Q&A: Texas Stock Exchange, International Stocks, & Investing While in School

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0:57hey everyone and welcome back to the rich habits podcast at the moment we are in number six robert five or six top business podcast on spotify feeling good it is go time back to number one we deserve it we've put in the work we've been crushing it for our audience so i'm excited well everyone this is our question and answer edition of the podcast which means you ask us questions and we answer those questions as if we were in your shoes. You can send us questions via Instagram DMs. We've got a handful of those here. You can email us questions. We actually have a handful of those in this episode as well.

1:30Or you can ask us questions inside of the Rich Habits Network, which is preferred because we always get back to the questions that are asked over there. There's a link in the show notes below to join and learn more about the Rich Habits Network. Now, Robert, this is going to be a fun Q &A episode because we're talking about the Texas Stock Exchange. We're talking about cryptocurrency. inside of Roth IRAs, different allocations as it comes to international stocks. We'll be talking also about how to buy a$1.1 million home and then finally round things off with a little bit of inheritance tax information.

2:03So this episode is going to be super informative. We're all over the place. I think that's what's so fun about these episodes, Robert, is you never know what question you're going to get next because we have such a diverse audience base of listeners that are always just going through some really interesting financial situations. Yeah, I love it because we have an audience of people that are at all different spectrums and different levels of their personal finance journey or their business journey. And I love that because we can help everyone, whether they have$10 ,000 or$10 million, kind of figure it all out because you say that a lot in your opening and it's just really critical and important because personal finance is personal.

2:41So I love the fact that each nugget that we provide can be different for each person. And so that's what makes this so rewarding for us to write. And these Q &A episodes are just so much fun for me because like you said, they are all over the board. So before we get into it, though, just a quick heads up, folks. Interest rates are falling, but you can still lock in a 6 % or higher yield with a bond account at public.com. That's a pretty big deal because when rates drop, so can the interest you earn on the investment. A bond account allows you to lock in a 6 % or higher yield with a diversified portfolio of high yield and investment grade corporate bonds.

3:21So while other people are watching their return shrink inside of their high yield savings accounts and other accounts, you can sit back and enjoy regular interest payments inside of a bond account on public.com. But you might want to act fast because your yield is not locked in until you actually invest. The good news, it only takes a couple minutes to sign up at public.com. Lock in a 6 % or higher yield with a bond account only at public.com forward slash rich habits. This was brought to you by Public Investing, member FINRA and SIPC. And this is only as of November 16, 2024. The average annualized yield to worst across the bond account is greater than 6 % at the moment.

4:02Yield to worst is not guaranteed. This is not an investment recommendation. All investing involves risk. Visit public.com slash disclosures slash bond dash account for more information. Now with the disclosures out of the way, Robert, I do want to linger on this bond account just a little bit longer because if I am right, I'm pretty sure the public.com bond account is paying a 7 % yield, right? Not just six, but we're back to 7 % yields right now inside this bond account. And it's so interesting, too, because like you look back and you think, OK, well, diversified portfolio, you build your base to one hundred thousand dollars.

4:35What are other ways I can diversify my portfolio? Historically speaking, bonds have been pretty boring. You get it for your snotty kid on their birthday and say, hey, good job. Like, go cash this in in 30 years. There's nothing boring about a 7 percent yield, Robert. So I just want people to kind of rethink about how bonds might fit, especially now at a 7 percent yield. Corporate bonds might fit inside of a well diversified portfolio. Yeah, I think you bring up a great point because I see it on our private lives in the Rich Habits Network where people's interest really peaks when we're talking about cryptocurrency or the NVIDIAs or the Palantir's of the world or the next great company.

5:11But they don't get peaked when we say bonds are making 7%. And that's because everyone looks at investing like it's supposed to be this big party and foray and emotions and all that. And it really isn't. We want you to look at it that it's just kind of this boring, you know, methodical. You have your plan. You stick to it. Your dollar cost average. And right now, bonds are paying so well that everyone should just consider having a portion of their portfolio in these kind of boring sectors and products because you want to have that money growing over time. And you can't have everything in these high flyer stocks and cryptocurrencies.

5:49Right there with you, Robert. Now, let's take our first question. This one's coming from Michael F. Michael says, how will the Texas Stock Exchange affect the overall stock market? Now, Robert, I don't think we've talked about the Texas Stock Exchange on the podcast before. I'm pretty sure the timeline for this stock exchange is 2025 and 2026. So maybe let's take a moment to kind of introduce what this might mean for our listeners as it relates to the traditional New York Stock Exchange and the NASDAQ, why they did this, how much they're spending on it, some of the backers, right, some of the investors that are involved.

6:26So I'll kick off this conversation. The Texas Stock Exchange is a planned stock exchange intended to be headquartered in downtown Dallas, Texas. It has attracted significant investment with about$120 million raised over two dozen investors, including BlackRock and Citadel Securities. This makes the Texas Stock Exchange one of the most well-capitalized new entrants to file for SEC regulation. Now what's so interesting in my opinion Robert about the Texas Stock Exchange is their whole idea for competition against the New York Stock Exchange and the NASDAQ comes from offering a more business-friendly environment.

7:01So they seek to attract companies who are being frustrated with the increasing compliance costs and like the politically influenced sometime listing rules inside of New York. I read that this exchange intends to have all national securities, right, fully electronic. They've got the primary listings, dual listings, exchange traded products, ADRs, non-US firms, all that other fun stuff that comes with listings. And the goal is to start facilitating trades in 2025 and then to host the first listing in early 2026. Yeah, I love it. And whenever you can add competition to a market that is as big as the New York Stock Exchange and NASDAQ.

7:39I think it is great and it's long overdue. There's been whisperings in some of the articles and some of the stuff on X where this is going to be the BlackRock exchange and they're going to have more control, et cetera, et cetera. But I think the biggest takeaway for me and what I've read up about this is the offering a more business-friendly environment. We have heard for decades that the New York Stock Exchange is very difficult to deal with and that is just overly laborious and expensive to be able to even file with them for an IPO. So I think having another alternative is going to be great for innovation in the United States, especially if it ushers in a new era of more IPOs, because then it lets these companies, a lot of these tech companies that have stayed private longer, it lets them get in the mix, raise the capital they need to grow faster.

8:32And I think it is going to be an incredible, incredible era in stocks, IPOs, and just the markets in general when this gets live. Yeah, and I didn't know this, Robert, when I was doing some research, but Texas is an economic powerhouse. They're home to more Fortune 500 companies than any other state in the United States, which that's just unreal to me. Now, the skepticism, right? What could go wrong with this? So what I've found on the internet, Robert, as it relates to the skepticism, if this is a real thing, is they will only be able to truly compete with the NYSE, with the NASDAQ and these other exchanges, if they have substantial trading volume and market acceptance, right?

9:13So you're only an exchange, if people are using your exchange, right, which is now going to be interesting, as we already have these powerhouse exchanges that everyone trades, you know, their stocks and equities on. So how's that going to impact it? I'm not sure. At the end of the day, I think it's really cool. I think it's a great idea for innovation. It's great allowing us to have sort of this like more business friendly environment. And maybe we'll see like smaller companies start listing because it's probably a little bit more cheaper, which could be really cool, right? I mean, Amazon was a small company back in the day when they IPO'd in 1994.

9:40And now look at them now. So there's a lot of really cool things to look forward to as it relates to the Texas stock exchange. So I appreciate your question, Michael. So our next question comes from Donna M inside of the Rich Habits Network. She says, first, I am so grateful for this podcast and the network that I'm inside of as I'm educating myself and my adult children about smart investing and now asking questions both here and with our Vanguard advisor. Our Vanguard advisor diversifies our portfolio based on our risk tolerance. So we have about an 80-20 split between stocks and bonds. Because the rally we've recently seen, our stocks are now about 85 versus 15, and we told them to leave it that way.

10:16They say we're taking on a really big risk. I'm not gonna lie, that makes me nervous because I feel like they know more than me. So here's my question. Should I be diversified in not just stocks in the US, but also international stocks? And what do you guys think about this 85-15 split in my current portfolio? Robert, I'll let you kick this one off. Yeah, Donna, it's a great question. I love that you're a little bit nervous. And I think it's important to understand, Austin and I talk about this all of the time, and we see it on a daily basis that I believe people are over diversified into international stocks.

10:52And the numbers really don't lie. If you look at the last five years of worldwide performance versus, let's say, the S &P 500, the New York Stock Exchange, the top 500 companies in the United States, it has underperformed by 50 percent. So for me, I always feel I want to go where the money is. I want to look at the math and I want to stay there because of the opportunity cost of watching my money grow. So in my opinion, I don't think you're at all wrong having this 85-15 blend because once you get international up to say 20 % or higher, same with bonds, I feel that you're leaving too much money on the table by not betting on the top 500 companies in the US.

11:37And so that's my opinion on this. I'm so happy that you're keeping an eye on it because you're going to perform better than most people who just lead a blind eye and let some broker they barely know handle their money. So I think great work. And yes, I agree with what you're asking. I love that perspective, Robert. Donna, does the Vanguard advisor know more than you? They probably do. They probably have some really cool letters after their name, some certifications, some different licenses, stuff like that. And we don't mean any harm to them. But I would imagine that their job is more focused on capital preservation than capital growth at the moment.

12:13An 85-15 split between stocks and bonds, I think, is healthy. That's totally normal. Assuming you're in perhaps your 50s and 60s, the mistake people make, and I just want to make sure people understand my perspective on this, which is unless you truly plan at 65 years old to sell all your stocks, go all in on cash, and then live off this cash for the next 20-30 years of your life, you should stay invested. Now you can balance that investment, you can have a little bit less risk in your portfolio. But people I think make this mistake of, oh my gosh, retirement's 10 years away. Like if we have a dip, we'll have a dip going into 65.

12:51And then it's like, then I'll lose all my money at 65. It's like, no, are you going to live till 70, 75, 80, 85? Probably, statistically speaking, you will. Therefore, you should stay invested into those years as well. And so by staying invested for me, that means having that 80, 85%, maybe 70 or 60, depending on your risk tolerance, but having these stocks in your portfolio and these equities that are not international in the sense that they don't really have a track record, right? We want to lean into things that have a long track record of growth, which is American capitalism, the S &P 500, the NASDAQ, the total stock market as well.

13:25So I just want you to really think about, Donna, like how close are you to these retirement years? And then how do you want to spend these retirement years? Do you want to spend them kind of living in fear as to, oh my gosh, is my money just going to evaporate if I stay in the markets? Which statistically it doesn't. Or two, do you want to allocate your portfolio in such a way that, yeah, you're going to see some protection from bonds in risky environments. But you're also going to see some amazing upside. I mean, the S &P 500 is up 25 % this year. It was up 28 % last year, Robert. Like if you're all in bonds or cash or whatever else in retirement, you won't realize that.

14:00Newsflash, that's a 60 % gain year over year when you compound it. So it's just so important, I think, for people to stay invested throughout retirement in a risk-adjusted way that makes sense for them. And I don't think international is the answer here. And I want to add some more to this. And that was a great take. And that is, Donna and everyone else listening and following along, we're not saying bonds are bad. We're not saying international is bad. Our message is always very clear. Without being too risk on, we want to make sure that everyone has a portfolio that's built for their risk tolerance.

14:33When you go into this financial advisor's office, they don't know anything about you. And if you don't properly tell them where you're at and where you feel from a risk tolerance perspective, then they're going to put you in a really safe spot. And sometimes that's okay, especially if you're in your 50s and 60s and you're edging towards retirement where you want to take some of the risk off the table, take your foot off the gas a little bit. But for those of you following along that are in your 20s, 30s, and 40s, if you take your foot off the gas too much too early, then you leave millions of dollars on the table that you didn't earn because you were so risk off.

15:12So I just want to make sure everyone understands that from the different age categories, because we have a very wide audience here to understand the when of how you make these adjustments. 100%. And I will die on the hill, but you should stay invested throughout retirement. Turning 65 is not a milestone of woohoo, I get to cash out everything and sit in cash for the next 30 years. That's a terrible idea. You want to stay invested, risk adjusted returns, understand that risk profile for you. Couldn't agree more, Robert. Now jumping to our next question from Marie N. Marie says, hey everyone, I'm 55 years old and I've reached my personal limit on investing in crypto in my bridge account, but I have a sizable nest egg in a traditional IRA and a Roth IRA in Vanguard.

15:54Unfortunately, Vanguard's not allowing any crypto purchases. I've got room left in my backdoor Roth conversion for the year, so I'm thinking if there is a Roth out there that will allow me to invest in crypto, I can open an account on that, transfer money in, and then throw it into some of my crypto favorites like Bitcoin, Ethereum, Solana, Chainlink, XRP, and others over the coming week. Now, I've seen that there's some online IRAs that allow for only Bitcoin, but that's all I've been able to find. So how have you all been able to add cryptocurrency to your own Roth IRAs? Really good question, Marie.

16:25In my experience, the only cryptocurrencies I have in my Roth IRA is Bitcoin. It's about$15 ,000 worth. It makes up about 20-ish percent now because it's increased so much over the last two years of my account, which I think is pretty cool. And, you know, once Bitcoin kind of does its thing, I'll probably shave some off the top and move it back into the S &P 500. But Bitcoin is the only way I have crypto in my IRAs, right? I want to remind everyone that, you know, the IRA is sort of this like never touch money, right? The Roth IRA, the traditional IRA, even the 401k, these accounts are money you don't want to be too risky with, money you don't want to gamble with, you don't want to trade options inside of these accounts, right?

17:06Allowing your money to have undue risk that could pull down its value tremendously, inhibiting you from retirement. So in my opinion, having a little bit of Bitcoin in a Roth IRA is great. Call it 5 to 15 % is the rule that Robert and I like to say. That is a little bit less than what I have, again, because my Bitcoin has gone up. But again, I'll rebalance here pretty soon. But yeah, I really encourage you, Marie, not to think about, you know, having a 19 different crypto portfolio in your Roth IRA. So having a little bit of IBIT, having a little bit of ETH, right, which is the iShares Ethereum Trust ETF, having some of these in your portfolio in a very normal ETF structured way, I think is the best way to do it versus opening up a new account, rolling stuff over, having to do some different forms and different tax stuff, like just buy some ETFs and ride the wave with the rest of us.

17:55That's my advice. Yeah. And I'm going to take a little bit different approach, Marie. I love that you're thinking like this, but I think you're overcomplicating it. I don't think you should be worried that every little piece of what you're building in your crypto part of your portfolio needs to be in some special tax-efficient fund. I think I would look at it, get that public.com account set up. If you like Coinbase instead, use Coinbase. Build your account, do your investing there, make sure you understand how to use the platform, and forget about it. Because right now the importance in the crypto market at least is that you should be dollar cost averaging.

18:31You should have done all the work over the last year, but if you still have more work to do, dollar cost averaging, get the money working, get these amazing gains, and ride the wave of this cryptocurrency adoption over the next few years, and then reevaluate. That's it. Just keep it simple. You know, you might find that one coin is available on Coinbase that isn't somewhere else. That's okay. You can have multiple platform accounts. I have so many of them because I buy more cryptos than most people. So keep it simple. You've got the right list. I love Bitcoin, Ethereum, Solana, Chainlink, XRP, SUI.

19:07It's a great start. And just keep it simple because I think you're trying to overcomplicate it to get tricky and find better ways to do it, which I love that you're thinking like that, but it's not always necessary. I couldn't have said it better myself, Robert. I'm right there with you, man. Now, listen up, guys. Time could be running out to lock in a 6 % or higher yield at public.com. You can lock in a 6 % or higher yield with a bond account at public.com, but remember your yield is not locked in until the time of purchase, so you might want to act fast. Lock in a 6 % or higher yield with a diversified portfolio of a high yield and investment grade corporate bonds only at public.com forward slash rich habits.

19:49Don't forget the rich habits part because a lot of people I've seen in the school community and across our emails and our DMs are like, hey, just open up this account on Public and I found it on the internet because you guys just typed it in Google. No, head over to public.com slash rich habits because you get some extra free money. I think it's like 10 or 15 bucks if you open an account with us, get some free money to fund your account with, you're off to the races automatically. That's the power of the Rich Habits podcast, Robert. Well, and it also shows us some love because we're always providing all of these great platforms and investment ideas and ways to do things.

20:20And those links help us as well because it supports us and lets these platforms know that we're doing a great job to get them the right type of audience onto these platforms because, you know, we only talk about the platforms that we use and that we like and trust. So it's just important to try and use that link when you can. We appreciate it. So don't forget, lock in that 6 % or higher yield at public.com with their bond account. Now, our next question comes from Danielle E. Danielle says, I just started a new job at a new company and I'm wondering what I should do with my traditional 401k for my old company.

20:55Should I take it out and put it into an after-tax Roth IRA? I know I'll have to pay taxes on it because it's a pre-tax 401k, but it seems better to pay taxes now versus later and then put it into another traditional pre-tax IRA instead. My new company doesn't offer a 401k match either. They are more of a startup, so they're offering equity in the company with stock options. Let me know what you all think about this. You are completely right, Danielle. So let's just make sure we lay the groundwork here for everyone listening and kind of what Danielle's figuring out. Danielle has, let's call it$50 ,000 in this 401k from her old employer.

21:27You want to make sure you don't just leave money sitting around in old 401ks. Robert and I are big proponents of active management and being able to have autonomy over your investments, especially if you can do it. So now that she's on to bigger and better things, she has that autonomy and she can definitely go do that. So she could either leave it over there, which we don't want to do, or she can take it and put it into a traditional IRA. So 401k to traditional IRA, they are completely the same thing. You can just move the money over, no taxes are involved. It's a very simple process. I've done that myself.

21:59Or you can take the 401k and then roll it over to a Roth IRA. And as a reminder, everyone, the Roth variant of these retirement accounts means it's after tax dollars. And this 401k is pre-tax dollars, which means if she would roll the money over from the 401k into the Roth IRA, she'll be paying taxes on the amount that's rolled over. So Danielle, I totally agree. Roll it over to the Roth. If you can afford it, make sure that you are doing this in such a way. Heck, I would even consider doing this next year in 2025, giving you an entire 12 months to save up for that tax bill that will be due then April of 2026.

22:34If you roll it over here in 2024, you're going to have to owe those taxes in just like three or four months here in April. So wait two months, especially if it's invested correctly already in that 401k. Give yourself a little bit more time to perhaps save up that money you need to make sure you can take care of that tax bill in April. But that's definitely a great idea, rolling it over to the Roth, ensuring that you are able to now grow this money tax-free throughout the rest of your life. Yeah, I think that was a great takeaway. And for everyone listening, we just always want to see tax-free growth.

23:05And that's why we are a big proponent of the Roth IRA. So I think it's always better in a situation like this, and Austin, you spelled it out great, is for people, take the tax hit now. You're going to pay taxes at some point, and we assume taxes are going to be much higher 5, 10, 20 years down the road. So I love that strategy. I think it's the best strategy the way you laid it out. And then that money is tax-free for life, and it grows and grows and grows, and you don't have to worry about paying the tax man later. So our next question comes from Austin G. Austin says, Hey guys, I currently have a Roth IRA with$3 ,000 in it, but it's not accrued much over the last five years.

23:42I've not been contributing to it because I've been utilizing my Roth 401k instead. My employer matches what I put in, and then I've been using the rest of the money and my budget every month to save up for a house. We just had our second child, and I'd like to transfer this$3 ,000 out of my Roth IRA and into a 529 college savings plan. Is this possible to do without taking a penalty? Or is this money just stuck in my Roth IRA until I eventually start to contribute to it? Thanks for all you do. Your podcast is awesome. A couple things, Austin G. One, what do you mean it's not accrued much over the last five years?

24:13The S &P 500 is up like 100 % over the last five years. So maybe you didn't have it invested right? I don't know. But just make sure, quick reminder, everyone, if you have a Roth IRA, you have money inside of it, make sure it's actually invested. The Roth IRA is not the investment. It's the account you invest through. So if you have money in your Roth IRA, make sure it's invested. Shout out to Century, one of my friends who had like 18 grand in her Roth IRA like two years ago. She's like, yeah, I'm doing great. And it wasn't invested. I had to invest the money for her. I see that all the time.