Q&A: Am I Behind Financially?, Robotics Investments, and the “Buy, Borrow, Die” Strategy

0:01This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required. Compatibility and availability varies 18+. Right now, get up to 15 % off select storage solutions. Put heavy-duty HDX totes to good use, protecting what's important to you.

0:34The solid, impact-resistant design prevents cracking. And the clear base and sides make items easy to find even when the totes are stacked. Find select shelving and tote storage up to 15 % off at the Home Depot to organize every room in your home, from your garage to your attic. Visit homedepot.com. How doers get more done. Hey, everyone, and welcome back to the Rich Habits Podcast question and answer edition on a super special Friday episode. How exciting is this? Q &A on a Friday that even rhymes. I like it. Hope you guys are excited for this quick little switch up. We decided to put our Rich Habits Radar episode yesterday on a Thursday, switch it up with the Q &A episode now here on a Friday.

1:18But the format and everything about it is exactly the same. Still answering your questions. The questions we get via Instagram at richhabitspodcast or email at richhabitspodcast at gmail.com. And Robert, we've got some really good questions on this episode. We're going to be talking about tons of different things like close end funds. We'll be talking about the buy, borrow, die strategy. We'll be talking about the different high earner tax optimization stuff. We got some good stuff rolling. But yeah, we've got a ton of great questions here are teed up for today's episode. But Austin, before we get into the questions and the episode, remember today, very special day for everyone.

1:55We have the public AI agent webinar. We've been talking about this thing for two, three weeks. We've had hundreds and hundreds of people join up, super excited about this. So what does this mean? We're going to have public Stephen Sykes on the webinar with us. We're going to be building these AI agents live just so you guys can see how to do it because we want everyone that follows along with us to really be able to get involved with these AI agents on public.com and understand how to use them for their benefits. So I'm really, really excited about this one. 100%. We'll also be walking through Publix most compelling pre-built agent strategies, things like repositioning around Fed rate decisions, smart dividend reinvesting, goals-based trimming of your own portfolio.

2:40We'll talk about what these AI agents can't do for your portfolio, which is like not that many things, but it's good to understand what they're capable of and what they're not capable of. And finally, as Robert had mentioned, Stephen Sykes, the chief operating officer at public.com will be on with us live, where we're going to put Stephen on the spot, call you all up on stage and figure out how Stephen can legit build one of these AI agents for your portfolio and show you exactly how to do it for your specific needs. This is less of a webinar, more of a workshop, Robert. We're just going to be going through the motion, getting it all figured out with Steven in public.

3:16It's going to be a blast. So be sure to come later today at noon Eastern time, link in the show notes below. And if you missed the webinar, that's okay. There's going to be a completely free replay. You just click the play button. I think it's going to be right on your screen on Crowdcast. You can watch, read the comment section, see everything right there. So definitely check it out regardless if If you can join us live or not, it's all going to be right there. And no excuses. This is a free webinar. Free. You can learn how to build and understand these AI agents right away in this webinar. Free of charge.

3:50We're not going to sell you anything. We're just so excited to do it. That said, got to give a shout out to Public.com, the investing platform for those who take it seriously. because on public, you can build a multi-asset portfolio of stocks, bonds, options, cryptocurrency, and now generated assets, which allow you to turn any idea into an investable index using AI. And it all starts with your prompt from renewable energy companies with high free cashflow 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 even let you back test it against the S &P 500, all with just a few clicks.

4:29Generated assets are like ETFs, but with infinite possibilities. They're completely customizable. They're based on your thesis, not someone else's. So go to public.com slash rich habits and transfer your portfolio. That's public.com slash rich habits. Paid for by public investing and full disclosure in the podcast description. So our first question comes from Jess G via email. Again, that's rich habits podcast at gmail.com. She says, my name is Jess. I'm 28 years old and I'm a huge fan of the show. Let me tell you, having an emergency fund saved my butt last year. I was unemployed for two months and my car broke down.

5:04I didn't have to go into any debt because I had that emergency fund. So thank you so much for drilling that into my head. Now I have my emergency fund built back up to$5 ,000 and my only debt is this used car. I owe about$22 ,000 on it. The interest rate is at 8%, but I will be able to refinance it to about 5.5 % very soon. I have$6 ,000 in a brokerage account,$14 ,500 in my Roth IRA,$26 ,500 in a traditional IRA from an old employer, plus$1 ,600 in a new employer 401k. All my stocks are the ones you guys talk about, the big index funds and ETFs. I'd like to buy a house in the next two to five years and hopefully house hack, but I feel behind my investing journey.

5:47I'd love to be a homeowner eventually, but I'm not sure if I'm heading in the right direction. I make$55 ,500 a year and my biggest bills are rent at$13.40 a month and my car payment at$3.80. Can you please offer me some guidance as to how I can purchase my first home in the next two to five years starting from my current situation? Robert, we normally don't do these like, what do you think about my situation type questions, but I think this one is really good because Jess sounds like the average listener out there. Hey, I've got this a little bit of an emergency fund. I've come into some recent tragedy with some unemployment and my car breaking down, right?

6:27Like just turmoil. Life's a roller coaster, but I'm still chugging along and I'm still making goals and I'm still knocking them out one by one here. So Jess, here's what I love about your situation. You've got a ton of money invested. You've got$6 ,000 in a brokerage account,$14 ,000 in a Roth IRAs, that's$20 ,000 total, another$26 ,000 in a traditional IRA. So now we're at$46 ,000 and another$1 ,600. So call it about$50 ,000, depending on what the stock market's doing, invested into these retirement plus bridge account, which I love. And at 50 ,000 at 28 years old is a ton of money to have invested, considering a lot of people don't start investing until their 30s.

7:11So congratulations on doing so well here. Robert, what's your take though on house hacking? And how could Jess begin to set her current situation up where she's continually investing while also setting money aside over the next two, three, four, five years. So she'll have a down payment on a duplex, triplex, or quadplex. Maybe walk through some solutions for that. Well, first I want to say, Jess, you are not behind on your journey. You are miles and miles ahead of most people that are 28 years old in the market today. We spread this message everywhere to get people to invest early and often. And you've already done that.

7:49You've laid the groundwork. You have the traditional brokerage account. You have the emergency fund. You have all of the tools to build wealth. And you said house hack. You're not saying you want to buy the dream home. You want to get in the real estate game through house hacking. So here's what I would do. You're halfway there for building your base. And you say you want to get a home in the next two, three years. I think by then your base will be built. It's up and running. You've got that$100 ,000 saved and invested. but along the way, what I would do is start earmarking money towards that purchase to house hack.

8:24So I would start plugging away and putting aside some money every single month of this money you're investing into a traditional brokerage account on public.com. Get that. That's your house fund. That is your house hacking fund. You're going to buy that duplex or triplex. That's what I would do and do that for the next two or three years. So you've got this money building and working towards that house while you sleep. What would I do for house hacking? I would research now so you can make sure you cover all the criteria for the Fannie Mae 5 % down mortgage. It's a tremendous product. You can borrow up to 1.3 million and up to four doors and just read up on it because I think if you get ahead of this, that would be the move for you to take the least amount out of that$100 ,000 saved and invested that we always talk about to make sure people have their base built.

9:13That is how I would do this, but you are crushing it. You're so far ahead of the curve. I would not worry about feeling like you're behind because you've got all your bases covered. And look at this. You went through some hardships and immediately went right back to the playbook and built that emergency fund back up and you have everything else in your favor. I think it's a great breakdown. I'm kind of looking at this budget, right? $55 ,500 a year working in the landscape industry, your biggest expenses are that rent at$13.40 and your car payment at$3.80. I would argue that with an honest budget and an extra maybe five to 10 hours a week of side hustle time, so call it an hour to two hours a day here, Monday through Friday, you could probably boost your monthly earnings by anywhere between$500 and maybe$750.

10:00And that money specifically can then go be invested into these index funds and ETFs we talk about in your taxable brokerage account on public and do that every month for the next two, three, four, five years like Robert's alluding to. And that now turns into tens of thousands of dollars over the coming years. That money is then that down payment Robert is alluding to. I think it all comes together very well here. Without sacrificing money, you're already putting into these retirement accounts Because again, you've done a really good job of getting about$50 ,000 invested here at the age of 28 years old.

10:33I think that's incredible work. We don't want to slow that down. More money you can get in these retirement accounts, more money you can get invested toward your future, the better. So when it comes to finding money for a down payment, I would love to see you, whatever that side hustle might be. We've got a whole episode dedicated to side hustles. Go figure out how to earn$300,$400,$500,$600 a month extra by working a couple hours extra maybe every day, maybe doing some weekend work, whatever's going on. I think it's totally doable, especially, Jess, if you're as hungry as you sound like you are here to go out and house hack and figure out the situation.

11:08And if you do decide to relocate to Florida, make sure you settle on one of those tertiary markets if it's just a random market where there is a ton of growth. That's happening all around Florida. And you want to find yourself in a market where there's a ton of opportunities moving forward, whether you stay in the landscaping industry or not, because you just want to be where the money is and the jobs are. So our next question comes from Sam S. Sam says, hi, Rich Habits. I've been listening since the early days, and I just want to say thanks for all the work you put into the podcast. It's become one of my favorite weekly listens, and I've learned a lot from the both of you.

11:43I was hoping you could spend some time discussing closed-end funds, specifically the pros and cons of owning them as part of a long-term portfolio. The reason I ask is I've been researching a closed-end fund called BOT, which provides public investors' exposure to several private robotics companies and physical AI companies. The concept is really interesting to me because it seems like one of the few ways everyday investors can gain access to privately held companies before they go public. I'd love to hear your thoughts on something like BOT. How do you evaluate a closed-end fund like this? What are the biggest risks or drawbacks that investors should be aware of, especially when it comes to premiums or discounts to NAV, liquidity in the valuation of private holdings?

12:23And more broadly, do you think closed-end funds deserve a place in a long-term investment portfolio? Thanks again for everything you do and keep up the great work. Robert, before we answer this question, I want to make sure everyone's on the same page about something. In this question, Sam said, the concept is really interesting to me because it seems like one of the few ways everyday investors can gain access to privately held companies before they go public. False. The Rich Habits Network also allows people to do that. Every single month we're investing in a privately held companies and we've actually invested into four robotics and embodied AI companies privately directly through the rich habits network that are held inside of this bot bot ETF.

13:03So if you're looking to gain exposure to privately held companies across all different types of sectors, join the rich habits network, make your first angel investment, learn more about the different opportunities we've had in the past. We're always introducing new cool opportunities in the future from seed to pre-IPO opportunities. So go check out the Rich Habits Network. We're still offering a seven-day free trial. You have seven days to watch the eight hours of video coursework, to join a live stream, to ask some questions, to review past investment opportunities before you actually make a decision if you want to stick around and pay the$77 a month.

13:38That said, Robert, let's jump into now answering this question. So I think the first place to start is kind of defining what closed end funds are and how they're different from things like ETFs. So the simplest way to think about them is unlike an ETF where shares can generally be created or what they call redeemed to keep the market price close to the value of the underlying holdings, a closed end fund has a fixed pool of shares that trade on the open market. That means the stock price can trade above or below the fund's net asset value or NAV. Net asset value can be thought of as the true intrinsic value of the underlying holdings.

14:21So when closed-end funds list on the markets, they have a true, I think for BOT, it listed like$9 or$10 a share. That was the true intrinsic value of its holdings compared to the number of shares that were created upon its inception. BOT is an interesting example like you kind of were alluding to here because RoboStrategy describes the fund as a way for public market investors to gain exposure to private and public robotics and embodied AI companies, which I think is one of the hardest types of secular growth trends for public investors to gain exposure to, again, assuming that they weren't inside the Rich Habits Network when we invested in Aptronic, Infigure, and Standard Bots and all these other companies years ago.

15:04So the way I would evaluate a closed-end fund is I'd ask myself questions like this. First, what are the actual holdings? Are they holding public stock in a company like an ETF, or are they owning private stock in a privately held company? Is that an SPV? Is it a single layer? Is it a double layer? Like, understand the intricacies of the actual holdings. Second, what percentage is private versus public? Because if a lot of it is private, then it's up to you to figure out what is the true intrinsic value of that private company. For example, Figure AI raised at a$39 billion valuation a year, year and a half ago, whatever it was.

15:41Yeah, but a lot has changed with that company since that year, year and a half. So is the intrinsic value now a figure 50 billion, 100 billion, 200 billion, 15 billion, right? Who knows? It's up to you as the investor to figure out what is the intrinsic value of these privately held companies. The opposite of public. When it's a publicly held company or a company, you know, a holding that is clearly, you can see an investor is going to pay you$22 a share for it. Very different than having to kind of back into your own math there. Third, and this is probably the most important in Robert's eyes, the fee structure.

16:13How are the fees actually working here? with the BOT closed-end fund. I'll let Robert dig into fee structures and how things can be different for closed-end funds here soon. And then in my opinion, the last thing that I really want to dive deep on as an investor is, is it trading at a premium or a discount to its market net asset value? What is that net asset value truly worth right now whenever you take in the progress of a standard bots or a figure or an Aptronic or whatever on the secondary markets and translate that into its holdings. And how does that all come together? Do you think it's overvalued?

16:48Do you think it's undervalued? I think BOT right now is trading around 35 or 40 bucks a share, which is a lot higher than its original net asset value of like nine or 10 bucks, right? But does that mean its underlying holdings are now more valuable? Like, I don't know. It's up to you as the investor to figure that out. So I know that was kind of long-winded, but I think these are really, really important to understand so you don't find yourself piling in to a closed-end fund that might be way over net asset value and you just get crushed on the back end because you don't know how to evaluate these types of investment instruments.

17:20I think you did a great job and long-winded in this instance is really important because so many people, they see the sexy headlines of getting into these closed-end funds and getting in pre-IPO and all of that, but they don't understand the net asset value, this NAV term we see all the time, and they might not even understand how much they're paying above that. And so I think it's really important for people to understand you need to know what you're paying to get into that investment. Because if you're paying way too much and then you have these secondary market commissions, you have the expense ratio.

17:52And in these terms, in these closed-end funds, sometimes the expense ratio can be 1.5 to 2%. So when you add all of that up, you might be paying such a huge premium in a closed-end fund that you're missing out on any of the upside that you would have gotten if you just waited for the IPO. So just make sure you understand all of it. It's like anything else. If there's a lot of these terms you don't understand, do the research. AI is your friend so you can understand that you're actually getting a good deal on this rather than just paying for the sexy headline in a secondary market. And also what you added, Austin, is people can join the Rich Habits Network, get access to all of this, and the deals are flushed out.

18:36It's not through all of these person next to a person next to a person because we're doing this in the Rich Habits Network every single month, giving people access to the same companies, but in a way where they have the knowledge and comfort of knowing we've flushed out what is right and wrong and what is a good investment. Yeah, I'm just looking at the RoboStrategy portfolio. And yeah, Robert, we invested into figure, Aptronic, StandardBots, and Path Robotics. And so did RoboStrategy. So you could have invested in these companies directly through us, or you can buy an overvalued closed-end fund, the BOT ETF here, which by the way, I just looked up the fee structure on it, two and a half percent annual fee structure just to own it.

19:20So it's important. It's important to understand this again, it was long winded, but you all need to understand as these instruments begin to become more available to people, if it's a BOT, if it's a VCX, if it's a insert, other closed end, open end, whatever fund here, Evergreen Fund, Cashmere Fund, right? There's a ton of different things that exist out there. As they become more and more prevalent, you have to do your homework on them and you have to understand exactly what you're getting involved in. And if you don't understand golden rule number one with investing, don't invest in anything that you do not understand entirely front to back like the back of your hand.

19:56Yeah, great take, Austin. And I think that's the most important key of why this podcast exists. We are here to help people from all walks of life, from all levels of financial freedom or just getting started as an investor, because we want to break down these terms and these processes in investing to help everyone know that we all have blind spots. And the more knowledge you have, the better off you're going to be in making solid choices? Because as soon as people get moving and they get a little bit of money, yes, we want you to use these tools. Yes, as you build more wealth, we want you to understand all the advantages you can get from some of these tools.

20:33But we also don't want people to get so fancy and do these things in a way that it might set them back versus actually help them long term. We've got a ton of complex stuff, though, and we're happy to answer it. Next question coming from Russ P. Russ P. says, Hey, Robert Nasson, I don't hear you guys talk about pledged asset lines or security backed lines of credit very often, but they've been an absolute game changer for my wealth management. We always hear about how billionaires use the buy, borrow, die strategy to avoid capital gains taxes. But with modern brokerages offering highly competitive, low cost margin and line of credit rates around 4 % right now, this strategy is completely accessible to everyday millionaires.

21:13I recently used a pledged asset line to purchase a vacation home. The closing process took almost no time compared to a traditional mortgage, and the rate I locked in was more than 200 basis points lower than the standard mortgage rate. To manage the risk of a market drop or a sudden margin call, I follow a strict set of personal guardrails. Number one is I never let the loan balance exceed 25 % of my non-tax-advantaged investable assets, aka bridge account. Number two, I only use the debt for major physical assets like real estate that I could easily refinance into a traditional loan or sell off if interest rate spikes or the market corrected.

21:49What are your thoughts on using strategic low loan-to-value leverage in a taxable portfolio for major purchases instead of traditional financing? Is this a brilliant way to optimize cash flow and stay fully invested? Or do you think the downside risk of a market correction makes it too dangerous for us non-billionaires? Robert, this is a great question for you to answer. I love this, Russ, and you have spelled it out perfectly. You've covered all the bases in a way where people that are listening and following along can understand what this buy, borrow, die means, but not get themselves in trouble.

22:23So let's go the bad side. So many people go, wow, I have this portfolio of$200 ,000 on public.com or E-Trade. I'm gonna go borrow against it and do what the billionaires do. But the problem is they go borrow 70, 75%. I think most of them are around 70 % of your portfolio. They borrow all of it. Then there's a market correction of 25, 30%. They get a margin call and they don't have the funds. But the way you laid this out of keeping that balance at 25 % of the total value of the portfolio is magical. I'd even be okay with going to 50 % because you're right. When you have millions of dollars or even hundreds of thousands of dollars invested, and you can borrow against that without it being a taxable event, without selling that equity, it is a magical, magical way to build wealth as long as you know what you're doing and you stay within those personal guardrails because again, people think margin in these loans and all of this is free money.

23:22It is definitely not free money and very dangerous if you don't stick with it and you constantly, it's kind of like when people get a line of credit and they're always maxing it out. Those are the same people that generally carry credit card debt. So I think as long as you handle it responsibly and you do this buy, borrow, die strategy with these pledged asset lines of credit, I think it's a fantastic way to help you build wealth and get liquidity without selling your equities. Yeah. I just want to double down on your framework here, Russ, as to how smart it is. If you're using a guardrail, maybe you're someone listening right now and you've got half a million dollars in a brokerage account.

24:01That's the hard part, Robert, because it's like Russ's framework is very clear. I only use the debt for major physical assets like real estate that I can easily refinance into a traditional loan or sell off if interest rates spike or the market corrects. I want to talk about that for a second because this 4 % interest rate you're getting and the way he was able to do this for everyone that's like, I still don't understand. Russ probably has a couple million dollars in a taxable brokerage account. And that couple million dollars, he can easily borrow against using a margin. So what does that mean?

24:32A little bit of debt. So let's say, you know, Russ has got, I don't know,$4 million sitting in his public account. And you can go borrow at 4 % interest on, you know, up to 70 or 75 % of your portfolio's value. And that interest, you can do interest only, pay it back, whatever that way. And so what Russ did is Russ goes, okay, I want to go buy a million dollar vacation home. I've got$4 million over here. Do I want to sell a million dollars of stock, realize a capital gain, pay taxes on that, and then from what's left, use that money to go buy my house in cash or go through a mortgage process, down payment, still sell it, have to go through closing, all this stuff?

25:12No. Russ said, listen, I've got$4 million. I'm going to go borrow a million of that from my portfolio. So what happens there is your portfolio custodian, let's say public, is going to say, okay, you want to borrow a million dollars. We'll hold on to this million dollars of VOO or S &P 500 or Microsoft or whatever you got going on here. We'll give you a million dollars cash. And so now Russ's loan to value ratio, 1 million of 4 million is 25%. Never let the loan balance exceed 25 % of my non-tax advantage investable assets. And then he used that million dollars instead of going through the financing of getting a mortgage and having to apply and go through all the clock.