Q&A: Avoiding AI Investments, Financing Business Buyout & Nancy Pelosi's Portfolio

0:00Austin Hankwitz:So good, so good, so good.

0:02Robert Croak:New markdowns up to 70 % off are at Nordstrom Rack stores now. Stock up and stay big on shoes, tops, dresses, accessories, and more must-haves for summer.

0:13Austin Hankwitz:Join the Nordiclub to unlock exclusive discounts, shop new arrivals first, and more. Plus, buy online and pick up at your favorite rack store for free.

0:21Robert Croak:Great brands, great prices. That's why you rack. Study. And play. Come together on a Windows 11 PC. And for a limited time, college students get the best of both worlds. Get the Unreal College Deal. Everything you need to study and play with select Windows 11 PCs. Eligible students get a year of Microsoft 365 Premium and a year of Xbox Game Pass Ultimate with a custom color Xbox wireless controller. Learn more at windows.com slash student offer. While supplies last, ends June 30th. Terms at aka.ms slash college PC. Hey everyone and welcome back to the Rich Habits Podcast question and answer edition brought to you by public.com.

1:04Robert Croak:These are our Thursday episodes where every Thursday we answer your questions as if we were in your shoes going through whatever you're going through. You can ask us questions on Instagram at richhabitspodcast. You can ask us questions via email at richhabitspodcast at gmail.com. or maybe you want to ask us questions inside the Rich Habits Network, our community for our biggest fans. Whatever you do, get a hold of us, ask a question, and it might end up on these Thursday episodes.

1:32Austin Hankwitz:We love these episodes because we can hear it all from you guys. Personal finance is personal, and everyone has so many great questions in our DMs like Austin said, and it's just so fun just taking it off the dome and trying to create as much value as we can for each and every one of you. And you guys love these episodes, even those of you that don't ask the questions. So that makes it even more fulfilling for us.

1:56Robert Croak:A hundred percent, Robert. People love these Q &A episodes. It's a really popular segment of the show. And I like them a lot because it offers our audience the ability to like, we get to really provide value to them directly. It's not like a lesson. It's not, you know, some headlines that can go read somewhere else. It's real value. It's my perspective. It's Robert's perspective. It's our combined sort of back and forth on a question or, you know, whatever's going on. So I love these episodes. Now, before we jump into this episode that we both love so much, got to give a shout out to public.com, the investing platform for those who take investing as seriously as we do here on the Rich Habits podcast.

2:34Robert Croak: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 artificial intelligence.

2:49Austin Hankwitz: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 even lets you backtest it against the S &P 500, all with just a few clicks.

3:09Robert 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 transfer your portfolio today. That's public.com slash rich habits.

3:24Austin Hankwitz:Paid for by public investing. Full disclosures in the podcast description.

3:28Robert Croak:So we have this first question here, Robert, sent to us via email at richhabitspodcast at gmail.com. It's coming from Sean H. Sean says, Hi, Austin and Robert. My name is Sean, and I've been listening to your podcast for the last two months, and it's been awesome. I never really thought about retirement. I always focus just on getting by, but I've since opened a Roth IRA because of you all, and I'm working toward building other wealthy rich habits. That's awesome, Sean. That's so cool. All right, so Sean says, my question is regarding my father-in-law's construction company, which I've worked at for 12 years now and I've taken over most of the operations over the last few years, including acquiring the license the business runs under.

4:08Robert Croak:My father-in-law has proposed getting me into the ownership side of things. He's drafted a proposal with his attorney in which I'm given 25 % of the company and the other 75 % will remain with him until he passes. And then it will be split evenly between his three daughters, one being my wife. Together, we will control 50 % or more of the business and I'm getting the first right of refusal to buy the company off the other two daughters as well. How would you go about preparing financially for this? Do I throw as much of the company profits that I earn into a certain type of account to prepare for a future buyout in the future?

4:45Robert Croak:Do I invest and work on building my own wealth and maybe just plan to take out a loan when it comes time for a buyout? Thanks so much. Would love to hear your opinion on the best way to prepare for such a buyout as the company is just shy of 50 years old. And I'm excited that this is going to be my turn into building this business. Sincerely, Sean H. Robert, I feel like you've probably had some experience when it comes to buying out existing owners and maybe loans to do that or different financing options or different ways to prepare for that. So what advice do you have for Sean here?

5:15Austin Hankwitz:Yeah, Sean's in a great position. This company's established. It's been around for almost 50 years. It seems like the current owner, his wife's father, is really meaningfully trying to take care of Sean, which I love. And I think it is a perfect storm. So Sean, what would I do in the meantime? I don't know how old the gentleman is, so I don't know if this is a 10-year plan, a 20-year plan, a 30-year plan. But what I would do in the meantime is get that traditional brokerage account set up, get your Roth set up as well, make sure you're up and running, building for your own wealth because you never know what's gonna happen with the company.

5:48Austin Hankwitz:But I would get a traditional brokerage account set up and I would also get that emergency fund set up like we always talk about so you've got cash building for the future, for this purchase. But I think you're on the right track with the SBA loan. I wouldn't worry about it for down the road that you have to have all this money to do the buyout in cash. There's always going to be ways to raise capital, especially when purchasing or investing in a successful small business. So I love your situation. I would get the paperwork done sooner than later because things change over time. You don't want this to linger for another year or two.

6:24Austin Hankwitz:Something happens between you and the daughter and you give up that equity that you rightfully deserve. So I would get the paperwork done. I think he's doing a great job how he's proposed it with the 25 % now, and then you would be able to buy the rest later in that first right of refusal. So I think it's a great situation. Get the paperwork done. Get your own attorney, though. This is what I would recommend. Get your own attorney on this because you want to make sure it's all legitimate and done properly because seems like a great guy, but you always want to get a second opinion.

6:56Robert Croak:I think that's great. And the one part of this that I want to double down on is the aspect of ensuring that our friend Sean here is doing his own wealth building things outside of this company, right? Because maybe God willing, your father-in-law stays alive a lot longer than you might think. And that's 75 % that he retains that's supposed to go to the, you know, your wife and her three sisters. Maybe that doesn't happen for another 25 or 35 years. and you might be retired by that. You could be so much older. And so all I want to make sure is that, and you already are working on this, you'd mentioned the Roth IRA and things of that nature, but I want to make sure that you yourself are preparing for your own retirement outside of whatever this company could be or could not turn into into the future.

7:41Robert Croak:Robert called out, you know, who knows what's going to happen to the company? Maybe a competitor comes in and just wipes you guys clean, right? Like who knows? So I love knowing that you are building toward your own retirement with a Roth IRA. You got the emergency fund set up, I'm sure. Maybe you've already got some extra funds in a bridge account, a taxable brokerage account on public.com. You're investing into the ETFs and index funds we talk about. Maybe you have a couple children, you're contributing to their 529 accounts, whatever's going on here, but you are finding yourself in a way where you're out of high interest debt and you're investing aggressively toward your future and your retirement exclusively away from whatever this company might turn into into the future.

8:19Robert Croak:Now, I also agree with Robert as it relates to the other 75%. Yeah, some of it's going to go to your wife, you guys will control 50 % or more. That's great. The other let's call it 49 % that's owned by her two sisters and you have the first rider refusal to buy them out. First rider refusal means that if they want to sell it, you are the first one up to buy it. They might not want to sell it. So you have to also then think about that you might be, you know, running some numbers in your head here, Sean, okay, the business does this much in profit. If I own 100 % of it, you know, I'll be able to do this and keep this much per month, and I'll have a nice big retirement.

8:55Robert Croak:Like, you're probably running a lot of scenarios in your head, and you're doing all these different things. And we might not have full information as it relates to the sister's appetite to own equity in this business. But you've got to run all those same scenarios, assuming you only will ever own 50 % of this business, and they might never want to buy out, they might just want to keep collecting their equity, you know, those distributions. and that might be their retirement and that's how they're thinking about it. So I love that you're thinking through all of these different scenarios, but my biggest piece of advice for you is to assume they keep 49 % or whatever it might be so you guys maintain that majority ownership and you are building wealth for your own retirement that has nothing to do with the success of this company.

9:38Austin Hankwitz:I love that take and I wanna add one more layer to this. For Sean, make sure when you do get the paperwork and you have your attorney look at it, Make sure that there are some language in the contracts that state that upon his passing and you given that opportunity for this first right of refusal to buy them out, that if they do say no, that there are some operational language in there that states that you have either supermajority voting rights or operational control of the business because you don't want this ending up in probate court for two or three years where the business gets ruined. Everyone's fighting over scraps and put yourself in a bad situation because you always want to hope for the best, but plan for the worst.

10:20Austin Hankwitz:And in this situation, he could get hurt tomorrow. Private equity could come in and buy, you know, a competitor could buy the company out before your paperwork is signed. All of these things could happen. And we just want to make sure you're fully prepared.

10:32Robert Croak:Great call it, Robert. Our next question comes from MC. MC says, good afternoon. I love y 'all's podcast and greatly appreciate you sharing the stocks and such that you invest in and would recommend others to look into. However, two of those investment themes are ones that I cannot morally get behind. AI and REITs, specifically Fundrise. As a conservationist, it's my life's work to restore, protect, and care for the natural environment. Investing in AI means investing in AI data centers, which is the exact opposite of conservation. Not to mention, I'm from a rural town, which are often the targets for these centers and face several impacts from them.

11:10Robert Croak:Likewise, I was interested in Fundrise because of its accessibility into real estate. But when I saw that there was no way to choose what and where I wanted to invest and that the majority of the projects are invested in Florida, which as a resident who despites the overdevelopment of this beautiful state, I could not in good conscience support that. So what options do you recommend someone to look into if they, like myself, want to grow their wealth, but do not want to do it at the cost of financially supporting what they do not morally support? That's a good question, MC. I love that. So I guess there's two ways to answer this question.

11:42Robert Croak:The first way to answer this is there are absolutely resources out there. There are ETFs that exist. There are mutual funds that exist. There are financial advisors that exist specifically to serve people like you. They will find and build and craft model custom portfolios that are investing specifically into companies that are operating within the guidelines you give them and are trying to, you know, make sure that your money is being invested in owning equity into businesses that you morally agree with. Now, let's be very clear here, just because I want to make sure everyone's on the same page.

12:22Robert Croak:When someone goes and buys a share of Amazon stock for$250 a share. You're not giving Amazon$250 a share. You're buying one share of Amazon from someone else somewhere that's selling it to you at$250 a share, right? Amazon is not getting money by buying their stock just like Google or whatever, right? Because I think a lot of people make the mistake of thinking too, oh, I want to invest in all these cool things, but I don't want to be giving these trillion dollar corporations my money. They don't need my money. You're not giving anyone your money. So I just want to clear that up too, in case there's any confusion.

12:54Robert Croak:But there are tons of resources. There's tons of, you know, ESG ETFs out there and other sort of vehicles that exist that align investors moral compasses with their financial, you know, capital deployment and portfolio construction. And so I don't have any of the I'm not going to recommend any I don't really know too much about that space. So I don't want to pretend to be an expert. But I do know they exist. I know there's tons of resources out there. And so I highly recommend MC just doing a a little bit of research on Google, or I was going to recommend ChatGPT, but you don't like AI. Well, I guess Google is also AI.

13:31Robert Croak:That's going to be a tough one for you because the whole world's going for AI. And so just kind of not using that or not supporting that might be tough. But regardless, I'm so sure there's a lot out there for you.

13:40Austin Hankwitz:I think that's a great take. And I'm very similar, MC, in I don't invest in companies or sectors that I don't agree with what they do or what their social construct is. So if you take like gambling, I don't invest in weed companies, tobacco companies. Generally, I don't invest in liquor companies. So there are different sectors that I also am very similar to. And like Austin alluded to, and it is AI, unfortunately, but you could literally go to Publix Generated Assets, type in a prompt based on exactly what you asked within this question, And it would make you a portfolio of companies that are socially responsible around your conservationist beliefs.

14:27Austin Hankwitz:And I think that would be a good start for you because I get it. I don't want to support companies and sectors that I'm not into because I don't want to make money off of things that aren't healthy or good for the environment. So that's where I would start. Public generated assets go in there, put together some prompts. It'll build a portfolio for you and use AI to not invest in AI to help you get to where you want to get financially by still using these tools. I think that's where I'd start.

14:56Robert Croak:I didn't even think about generated assets, but you're right. I mean, MC, that's a perfect place to start. I want to invest in these things. I don't want to invest in these things. I want to ensure, you know, whatever that description is for you. And it will do a really good job of sort of pulling that stuff up. And I think that kind of bodes well to because the next question comes from Lucas V, who says, I've built my base with index funds and ETFs you guys talk about. I have a couple thousand dollars and I want to invest in SpaceX as soon as it goes public. Should I invest it all at once or DCA?

15:28Robert Croak:You know, SpaceX's whole sex appeal right now is data centers in space, right? Literally taking these reusable rockets, I think it's Starship, and being able to, because I watched this conversation between Elon and Jamie Dimon over the weekend, which essentially said it's going to be cheaper for them to move cargo into low Earth orbit with Starship than it is going to be for Amazon to move your packages around the world because of the way that they've been able to reuse these rockets and things like that. And so data centers in space is a really cool thing that people are chatting up about trying to figure out.

16:05Robert Croak:And so to our friend MC, yeah, a data center in rural Montana sucks. No one wants that. No one wants to look or hear or, you know, see what's going on there. so let's put those suckers so high up that we can't even see them let's put them in low earth orbit or whatever's going on there so they're getting all the the power from the sun and we don't have to worry about electricity costs for you know neighboring uh communities and towns or whatever's going on let's put them all in space and then use a laser to shoot down the energy somehow some way i have no idea how that works but it sounds fun and i think that's what's so cool about just this whole idea of innovation.

16:44Robert Croak:And I just it's inspiring, Robert, because people then find and see, okay, we need a lot of energy. If we are going to continue to use artificial intelligence, like people have shown to want to use it, right, a billion people use chat GPT every single month on average. And so that's only going to expand same thing with anthropic and x and all these other models and all the agents and everything like that. So we need a lot more energy. But the problem is no one wants these data centers in their backyard. So let's then use reusable rockets to put them in space where no one has to see them and some sort of cool laser technology to shoot it down to, I don't know, something else.

17:21Robert Croak:And it's cool. That was a roundabout way, Lucas, of answering your questions. If I had a couple thousand dollars to invest in SpaceX, I'm not sure I'd buy it the first day. I normally don't buy IPOs the first day or even the first couple months. I like to wait for earnings call or two. If you really want a good rule of thumb, think six to nine months, in my humble opinion, is kind of the range there where the stock will start to find support. It'll not violently trade up 9%, 10%, 12 % in a day. Oh, it's up 7%. Now it's down 12%. Oh, it's up 4%. Now it's down 6%. That's what the IPOs tend to do in the beginning.

17:58Robert Croak:But over time, they tend to really find their couple percentage points here and there. And I think that's where I like to accumulate my positions. So Lucas V, to answer your question, I'd probably wait a little bit or just dollar cost average over a long period of time.

18:12Austin Hankwitz:I agree with you 100%. I think SpaceX, anyone that's buying at the IPO is late to the party. Not saying you might not be able to make money on the initial spike because there will be one, but most of the money is going to be made from the people that have been investing in SpaceX long before the IPO. and they're going to take profits. They've been waiting for one, two, three, four, five years to be able to get some liquidity out of SpaceX. So I would be careful. Like Austin said, I'd wait three, four months, see what the price action does, then start dollar cost averaging in because right now it is the most hyped up IPO ever and it's probably going to price way above what the actual value is.

18:54Robert Croak:Yeah, Robert and I were doing some research. And again, this goes back to our episode that we got so much flack for, which was why are you guys talking about these event contract websites like Polymarket and Kalshi? I don't understand. I thought we aren't gambling here. No one's using them to gamble, but it's fun to use those to understand the investor sentiment around big events like a SpaceX IPO. We were looking at Polymarket. Polymarket says that SpaceX's market cap on the first day of trading would likely close between$2 trillion and$2.5 trillion, which is higher, Robert, than the 1.75 trillion sort of target there.

19:31Robert Croak:I think on Hyperliquid, it's trading at 167 a share right now, which is higher than the 135 that they priced it at last week. All this stuff, you know, this comes out on Thursday. Friday is the IPO itself. So we have no idea what new news has come out since then, I'm sure. But long story short, you should be using these tools, using these platforms to better understand what's going on with sentiment, how people are trying to, you know, buy and sell these things. And it's just a really great way to do a little bit of extra research. So you're not caught off guard on day one of an IPO or some political event or, you know, whatever's going on.