Q&A: Vending Machines, Financial Advisors, and Shrek

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1:13So we are absolutely thrilled to bring it back another week and have a really good breakdown of awesome questions that we receive both on Instagram, Discord, and through email. Yes, I love this new Thursday podcast format. The Q &A session is one of my favorite parts because we really get to dig in, get in the trenches and answer all of your pressing questions. And our goal here is always to create and provide information for rich habits for everyone to build wealth. And so when we can answer your personal deep, dark questions, we love it. So let's dig in. I'm excited. The personal deep, dark question.

1:51Well, our first personal deep, dark question in Robert's words comes from Brian T. Brian says, do you have any recommendations on a platform to use for a 529 account? I've looked at about 10 different platforms and they're all very limited as it relates to what I can invest in because they're typically target date funds. So speaking from experience here, Brian, what I've done is I've opened up a 529 plan on Vanguard. I did this about two months ago for my newly born nephew. and what they do is they have a$3 ,000 initial investment minimum that you have to contribute, which is I think pretty reasonable, but that's the only sort of parameter restriction they have.

2:29They make it very simple for you to invest that money into Vanguard ETFs. So for example, I'm in VGT and VOO. VGT is the technology growth ETF that they offer. It's outperformed the market for the last decade and VOO, as we all know, is the S &P 500. But with that being said, Robert, do you have any other 529 account suggestions? Not really. I agree with you on the one you selected because obviously I'm a fan of the Vanguard products. I just feel that with their, you know, cost being low and their performance always being really good that I like Vanguard, you know, and the key for me here on the 529 account is just the fact that you want to be able to have some autonomy if you can, because at the end of the day, a lot of the 529 accounts are going to put you into these target date funds that I don't agree with and Austin and I don't prefer.

3:19Target date funds, just so you understand, don't really take into account COVID or a war or an economic downturn. They are created to be slow and steady for people over a long period of time. I don't personally agree with that because I think you're just leaving too much money on the table. So that's why I would prefer you go with a 529 account that you have autonomy in. Really good answer, Robert. Our next question comes from Franklin. Speaking of target date funds, Franklin says I'm 48 years old and I have about$300 ,000 in a 401k from a previous employer. I want to roll it over into an IRA, but I'm not sure what to invest it in.

3:59Should I invest it into a target date fund or VOO or something else? Robert, we talk about this all the time, so I'm going to let you harp on this one. Yes, we do. I don't like target date funds. Great question, and I'm glad you're addressing this because you definitely need to get that money moving, but I don't prefer target date funds just because, as we said in the last question, they just don't take into effect market conditions. So as I stated, you have to think about what happens when COVID occurs, if we have a war, a downturn in the market. Target date funds are exactly what they say. They are set for when are you going to retire and how can we keep your money as safe as possible, which is fine, except for the fact that usually they way underperform even just VOO in the markets.

4:44And you're going to be leaving four or five, maybe 6%, 7 % in a good year on the table by going with the target date fund. So in my personal opinion, I would shy away from the target date fund and I would look more at a good blended mix of index funds. Like you said, VOO, QQQ, maybe look at VGT or VT. I really like AIQ right now. If you want to have a taste in artificial intelligence, I think AIQ is going to perform really well. So that would be my takeaway, but I'd love to hear yours, Austin. I agree entirely. Now, coming from the perspective of like, well, why do I want a target date fund? Target date funds do one thing decently well, and that's to preserve your money, right?

5:27So if you've built up a massive retirement, they're going to do their best to be sure that a lot of that money is in T-bills and bonds and very stable equities so you don't see those big price fluctuations. That might be useful if your student is already in college right back to our last question where this 529 nest egg you want to preserve that to pay for college. That makes pretty good sense but from a wealth building perspective in your 401k and only 48 years old I don't like the idea of preserving. I want to see those big upswings and those big downswings, knowing that the ups are going to be higher than the lows, right?

6:02So when I think about investing into a 401k, to Robert's point, I want to be in the index funds. I want to be in the VOOs, the QQQs, the QQQM, as we talked about in last week's Q &A episode. But something I also want to call out here is the rule of 72. So the rule of 72, essentially what that means is, is it helps you figure out how many years it's going to take for you to double your money. So if you take that 72 number and you divide it by what you think you're gonna get as an annual return over the next however many years, and you divide that into that 72 number, that tells you how long it's gonna take you to double your money.

6:40So for example, if we were to expect a 10 % annual return every single year, you can take 72, divide it by 10, and it's gonna take 7.2 years for you to double your money. You're 48. You're probably going to continue to invest until you're 68. So call it 20 more years. At a 10 % return, which is what the stock market does, that is three more doubles that you could expect on this$300 ,000 if you didn't touch it at all, right? So it doubles to 600. So that's one double. Doubles again to 1.2 million. That's the second double. And doubles again to 2.4 million, right? So that's the type of growth that Robert and I allude to and want with these index funds.

7:21and you're not going to get that in a target date fund. That's a great explanation. And one of the key takeaways of the rule of 72 and what we're talking about here on this question is really just understand that it's about time in the market. The longer you're in the market and you have your compounding not being interrupted, your profits are rolling over, they're compounding. It's just really, really powerful. You know, Warren Buffett once famously said that compound interest are the two greatest words in the English language. And I couldn't agree more because at the end of the day, so many people are in and out of investing and they're not consistent.

7:55And the key here is being consistent. Our next question comes from a fellow named Daniel, and it's kind of crazy. He says, I have about$7 ,000 in cash in my gun safe. I owe the IRS about$2 ,400. Do I need to pay for a financial advisor? It's going to cost about$1 ,250 per year. So let's unpack this a little bit. One, why do you have$7 ,000 in cash sitting in a safe? You should definitely have that in a high yield savings account or T-bills on public earning you interest, right? That's about$400 a year in interest you're leaving on the table by not parking it in the right account that we suggest.

8:31So first thing. Second, I owe the IRS money. That's a good idea. Pay that off, right? Don't want that hanging around you. And then the final question here, which is I think the really important one I want to answer is, do I need to pay for a financial advisor costing$1 ,200 per year? So Robert and I, we talk about this all the time because we do get people saying, hey, I've got buco money. Do I need a financial advisor? Or I've got a very complicated business situation and my spouse and my children. If that's the case, then yes, get a financial advisor. You've got hundreds of thousands, if not millions of dollars.

9:02You have a very complex financial picture. You need some advice and advising to navigate that. But if you don't find yourself in one of those complex financial pictures and you do have maybe a couple thousand invested, maybe up to$100 ,000 or$200 ,000 invested, it's still not needed, right? You still don't really need someone to hold your hand on that. Just park it in these passive index funds that Robert and I talk about every day. Yeah, this is a good one. It's kind of interesting because I don't know where the financial advisor part comes in. And I think right now you just need these kind of rudimentary questions answered early so you can understand your next steps.

9:38But definitely, like Austin said, you have to get the 7K out of the gun safe. That needs to be making money for you because, remember, parked money is dead money. And when you have it in a gun safe, it's definitely parked money. So we need to get that making that 4.5%, 5.5 % at the very least. And then secondly, absolutely 100 % full stop pay off the IRS because guess what? If you don't, they're going to add penalties and interest. That$2 ,500 is going to turn into$3 ,500. And pretty soon you're going to be in trouble and you're going to be out of the$7 ,000 you've worked so hard to save. So get the IRS paid off.

10:11Get the$7 ,000, what's left of the$7 ,000 put into the index funds, the treasury bills, the T-bills, or even a high-yield savings account. Then start working on your next nest egg so you can get back on track. Good question, Daniel. Our next question is actually a really good one. It comes from Angel L. Angel says, I don't really know what should be considered my portfolio. Is it my house? Does that include my retirement account, my crypto? Does it include valuables? What is my portfolio? How should I be thinking about building my portfolio? Angel, that's a great question. And it varies from person to person.

10:46But let's break it down in your instance. So is your house part of your portfolio? One way to look at it if it's your primary home is, is there capital appreciation? If you have equity in the home, the home is going up in value over time, then yes, I believe you could add that into your portfolio. In a lot of markets, maybe where there's very low capital appreciation or you're upside down in the home or something like that, I don't believe that it would be considered portfolio building or part of your portfolio. The crypto definitely is part of your portfolio and anything else, if it's crypto, small businesses, index funds, collectibles, precious metals, those would all be considered part of your portfolio because you are taking cash and you are investing in those items with the hopes that it will go up in price.

11:34So anything that is either cash flowing or going up in value over time, you want to consider as part of your portfolio. And you want to make sure that that's very well diversified and well-rounded so you're adding to the various categories over time because you don't want to have all your eggs in one basket and that market crashes. So I would say you're on the right track and you just need to understand what is and what isn't considered portfolio investing. Now, I'm going to hit you with a crazy little anecdote here. A asset class, Robert, that I recently added to my portfolio are music royalties.

12:13So public.com just released the music rights to the Shrek franchise to their investors, like the Green Ogre Shrek, like the multi-billion dollar franchise Shrek. And so it's weird. You can buy for$10 per share. you can invest into the music rights of Shrek, and you can expect anywhere between an 8 % to a 9 % annual dividend paid to you, the investor, because the music rights earn money. It's very interesting. So if anyone listening right now wants to maybe continue to diversify their portfolio into things like music royalties, we'll leave a link in the show notes below with more information about that.

12:52But I don't know, I thought I'd share that. I think it's kind of a fun little addition to my quote unquote portfolio. The idea of investing and diversifying your portfolio and building it to all these other different things, it can mean a lot of different things for a lot of different people. It really just comes down to one thing, invest in what you know, right? Invest into what you're comfortable with and don't invest into something because two guys on the internet told you to, right, Robert? Well, I wanted to touch on it because right now everyone is hearing all the gloom and doom about the stock market and everyone's so afraid and I'm getting hundreds of DMs going, oh my God, the sky is falling.

13:27What are we going to do? And, you know, people just need to really zoom out and understand, especially everyone listening and following us, that there's always a better mousetrap. And if the stock market's down in one sector, well, guess what? There's going to be other sectors. And when you diversify, there's always going to be places to put your money, to make a good return, so you don't have to sit there and worry about the sky is falling tactics that people are putting out there. And, you know, notoriously, September and October in the stock market are usually light and not that great. And so that's why I want to just touch on some of these alternative strategies when it comes to building your portfolio, because there's so many ways to make money with your money.

14:06It's not just your 401k or the stock market. There's hundreds of other options. And I want to touch on that. 100 percent. Good question, Angel. So our next question comes from Jeremiah M. And it's kind of a piggyback question on our last one. Jeremiah says he really wants to begin diversifying his portfolio, but he's not sure as to what platforms to use to achieve that. He asked us to break down our own portfolios and the platforms that we use, so I'll kick us off. So I'd say my portfolio right now probably has, I don't know, probably across like five or six different platforms. Right now, that's definitely real estate with Fundrise, obviously single stocks and ETFs with public and M1 Finance.

14:44the random sort of like the music royalties we just talked about that's on public.com I'm also into artwork on masterworks I'm also into vintage collectibles on rally road I also have wine and whiskey on vino best I've also invested into a slew of different startups but that's not like actually a platform that's just like me investing my own capital into different companies But if you want to define some startups to invest into, obviously Fundrise has their innovation fund. So that's a really good solution there for you. So it's kind of a two in one. That's all I can think of at the moment, Robert.

15:23What about you? What different platforms are you using? How are you diversified across your portfolio? Wow. OK, I'm going to have to really think this one through. So let's start with Acorns. I love Acorns. I think it's great for the beginning mid-level investor that wants to do their roundups and maybe invest$10 a week. and make it automated and let their robo-advisors do the rest. So I love Acorns. The Roundup feature is one of my favorite things because I feel it's free money. I would say number two, Fundrise for sure. Whenever I want to have some passive income, so I have a set it and forget it strategy with Fundrise where I do in a certain amount every single month, let them take it away and do their job.

16:04They're the professionals at this. Number three would be public.com. We both love public. We work with public. Public is great if you're looking at treasury bills and also now the new music rights investment. I can't wait to dig into that today. But also for doing cryptocurrency purchases. So we love Public. Masterworks as well. Austin is in Masterworks. I love Masterworks. But then I also have like Betterment. I use Betterment as a robo-advisor as well. I have some stuff on Uphold. I have three or four different cryptocurrency platforms like Crypto.com, KuCoin, Coinbase, VinoVest I love as well.

16:42I mean, the platforms are endless. It's just really all about what is the best platform for you and what you feel comfortable in your diversification. We don't want to forget about looking at maybe precious metals. There's some good precious metal opportunities out there as well. And no, it's not gold. So yeah, I use, I don't know how many that was, maybe 10 or 15 platforms, but each platform is going to have kind of its specialty of what it's best at. And so I would just take from that list, see where you're at in your investment journey, and then use the ones that fit you the best. And I'll let Robert speak for himself here.

17:16But for me personally, I like to keep about 65 to 75 % of my invested assets in the stock market, right? I love to see the stock market go up. It's gone up for the last 90 years. I want most of my investment portfolio to see that appreciation. And so the diversification comes in on that other, call it 25 to 35%, right? So that other 25 to 35 % of my investment portfolio is diversified across the Fundrise, the VinoVest, the Masterworks, the Rally Road, the AcreTrader, right? Insert things here. The music rights with Shrek. So definitely keep that in mind as you build out your investment portfolio, Jeremiah.

17:56You want to have that 65%, 75 % into the markets with the other 25-ish percent diversified away into some of these platforms that we've talked about. Yeah. And to put a bow on it, I think Austin's portfolio weighting is probably optimal. Mine is a little bit more weighted differently because it's more aggressive. So I have a greater amount than probably most people should have in cryptocurrency and also startups. I love angel investing because I only need to be right one out of every five to seven times. And so my weighting is a little different, but I wouldn't go below 50 % in these equities in the stock market just because the returns year over year are always pretty solid.

18:38Even in down times, it's always going to go back up. So just keep that in mind when you're thinking about how to diversify your portfolios. Really good question, Jeremiah. Thank you. So our next question comes from Brad H. Brad asks, my spouse and I are military. Thank you so much for your service, Brad and Brad's spouse. And we bought a home in Alaska. We have been here for three years and we're moving once more, but we're thinking about holding onto this home since we put money into it. We love the neighborhood, location, and it's walking distance to a really good school. We only have a 3.5 % interest rate on the mortgage.

19:11We want to rent this house out and maybe even buy another house depending on where we move. We have six figures in our 401ks and we're feeling pretty good about our finances. What do you think about this? Brad, I think it's a great question. There's a lot of complexities here, so I'm going to try and break it down as succinctly as I can. First and foremost, I would say it's going to depend on what do you owe on the house and how much equity do you have in the house? And what's also attached to that is I would want you to look up in your area and figure out what the average capital appreciation is per year.

19:43In some areas, it might be 3-4%. In other areas like this area, you said it's a nice neighborhood, it might be 10%. So you want to look for a higher capital appreciation amount because if you look at it that way and you keep it, even if it's at 4 % a year over 10 years, That's a 40 % return on that property just in capital appreciation. But you also want to take into consideration very loosely, but the 1 % rule. And that kind of states of whatever you pay for the house, whatever you owe on the house, can you rent the house for that amount? So if the house is$200 ,000, can you rent the house for$2 ,000?

20:20So I would get that into your calculations as well, because you might be in a situation right now where you owe$180K at that 3.5 % mortgage rate, and you can rent it for$2 ,500, which then gives you the positive cash flow. So there's a lot of calculations you should put into this, but also look at the fact with moving, you might want to consider leaving it as a rental if it has the things we discussed, and then renting your new home where you get to your new destination, rent it for a year. That way you can learn the neighborhoods, learn the area, figure it out, make sure you love it so you're not moving across the country purchasing a home that you're not sure about.

21:02And also what comes into play with this is the fact that with interest rates so high and rental rates so high, you might be better off renting at the moment because that way you can save up some more money and not have to worry about another big down payment while keeping the other property. Really, really great perspective there, Robert. And I think the only thing I would add, Brad, is assuming you leave the state of Alaska, which is wherever you're moving to now, you're going to be a long distance landlord, right? Assuming you keep this house and you're renting it out. If something goes wrong, I mean, I don't think you really want to hop on a plane and fly.

21:37That's just going to crush your margins. So just keep in mind that you're going to have to have a property manager, a best friend, or someone that you can trust with their boots on the ground at the old residence, assuming you keep it and rent it out, that can definitely troubleshoot and solve problems as they arise. Love it. Our next question comes from Jack S. Jack says, I'm looking to start a vending machine business with my friend. We're both in college and putting one to$2 ,000 into this is a bit scary. So we're trying to figure out the margins, cash flows, expenses, things like that. Do you have any advice?

22:11Yeah. So me and a couple of my friends here in Nashville have a vending machine business. And I would say the cash on cash returns, right, the margins there for us hover between 50 and 60%. A couple expenses that you should think about, and they're not really expenses, hard expenses, the more expenses on your time. And that is these machines are going to break. That is something we learned the hard way. They break all the time. I don't care how nice, how new, how whatever the machine's going to break. And you're going to have to spend hours on the internet trying to figure out how to fix it. So Jack, just be prepared to sit down on a Saturday and instead of going to the football game, you're fixing maybe a couple of your vending machines around campus.

22:51Speaking of campus, that's a great place to drop these vending machines. We've got, I think, four or five of them at some college campuses around Nashville. We have a couple at a few car dealerships, a couple office spaces. One is actually even in a dive bar that stops serving food after 11, but the dive bar is open until 3 a.m. So that sort of four-hour stint for the munchies, it's a pretty good spot. but it really just comes down to where do you think people your age are going to go spend money. So for example, one of our most successful vending machines is in a boys dormitory at a HBCU here in Nashville, Tennessee.

23:27They go through honey buns like nobody's business over there. And so we're making a couple grand every month in cash flow just from that machine. It's bonkers. So think about just placing machines in different high traffic areas that you personally would want to see a machine and think about it from the customer's point of view. Yeah, you can expect 50, 60 % cash flow margins. And it's a fun hobby. It's a fun way to make quote unquote passive income. It really just depends on the prices you pay, right? Because you can only charge so much. So the best way to increase those margins are to bring down your costs.

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24:41I got to sit in the driver's seat. I grew up in an aviation family and seeing Bronx kind of reminded me of myself when I was that age. That's Andrew, a real United pilot. These small interactions can shape a kid's future. It felt like I was the captain. Allowing my son to see the flight deck will stick with us forever. That's how good leads the way. So my takeaway in the vending business, I've been in and out of the vending business for 25 or 30 years, is bring in a partner that is the local person that is going to be the day-to-day operations person. Because if you can have that person who's the handyman, who knows how to fix something, knows his way around tools, then you're not going to be doing it.