Q&A: FXAIX, Making Money in a Recession, and Early Retirement

0:01The world moves fast. Your workday? Even faster. pitching products, drafting reports, analyzing data, Microsoft 365 Copilot is your AI assistant for work built into Word, Excel, PowerPoint, and other Microsoft 365 apps you use, helping you quickly write, analyze, create, and summarize so you can cut through clutter and clear a path to your best work. Learn more at Microsoft.com slash M365 Copilot. Hey everyone, and welcome back to this week's episode of the Rich Habits Podcast question and answer edition. We have a ton of awesome questions teed up, so be sure to stick to the very end so you learn the absolute most you possibly can from these episodes.

0:46Now, our first question comes from Johan B. from Instagram. If you are on Instagram and you're not yet following us at Rich Habits Podcast, one, what are you doing? And two, follow us. You can ask us questions on Instagram as well as send us an email at richhabitspodcast at gmail.com. Now, Johan's question is pretty interesting. It's kind of a misconception. Johan asks, I had a question because you all mentioned index funds like VOO and QQQ and talk about compounding returns, but they're kind of confusing to me. Do we have to take the money and reinvest it every year? Just like set it and forget it and leave it in there?

1:20Or can I take the money out and still have compounding returns on my original investment? Robert, I bet that Johan is not the only person asking or thinking this, especially for new investors. So break it down for our listeners very simply. Love the question. And yes, this one is a big misnomer. And let's try to clear it up as best we can. So basically what you have to consider is if you have no gains, then you have no compounding. You would then just be stuck with the original amount that you invested. So the way to look at this is as you earn money, let's say you have$100 in, you earn 10%, that$10 of gains then compounds on itself along with the original investment.

2:01So in this instance, if you're taking out all of the gains, let's say monthly or quarterly, then you would have no gains to compound. So you would be stuck at the same level of investment because you're taking out all the gains. So I hope that clears it up for everyone that you have to let the gains ride. The key here is letting those gains earn the compound interest so that that way your account is continually growing over time. This is the most powerful investment tool you can have by letting those gains compound. I guess to answer the question of like, well, Robert, Austin, that sounds good and all, but why are my gains compounding?

2:42That doesn't exactly make sense. So why gains compound is because stock prices, you can think of them about moving in percentages, not exactly moving in whole numbers. And the reason for that is because of something called unit economics and sort of a compounding of efficiency when companies become profitable. When a company finally becomes a profitable company, they might make$1 in earnings per share that year. But because they're becoming more efficient and they hire the right management team and they are optimizing their supply chain and they're able to get a hold on inflation and these other factors, that dollar of earnings per share now turns into$2 in earnings per share and maybe$2.50 in earnings per share, right?

3:28And because of that sort of compounding effect in the profits of the company, the stock price is also moving and compounding that way as well. I mean, you look at companies like Apple, right? I mean, the only way Apple was able to go from $2 or$3 a share way back in the, you know, call it 90s, maybe to this$200 per share we have today is because compounding of profits and world domination. But I mean, same difference, right? Yeah, that's a good way to look at it. But great question, Johan. Love it. Our next question comes from Jenny T. Jenny asks, I have a question about investing into other ETFs than the investment institution I'm using.

4:06For example, I have Fidelity for my Roth IRA and my regular investing accounts. However, you guys always talk about Vanguard ETFs like VOO and VTI. Would it make sense for me to invest into VOO and VTI on Fidelity or instead to invest into the Fidelity equivalents? I'm not sure. I just wanna make sure I'm not getting penalized on Fidelity for some random reason. Great question. And the answer is this. If you prefer Fidelity and that's what your accounts are in right now, it's totally fine to get the equivalent of VOO on Fidelity, which is F-X-A-I-X. The reason we discuss VOO so often is because we just want to guide our listeners and our followers to what we believe is the best in each category from an expense ratio and a performance.

4:57So that's why it's always tricky because those few basis points for expense ratio can really add up over time. So that's why with VOO outperforming like SPY a little bit every year and having that lower expense ratio, that's why for me, I just want my money and my followers and the Rich Habits followers to just get the best deal they can. That's why we always push VOO. Another point to consider also is the availability of VOO. VXAIX isn't available on all of the platforms we use. We just always want to guide our listeners to have products that are readily available across all platforms like Public, E-Trade, Schwab.com.

5:41So this is just very important. So just keep that in mind on your journey that we just try to guide people for simplicity, where they're going to get the best value and the highest gains. That's the only difference. And I think what could be intimidating as well, Robert, is the minimum investments. I mean, sure, FXAIX, I'm not sure has a minimum investment, but the Vanguard equivalent, VFIAX does, right? They have a$3 ,000 minimum investment. And because it's a mutual fund and not an ETF, which is what Fidelity's FXAIX is, they only purchase shares at one point of the day, which means you might not be getting the best price.

6:19So when Robert and I talk about VOO and VGT or VTI, these other ETFs that we're really excited about that sort of track these indices, we are trying to share these names with you, knowing that you might not have the$3 ,000,$5 ,000,$10 ,000 minimum investment to get started, knowing that you might not be on Fidelity, but instead Public or Charles Schwab or one of these other platforms, right? Everyone's financial journey is different and they all come from different walks of life and are comfortable with one platform over another. So we just want to make sure that we're sharing ideas that are platform agnostic, as you might say.

6:53So really good question here, Jenny. Our next question comes from Hannah T. Hannah asks, I recently left my job and I had a 401k balance of$30 ,000. How do I go about moving the money out of my job's old 401k here into a platform or some other account that I can invest moving forward? All right, Hannah. So as someone who also left an old job and rolled over that same 401k, I'll give you the play by play. Your 401k has a cousin called the traditional IRA. The reason why they're cousins is because they're both pre-tax retirement accounts. Now, if you had a Roth 401k, your cousin would be the Roth IRA.

7:32But there's no Roth included here in this email that you sent us. So I'm just going to assume it's a normal 401k, which means it's all pre-tax money that you had invested. So you want to roll this money over into a traditional IRA, which is another pre-tax retirement account. The reason we are rolling it into a traditional IRA and not a Roth IRA is because if you rolled it into the Roth IRA, then you would have a tax liability and you would have to pay taxes on$30 ,000, which could be seven or eight grand of your retirement money just gone to the IRS overnight. So here's what we're going to do.

8:02You are going to go to M1 Finance. You're going to go to Charles Schwab. You'll go to Wealthfront, to Betterment, any platform you want to open up a traditional IRA. Personally, I chose M1 Finance. I think it's a super easy platform to use. Once you've done that and you open the account, I want you to go into like their frequently asked questions section of the website. And there's definitely going to be some articles about rollover into that account. And so essentially what happens here is you're going to get into contact with your old 401k provider and say, hey, I want to roll this balance from let's call it old provider A now into my traditional IRA on M1 Finance.

8:42And they're going to say, no problem. What's your account number? What's your, you know, log into your account, give us access, make sure everything's cool. You just click a little box, say accept, tell them where you're going to send it, account routing, all that fun stuff. It's super easy on the website. They lay everything out for you. And then you just click submit. And after maybe two or three business days, all that money, it will leave your old 401k and roll into your new traditional IRA. Now here's the mistake people make. They roll it over and they forget to rebalance or reinvest or re kind of invigorate the account.

9:13They just kind of say, oh, well, I was putting this target date fund because of my old employer and like the target date fund just rolls over into something weird. And like, I don't know, they roll it over, but they don't think about what to do afterward. And so Hannah, now that you have full autonomy over this new 401k balance of$30 ,000, you should be investing that into the index funds we just talked about, VOO, VTI, VGT, QQQ, right? These big longstanding funds that over a long period of time are going to compound 8%, 10%, 12 % annually for your money, allowing you to hopefully retire a net worth millionaire.

9:45One last thing I would just add is don't forget to continue to contribute to this account because going into 2024, the allowable limit is now$7 ,000. So you want to max that out every year if you can and just keep letting that compounding happen and let it grow. Really good question, Hannah. Thanks so much. So our next question comes from Jason M. Jason says, I made a mistake a few years ago. I opened a margin account. How do I get out from under margin? I don't really know what I'm doing. I feel tied down. Could you all please explain margin to me? Oh, Jason. Okay. Let me take a first stab at this, Robert.

10:23I'll let you jump in and then maybe we'll both come to an epiphany of a conclusion here to help out Jason. So can you please explain margin? Yes, I certainly can. So margin is debt. You are borrowing money from your online broker. So let's say you're on Robinhood because I know Robinhood does do margin. And let's say that you have all of your bank accounts connected, you're investing or doing your thing where you got 10, 20,$30 ,000 on there. Robinhood, especially back in 2021, when the GameStop stuff was going on, they were saying, hey guys, do you want to borrow on margin? And instead of just having your 20,$30 ,000 to invest, we'll actually loan you another$30 ,000 and you can take that money and you can go invest it into whatever you want.

11:05That's debt, right? That's like borrowing from your grandfather to go take his money and invest it, right? That's debt. So by investing this borrowed money, what happens is two things. One, you are on the hook to pay back all of the money over a specific period of time. And two, if your investment that you invested into decreases in value enough, you have to do something called a margin call, which means Robinhood, who lent you call it this$10 ,000, doesn't believe in whatever you just invested in is going to be worth that same$10 ,000 to get back. So they're going to say, hey, Austin, we don't know what you bought, but it doesn't look good.

11:46So we need you to put up your own collateral of$5 ,000 to make sure that we are going to get whole on this debt that we lent you, right? So margin is very scary. Margin is speculative. Margin is risky. Margin is every word in the dictionary that is not safe, right? So by going into debt to have these trade ideas or whatever, it just never really works out, in my opinion, unless maybe there's something you know that maybe no one else knows. Like, I don't know. I can't speculate here. But it's not something I've personally done. And it's not something I think that I'll go into more. But before we think about now helping Jason to get out from under his margin, Robert, I'll give you the floor to jump in and share your own thoughts.

12:25When I hear margin, a few words come to mind. Robinhood, obviously, crypto, Forex trading, day trading, and get rich quick. So the moral of the story is margin borrowing comes with all the same risks of any other debt that you would take on. And you just have to be careful in that situation. Because when you're taking on that free money that you think is margin, you're not thinking of the future and the what if I'm wrong. So many people see that margin availability in their account and they think, ooh, I'm going to double down on this stock. I'm going to double down on this crypto because Uncle Bill said it was going to be great.

13:05And then when it goes south, then you don't have the funds to be able to pay off what would be called a margin call when they come and they knock on your door and say, hey, we want our money back now. So please, please understand the depths of despair that can happen with margin if you don't know what you're doing. It's just very, very risky. And it's like any other debt. You just don't want to get in that situation where you could eventually lose your account and be upside down and owe that platform money that you don't have. So how do we get out from under this? Really good question. I would treat it like any other debt.

13:41Number one, I would stop going into debt. So I'd stop playing with these margin accounts. I would stop going into debt to trade or invest or whatever you think you're doing here, Jason. Obviously, it hasn't worked out, which you've come to the conclusion, right? You said I made a mistake a few years ago, so that's good. So realize the mistake has been made, stop going into debt, going forward, and treat it like any other debt, if that's the debt avalanche method or debt snowball method. But focus on this like any other high interest credit card debt or personal loan debt. You have to pay this off.

14:07This might be 7%, 10%, 12 % interest rate, which means it is a high interest debt, and it's not something that we want to keep around. I love it. Great response, Austin. Really good question, Jason. And we're rooting for you, man. Our next question comes from Coleman H. Coleman says, What's up, guys? I'm a huge fan of the podcast. I listen every day on my way home from work. So Coleman, if you're listening right now, I hope you had a good day at work. He says, I'm currently looking to further my experience as I came out of college in 2021 with little to no job experience in marketing. What are some good ways for me to gain additional experience and knowledge outside of work?

14:43Is there websites, courses, or anything else that I should be aware of that could help me with this? Robert, I'll let you kick it off. Well, Coleman, great question and better category. I think being in marketing right now is just a tremendous way to really earn a high income and build off of something. As we get more and more into the creator economy with entrepreneurs and side hustlers and everyone going out on their own, there's just always going to be a need for experts in the field that can help people with their email strategies, their websites, their marketing, their branding. for their personal brands, whatever it is.

15:21So I think you're on the right track and you just need to figure out what is your niche and what is your expertise. And so for me, looking at kind of internally of our team, I would say you really need to learn AI and some of the good softwares that can be used within AI to automate marketing strategies, DM strategies, and other items relative to AI usage. But also I would look at, Think about maybe finding a big company locally or regionally that you could go to and get a job with and offer yourself up to do a free internship. Maybe you say, hey, I'd love to do a 90 day internship here because that would be a great way for you to really immerse yourself in and get all of these skill sets right in front of you in a way that you're not paying for it.

16:09And you're not going out and getting some course that might be bullshit and doesn't really teach you a lot because they probably created the course in chat GPT. And you're going to learn how to really optimize chat GPT and other AI resources. So I would start there. And then the other thing I would look at is just following people that are really crushing it in marketing that have agencies already. Follow their TikToks, follow their Instagrams, follow their podcasts, and really just learn from all of that. because it's all about you immersing yourself into this category in this field and finding out what your niche is and really going all in on that.

16:48Yeah, this is a really, really good question, Coleman. As someone who also graduated college with like, I think I had like maybe one or two internships, but it wasn't anything crazy, right? I didn't have a crazy cool job lined up out of college. It was really hard. So a couple things that I've learned along the way. One, make sure you take LinkedIn seriously. And it is 100 % okay to be cringe on LinkedIn because everyone else is cringe. And the people that you knew in college that you think are making fun of you for making these cool marketing focused LinkedIn posts or commenting cool stuff or questions or ideas on other LinkedIn posts, they don't matter.

17:22They don't pay your bills. They don't achieve your dreams. You do, Coleman. So focus on you. That's the first thing. Kind of additional to that is when you're on LinkedIn, I want you to be thinking about not just consuming and creating content about marketing on the platform, but discovering other people who are doing things that you want to be doing someday, if that's in five years or 10 years, right? That might be an agency owner, that might be a chief marketing officer, that might be a marketing intern somewhere. Like there's a bunch of different people who are working in the marketing space.

17:51And a challenge I have for you, Coleman, is reach out to five people every day on LinkedIn in 2024 and just send them a note in the connection saying, hey, really love what you're doing here at ABC Company in the marketing department. I saw they had a cool thing that just came out, whatever. What's your favorite thing about working there? Don't ask to pick their brain. Don't ask for a 30-minute meeting. No one has time for that shit. But what they do have time for is like, oh, yeah, I really like the company culture. Or, oh, I like the flexibility about our email design. Or like, oh, I like this or like that.

18:22So that just kind of gets you in the door a little bit in the conversation. It's a very low-lift answer for these people. And you might find one or two on a monthly basis that are open to maybe a little mentorship action, a little bit more, hop on that phone call, whatever they can to help you here. But I think what's really important as someone who's looking for experience that doesn't have any, is to look and see what other people are doing as to where they are right now in their careers and in relation to where you wanna be and try and just kind of, maybe not ride their coattails, but be in the same conversations, be in the same meetings, be in the same spheres as them.

18:54So when that opportunity for experience or something comes up, they notify you and they say, hey, I just saw this internship. Hey, I just saw this new position. This guy started a club. I just started this podcast about marketing. You should listen to it, right? There's a ton of different opportunities here that can happen to help you learn, but you will never have known those things were happening if you weren't sort of in these communities already. So just don't be weird about LinkedIn. LinkedIn is going to be your best friend. And if your friends think you're cringe for posting on there or commenting or doing whatever you're going to do here to stand out, they're not your friends anyway.

19:24I'm going to follow back up on this. You brought up a great point. One of the most powerful marketing tools we use within all of my brands, Silly Bands, and all the other consumer brands that we have in our portfolio is the DM strategy. Trust me, it works amazingly well if you know what you're doing. We have one gentleman that runs that within all of our brands. He crushes it every day for us. And it's remarkable how effective of a DM strategy is, but also learn how to do it right. And this is a key takeaway for my benefit and everyone that's listening, is that I get DMs from probably 100 people a week that tell me that they can make my TikTok better, my Instagram better, my edits better, my videos better, my copy better, everything better, but they go about it the wrong way.

20:12Be authentic, bring value, and be honest. If you do those three things for any of you that are listening out there besides Coleman, you will go so far in the industry because so many people DM me on a daily basis, they bring zero value. The DM looks like they put it into chat GPT, copy and pasted it and send it to me. There is zero value. There is zero claim to anything. And my response is always, what makes you different? What makes you better? And what are your costs? Because every one of these people that DM me say, hey, can I edit one video for you for free? And I'm always like, sure. But what are your fees associated after I review the free one?

20:53They never give me an answer. It's always like, well, we have a monthly fee. We have this type of fee structure. Just give the damn answer. People like Austin and I are so busy. And if you DM us, you might have a life-changing moment if you do the right things in the DM. So remember, authenticity. Get to the point. We don't want our brain picked. and just please, please, please give us real information and don't just give us a response or a pitch coming from ChatGPT. It could change your life if you listen to those three things. And the last thing I'll mention here is this podcast came about because I sent Robert a DM because I thought he made cool videos on TikTok.

21:35And my DM was along the lines of, hey man, love your videos on TikTok. Let's jump on a call for 15 minutes. I'm doing a bunch of things to build my creator business that I want to share with you. I want to learn about what you're doing as well. And the podcast came from that, right? So like, I gave value up front. Like, I want to share with you what I'm doing. I hope to learn from you as well. Like, that's kind of what we're talking about here, Coleman and everyone else listening. That's how you should be thinking about reaching out to folks to not just gain additional experience, but hopefully learn from them along the way.

22:02Yeah, we could do an entire week of content just based on teaching people proper, authentic DM strategies when they're reaching out to people like us. And it's just so important. I had a gentleman that DM me like five times and it was all just like everyone else. And I told him what he was doing wrong. I said, you look like a sharp guy, but you're doing everything wrong. Here's how you should pitch. He took that information. He made a loom video of his services with examples. He gave me the pricing on one slide. So it was easy to understand. And he said, I would like an opportunity to work for you paid for 30 days at a reduced rate to be able to get his foot in the door.

22:43So many people want to get the money first and they don't realize, get your foot in the door. Get the opportunity to change your life with someone like us or someone bigger than us. As long as you can do that and get your foot in the door, the money will come, I promise, each and every one of you. But when you come to someone like us and you quote us a retail price, just like everyone else quotes, and you don't show what makes you different or better or show authenticity, you're just not going to get anywhere and you're just going to waste your time in the DMs and not land that whale that you're trying to land.

23:16Just so important. Really good question, Coleman. And thanks for listening to the podcast every week. Our next question comes from Albert on Instagram. Hi, guys. I love the podcast. Keep up the good work. One thing I was interested in was how would I begin to make money or income during a recession without already having money invested or in savings. I'm 18 to 19 years old. I haven't had that much time to get things in order yet, but I really wanna start a business. Albert, it is so much easier than you think, man. You don't need thousands to invest. You don't even need, like, you don't need any of that, man.

23:47You need, like, an idea and the will to work, right? That's what it comes down to. For example, Albert, when I was your age, I took, like,$40. I went to Amazon. I say this story all the time, but it's so simple, right? I was on Amazon. I took 40 bucks. I went and bought these Sylvania headlight restoration kits, and I would be able to clean four headlights, so two cars with one kit, and I would charge$50 a car. So I'd turn my$40 into $100, then I turn my$100 into$250, and then so on and so forth, right? It's so easy to just start building with like nothing. It's incredible. So here's a crazy side hustle that you should think about for next year.

24:25The reason I say next year is it's kind of coming up here on expiration. I saw a video over the weekend where these two guys said, wait a second, Home Depot is selling Christmas trees for$50. I bet someone would pay$100 to have a Christmas tree purchased, picked up, delivered, and put inside their house. So that's what he did. He made a Facebook marketplace post and he said,$100, I'll pick it up, I'll deliver it, and whatever you want, that's my fee. He went through like dozens of people on one Saturday. I'll say, yeah, 100 bucks for a tree, sign me up. Yes, yes, yes. So we took$50, he bought the tree, put it in his truck, drove to the house, popped it in the Christmas tree stand, took his 100 bucks.