, but you're buying NEO's funds on public, which I think is so, so exciting. Because on public, you can build a multi-asset portfolio, not just of NEO's funds, but also stocks, bonds, options, cryptocurrency, and now generated assets, which allow you to turn any idea into an investable index using AI.

33:30Austin Hankwitz:That's right, and it all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20 % year over year. You can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one-of-a-kind index, and lets you backtest it against the S &P 500, all with just a few clicks.

33:51Robert Croak:Generated assets are like ETFs but with infinite possibilities. They're completely customizable and based on your thesis, not someone else's. So go to public.com slash rich habits and earn an uncapped 1 % bonus when you transfer your portfolio. That's public.com slash rich habits.

34:08Austin Hankwitz:Paid for by public investing. Full disclosure in the podcast description.

34:11Robert Croak:So, Robert, our first question comes from Riley on Instagram. Riley says, what is the most tax efficient withdrawal strategy when I have IRAs, 401ks, and taxable brokerage accounts? So let's think through this one really closely here, Robert. I'm assuming Riley's talking about withdrawing money from these accounts in retirement, which means they're over the age of 59 and a half, and they don't have to pay a penalty of sorts to freely withdraw however much money they want to withdraw from these different accounts. Now, considering you mentioned IRA, 401k, and bridge accounts, taxable brokerage accounts, I did not see the word Roth anywhere.

34:55Robert Croak:And that makes sense because Roth IRA, Roth 401k, any Roth specific retirement account is tax free withdrawals. You already paid the taxes before the money went in. So taking money out of a Roth account, you don't pay any taxes. But the opposite is true with a traditional IRA, your traditional 401k and things like that. You actually are able to write off your contributions to these traditional retirement accounts against your taxable income. saving you taxes when you contribute to them. But when you withdraw money out of them, you have to pay that ordinary income tax. Now, people say, and it's kind of hard to really justify any of this, but what people like to say is, oh, I'm earning a lot of money now in my 30s, 40s, and 50s, my peak earning years.

35:45Robert Croak:So my effective tax rate is higher than what it might be in retirement. Maybe in retirement, I'll only live off of$80 ,000 or$100 ,000. And now I'm making $250 ,000. So it makes more sense for me from a tax perspective to contribute to these traditional IRAs, traditional 401ks than a Roth component, a Roth variant of a retirement account. And I guess, yeah, technically that could be true, but we can't predict what the tax rates are going to be in 20, 30, 40 years from now in retirement. So the most tax efficient withdrawal strategy is to ensure that whenever you are withdrawing the funds out of your retirement accounts, you're looking at those tax brackets.

36:25Robert Croak:You're making sure that you're withdrawing it slow enough and low enough to keep you in your ideal tax bracket. Let's call it, I don't know, under 20%, under 22%, 24%, whatever that looks like for you, and not withdrawing all of it,$600 ,000,$800 ,000 of it in a single year, and then paying up to 33, 35, 37 % tax on that incremental couple hundred thousand dollars, whatever those tax brackets are. I'm not a CPA. You guys can Google and figure them out there. But that's really where my head's at, Robert. Just make sure you're not being real crazy about how much you're taking out of it at a specific year.

37:00Robert Croak:One broad stroke pull off of these retirement accounts into your bank account there and being taxed in that one calendar year with this big tax bill. But do you have any other pointers or ideas to think about? I can't be. I mean, it's pretty simple.

37:14Austin Hankwitz:Yeah, I would say you covered it all. The only thing I would add to it that's not really tax efficient, but is important for these withdrawal strategies is understanding the 4 % rule and trying to stick somewhere close to that. Because when you go into retirement or you're leading up to retirement, you kind of have to reverse engineer how much money you need in retirement to lead the lifestyle that you're projecting for retirement. So make Make sure to read up on this 4 % rule, which basically explains that you can take out 4 % per year to come up with that number and not run out of money over 15 or 20 years.

37:47Austin Hankwitz:But just make sure you understand that so you know how much you need to be able to withdraw that 4 % per year and pay all of your bills and live the lifestyle you want to lead. That's not tax efficient, but that is a withdrawal strategy that should help some of you that are more concerned of how much you need in retirement.

38:03Robert Croak:Now, where the flexibility comes from, Robert, is where they mentioned bridge accounts, right? These taxable brokerage accounts. You get much more flexibility with these because they're not classified as retirement accounts. with a bridge account, you, for example, might be direct indexing on public.com, the S &P or the NASDAQ. And you might be experiencing some automated tax loss harvesting, allowing you to build up losses in your brokerage account of$4 ,000,$10 ,000,$15 ,000 on maybe an annualized basis, depending on how much you have invested there. And then as you realize profits in the account and withdraw those profits out of the account at whatever age you want to, because there's no age limits or restrictions around deposits or withdrawals there in a normal taxable brokerage account, you can use the money you've taxed loss harvested, those losses to offset the gains you've realized elsewhere.

38:56Robert Croak:And so sort of, I mean, you have$4 ,000 of tax loss harvesting here against$4 ,000 of realized gains elsewhere in your taxable bridge account portfolio, you now can add$4 ,000 to your checking account and you don't owe any taxes on that profit because those losses were offset by the gains there. Now you have to be wary about a lower cost basis when it comes to direct indexing, but you specifically talked about sort of the withdrawals here and in thinking about taxes. So that's where I'll leave it for you. But Robert, I actually, I had a conversation with my CPA yesterday and he shared with me a crazy strategy to save money on taxes that one of his other clients had recently done.

39:40Robert Croak:And I'm going to share it with you all here. His name is Steven Gabrielson. Snapback CPA is his name on social media. Go check out Steven. He's incredible. But he shared with me this. He said, Austin, people, small business owners are contributing up to that$72 ,000 a year to their solo 401ks to get and save on taxes because they are very high earners right now and they're contributing that$72 ,000 to pull down their taxable income. And that is in a traditional pre-tax retirement account. He said someone he knew had$2 million in one of these pre-tax solo 401ks. They then took that$2 million. It was a self-directed IRA.

40:22Robert Croak:They then invested that$2 million because it was self-directed into a real estate venture. That real estate venture, they like went out and they bought some existing hotel or some land or development, tore it all down, then was able to reprice his investment instead at$2 million all the way down to$400 ,000 as a sort of mark to market. That person then did a conversion from the pre-tax account to a Roth account, paid taxes on the$400 ,000 conversion there. So what would that be? Call it, I don't know, 25 % effective tax rates, call it$100 ,000 of taxes. And then did another mark to market about a year or two later, pulling that$400 ,000 back up to the$2 million, whatever it was worth whenever they exited the real estate.

41:12Robert Croak:So essentially over the course of two years there, his$2 million went down to$400 ,000, converted it from a traditional to a Roth. The Roth then went back up to the$2 million, and then he put it back in the markets now as a Roth retirement account. So no taxes on any withdrawals in the future, having only paid$100 ,000 on that$2 million, which is a 5 % effective tax rate. I was mind blown. That$2 million is going to double, triple, quadruple more into the future as the markets, I'm sure, continue to trend up until they're right. But essentially, this person created a way and figured out with whatever's going on there to only pay$100 ,000 in taxes on what I'm sure will be$3,$5,$10 million of Roth value in retirement.

41:59Robert Croak:Because again, once it's that Roth retirement account, you can pull as much money as you want out of it tax-free. What do you think about that?

42:06Austin Hankwitz:I think it's incredible, and it reminds me of the Peter Thiel story of how he became so incredibly wealthy when he had all this PayPal money, and he somehow converted it into a Roth component and then was able to grow it there and then buy all of these assets through the Roth component. So I think it's really smart. Just make sure everyone out there, when you do something so incredibly complex, that you have the right people helping you do it. That is how the rich get richer. And that is by understanding the tax code and how to use real estate as your friend. But I love that story. And I definitely want to look through it with a fine tooth comb and understand exactly how they did it, because maybe I'm missing something.

42:46Austin Hankwitz:I thought I do a lot of cool, complex things, but that sounds really, really incredible.

42:51Robert Croak:So our next question comes from She. She says, stumbled upon your show and I've been an avid listener since. Thank you for all you share. I'd like to stay anonymous, so call me She. My husband and I are 49 years old. We started late with investing and put all of our money in real estate. We have very minimal invested in the markets for our retirement. Our son is going off to college paying$65 ,000 a year in tuition. Student federal loans of$5 ,500 a year. We're able to fund$35 ,000 in cash, but we'll need to borrow$20 ,000 more to cover the difference. Our budget is going to be tight. What is the best way for us to finance this?

43:27Robert Croak:Should we do a parent federal loan? Should we take a HELOC out on our house or maybe navigate it some other way? Thank you so much for your insights, she. Robert, I'll let you kick this one off.

43:36Austin Hankwitz:She, she, she. There is no world where you should be financing this. You've already made it clear at 49 years old, you're late to the party. You have very minimal investments for retirement, yet you want to go into more debt to finance the student loan tuition. And for the college, I think it's crazy. I just wouldn't do it. I would have the conversation with your son and say, hey, we're going to put you in a community college for the first two years because the average community college, we looked it up, is$5 ,000,$6 ,000,$7 ,000,$8 ,000,$9 ,000 a year. Do that for two years and then find a college that isn't so expensive because why on earth at 49 years old would you want to further delay any chances of being able to have a solid retirement fund so you can take care of yourselves in retirement for all of this student loan debt?

44:28Austin Hankwitz:I think it's crazy. I like the fact that you want to help your son, but I wouldn't personally do that. If you had millions of dollars, sure, loan them the money, give them the money, do whatever you have to do. but you don't. And so you have to look out for yourself first because nobody's going to be there to pick you up in retirement if you don't have the money. So I wouldn't do it. Or if you're going to help at all, I would consider a community college because at the end of the day, many of the degrees that are out there now are not worth all of that money anyway, because AI is changing. The job workforce is changing.

45:00Austin Hankwitz:And I would just really be careful of getting further in debt, given your current situation.

45:06Robert Croak:I completely agree. She, do me a favor, put the phone or laptop or however you're listening or watching this episode in front of your son. Hey, she, son, you don't need to go to a$65 ,000 a year school. I'm so excited you got into a$65 ,000 a year school. It's a testament to how smart you are, testament to your extracurriculars, testament to how you interview and how you write and all the things that go into getting accepted into such a prestigious college that wants to charge so much money for their students. You need to go there. What you need to do is go through college as cheaply as possible, graduate with tens of thousands of dollars of student loan debt.

45:44Robert Croak:I graduated student loan debt. My fiance has got 30 something thousand of student loan debt. Like it's okay to have 20, 30,$40 ,000 of student loan debt. Very normal, very fine. You know, you can manage a 250, a$400 a month payment. If you go to this college and you go out and borrow$260 ,000 in tuition just to get a degree from ABC College, one, your monthly payment is going to be like$3 ,000. That is rent and a half for a 20-something-year-old first off. That's pretty much all the money I spent when I was 20 per month is$3 ,000-something. That is going to set you back so, so much. I know you're so excited to go there.

46:23Robert Croak:I know your friends are going to go there. Your girlfriend might be wanting to go there. I don't know the situation, but I do know that you are shooting yourself in the foot. And I guarantee you, unless this is like Harvard or Princeton or some real top tier branded school, I promise you going to your state school with two years of community college before and then two years at the state school. So you get the degree that actually says University of Tennessee on it or University of whatever on your actual degree is going to be just as fine as going to this random$65 ,000 liberal arts school or whatever, assuming it's not an Ivy League and it's just a normal, you know, hey, we're really expensive college.

47:02Robert Croak:Like, I promise you, this is the right decision to go somewhere else. And you are putting your parents in a really tight spot to expect them to come out and pay so much. It'd be so different if your parents were like, hey, we've got this 529 account. We've been, you know, to Robert's point, we've got all this money. We've been saving for it. We're ready for this. But they're not. They got to go remortgage the house. They got to go, you know, say the budget's going to be tight. Right. Think like that is that's insane. Like don't ask your parents to do that. And then also she do not offer that back to she here for a second.

47:37Robert Croak:We talk about this. We use this phrase a couple times on the show, which is when the plane is crashing, you want to put the mask on your face before you put it on to the person next to you. You're 49. You mentioned you're late to the party. You all need to get aggressive with your investing. You need to be on budget. You got about 20 years here of investing ahead of you before you start to, you know, 70 years old, really thinking here about retirement in a serious manner. That doesn't mean I need to go borrow$20 ,000 and pay$35 ,000 in cash for my son to have his freshman year, that he's gonna probably get a two-something GPA at the school because he's a freshman in gen ed classes and it's no fun and whatever.

48:17Robert Croak:Please don't do this. If you can't hear my voice, I hope you're watching this video and you can see it in my eyes. Please don't do this. It's a very bad idea. I would much rather see you do the community college route for a couple of years If you don't have the money, if you do have the money and you want to pay for a little bit of that community college, like that's great. But I'm just I'm not seeing in this situation, Robert, a family that can afford to pay$260 ,000 of college tuition for an undergraduate degree in something that's likely going to pay $75 ,000 a year straight out of college that might turn into six figures by the time they're 30.

48:56Robert Croak:but I've got so many friends that went to the University of Tennessee that borrowed$27 ,000 or$32 ,000 of student loans over the course of that four-year period of time. They worked part time on the weekends. They were waiters. I worked part time in college. I paid my own rent. I had six roommates my senior year. That's what college is all about, saving money and being as lean as possible and then graduating and making great money out of college because state schools are just fine. Like they're just fine. Robert, I mean, what was your experience going to college?

49:28Austin Hankwitz:Yeah, same as yours. I had no help. My father told me he would give me back then$25 a week to help. That lasted about five or six weeks and he stopped. I had to run up credit cards for books. I had to work nights and weekends to get through school, but it was worth every second of it back then. But I want to just click back on one little part of this. Prestigious schools don't mean what they used to mean. Nowadays with AI and where everything is going, if you feel your job and what you want to do, this career you're looking for needs a degree, I don't think it's worth it to have your parents and everyone involved be in this debt to be able to do that when you can go to a state school or a community college and probably get the same degree and just be just as effective in the market because of that and save tens and tens of thousands of dollars.

50:16Austin Hankwitz:That's my take, Austin, but I think you gave a great breakdown. Don't do this, Xi. Please, please keep saving for your retirement so you guys can live comfortably and have dignity in retirement, but don't go further into debt for this prestigious degree.

50:30Robert Croak:Now, before we jump to our final question, we've officially entered the second quarter of 2026 and uncertainty has never felt so high. Major indices haven't experienced durable uptrends in months. We saw this crazy V-shaped recovery. We talked about it from the March lows, but now we're having a little bit of a sell-off. It's all over the place. The Fed has completely flip-flopped on their rate cut expectations. Inflation is now top of mind for a lot of people in the markets. We are all over the place, Robert.

50:59Austin Hankwitz:Which is why it's never been more important to have a plan and stick to it. And if you're a long-term investor like us, that plan has never been easier to come up with and implement through dollar cost averaging and riding the wave.

51:11Robert Croak:We've been talking about how important it is to dollar cost average for years now. And when markets feel shaky, it's hard to see your progress. This is why we recommend being a part of a social platform like Blossom Social. On Blossom, you're able to see your entire portfolio in a very clean and simple way. Think your holdings, your performance, your dividends, all of the important information about your investments.

51:32Austin Hankwitz:You're also able to follow along other long-term investors on the platform, helping you stay motivated during these uncertain times. Not to mention the portfolios on Blossom are all verified. So if you're seeing someone buy or sell a name, it's because they actually did it in their own brokerage accounts. None of these fake gurus with these copy and paste fake accounts. These are all real and verified.

51:55Robert Croak:We're both on there. Portfolios are on there. So if you want to join us, just search Blossom Social in the app store or head over to blossomsocial.com on your phone or desktop. There's a link in the show notes below. Go check out Blossom. You can go see what I got, what Robert's got, and you can go see my massive Amazon position. Robert, our final question is coming from Mark on Instagram. Mark says, Hi, Robert and Austin. I love the show. I'm 23 and I recently made a big life change. I left my job in law enforcement in Wisconsin to move to Arizona for my spouse's career. Currently pivoting into cybersecurity and IT, studying for certifications while working at $35 an hour for my parents' real estate business.

52:32Robert Croak:We're currently living rent-free, which has allowed us to pay off a lot of debt, but we want to buy our own home sooner than later. Here's the breakdown. We've got$33 ,000 in a high yield savings earmarked for a down payment plus $7 ,000 for personal. $22 ,000 in our IRAs. $6 ,000 in ETFs and$1 ,200 in miscellaneous brokerages. We are actively putting$400 a month into VOO via public. We own a duplex in Wisconsin. It's netting about$550 a month in profit. And so here's my question. Once I land my new role, Should I be maxing out my 401k? Is that our number one priority here? Or instead, should I be doing something with this duplex or maybe even saving more for a down payment on a home?

53:15Robert Croak:Any general advice or direction you can give us would be super awesome. Thank you so much, Mark. Robert, I'll let you answer Mark's question. What do you think?

53:23Austin Hankwitz:I think Mark is doing a great job. I love everything about this question. It's very detailed. So that means Mark is on top of his money and about his business. Few things I would look at. I do love seeing you have the high-yield savings account already up and running. You've got the emergency fund up and running. You've got some money set aside for the first property. But what I would rather see you do at 23 years old, instead of buying that first home for you, and you already have the duplex, I know that, I would still consider house hacking. Because what that does is it keeps more money in your pocket if you use the Fannie Mae 5 % down mortgage, which you can buy up to four doors.

54:00Austin Hankwitz:so you could buy a duplex, triplex, or a quadplex with that. I'd love to see you guys do that, live in that in Arizona where you're at now for a couple years to be able to build some equity in that and then buy the primary home that you want to buy because we want to see you get closer to that$100K base before you start going all in on the dream home because many times buying the dream home, you end up being house broke and I don't want to see that happen with you or anyone listening. And then as far as should you be maxing out the 401k? I don't think so. I think you should go up to the match of whatever the company is offering.

54:37Austin Hankwitz:We always say that. Get the up to the match, the free money, and then everything else I would put into your traditional bridge account. That way you have control over it. You can build that with autonomy and rock and roll and get to that$100 ,000 saved and invested. That would be my take on this question.

54:55Robert Croak:Yeah, we like to say match beats Roth beats taxable, right? So I agree. I think you should go up to the match in your 401k if you have a match. And then above that, go max out that Roth IRA. Seems like you're doing a great job. $400 a month right now into VOO. I think that's through a Roth IRA at Imagine. So love to see that. And then if you still have money, then sure, go back to that 401k, turbocharge it a little bit, depending if you have autonomy. No autonomy. Want to see that back in public in that taxable brokerage account, invest into the index funds and ETFs we talk about. So Robert, you said that you want them to do the house hacking stuff.

55:31Robert Croak:So you think that they should turbocharge their high yield savings a little bit more? I'm looking at it right now. They said$33 ,000 in their high yield savings was only 7 ,000 in their personal. I'd rather see that 7 get closer to 15. I don't know how much money you guys are spending. You mentioned no rent, so I'm sure it's cheaper than normal, but like that's not going to be life forever. So if I were you, I'd like to see a fully funded emergency fund before you do extra investing or extra saving or anything like that. Of course, you've got a new role, so I'm not assuming you're going to just get hired and laid off, but you never know.

56:05Robert Croak:No one knows what the future holds. You know, you also could have an emergency like a medical emergency or maybe a funeral or things of that nature where you do need to come up with thousands of dollars and 7 ,000 might not be enough. So I really would also love to see you beef up that emergency fund fully funded to that three to six months of expenses, which probably is in the range of $15 ,000 to$20 ,000. Once you've got that, you are off to the races. A lot of ground covered here, Robert, at just 23 years old. That's an incredible situation to be in. Super, super excited for you, Mark. And congrats on hanging out in Arizona.

56:39Robert Croak:Arizona is a cool place to be. Everybody, thanks so much for joining us on this week's episode of the Rich Habits Podcast. If you learned something, please consider sharing this episode with a friend. Also, be sure to subscribe to the Rich Habits newsletter. It comes out every Thursday and it's completely free. We also have these Friday episodes called the Rich Habits Radar talking about the biggest headlines impacting you and your money. And of course, the Rich Habits Network, our community for our biggest fans to come together, ask questions, join us on Tuesday night weekly live streams. It's a good time over there.

57:10Austin Hankwitz:Definitely make sure you check out that seven day free trial for the network. It's all about community and leveling up your knowledge on finance, business, personal finance, real estate, and even mindset. I love the community. It's one of the coolest things I've ever been part of. So make sure you check that out.

57:26Robert Croak:Everyone, thanks so much. And we'll see you on Thursday.

57:44Thank you.