Q&A: When To Rebalance A Portfolio, Robert's Altcoins, & Weekly Dividends

0:00In America, half of every dollar spent on brand medicines goes to entities who don't make them. While middlemen like PBMs and 340B hospitals drive up costs, Biopharma is investing$500 billion in new infrastructure and manufacturing here at home and helping patients buy medicines directly at lower prices. Tell Washington to end middlemen markups and put American patients first. Visit phrma.org slash middlemen. More rewards, more savings. With American Express Business Gold, earn up to$395 back in annual statement credits on eligible purchases at select shipping, food delivery, and retail subscription merchants.

0:43Enjoy the benefits of membership with the Amex Business Gold Card. Terms apply. Learn more at americanexpress.com slash business dash gold. Amex Business Gold Card, built for business by American Express.

0:58us. Hey, everyone, and welcome back to the Rich Habits Podcast, question and answer edition. These are our Thursday episodes where we sit down and we answer your questions as if we were in your shoes. We get hundreds of questions asked to us every single week. So if we've not yet answered your question, thank you for your flexibility. You should just see the email and Instagram DMs that we get from you guys. It is just, it's overwhelming sometimes, to be quite honest with you, but we get through it. We're here finding the best ones, trying to jump in every single week and answer these as thoughtfully and tactically as possible, right?

1:32Because, Robert, the whole purpose of this show is not to just have these high-level ideas and breakdowns, but more specifically to give people tactical money advice. Yes, we are definitely here for the people. And I like that sentiment around overwhelming at times because I think people feel we probably outsource all of this work going through the DMs, getting the questions put together to some intern or something. But nope, we do it all right here live because we want to make sure we give you guys the best product we can in every single episode because personal finance is personal and no one else is going to be able to help us answer these the same way that we would provide the information to you.

2:14So we love these episodes. So keep those questions coming. You're totally right, Robert. We get so much. And again, if you have a question for us, email us at richhabitspodcast at gmail.com or DM us on Instagram at richhabitspodcast. You should also just be following our Instagram account. We post clips. We post little updates in the stories. We got all the fun stuff over there. Even started doing these like kind of static images that break down general investing concepts and some personal finance behavior stuff. It's really interesting. So richhabitspodcast on Instagram. Go check us out. But Robert, before we jump into our first question, gotta remind everyone that the only way you're ever going to retire is if you have a nest egg that's growing for you over time.

2:52And the easiest way anyone can begin investing towards their future is on public.com. They make it incredibly simple to build a multi-asset portfolio, including ETFs, stocks, bonds, crypto options, and more. And they also offer access to industry-leading yields of up to 3.8 % APY for your emergency fund. And for a limited time, you can earn a 1 % match on all of your IRA deposits, IRA transfers, and 401k rollovers. It's$1 ,000 in free money for every 100k you roll over into Publix platform. So think about that old 401k you haven't touched in a while or that IRA that's sitting on that boring, stinky broker.

3:29Take that money, roll it over to public.com, and claim your 1 % match. Fund your account in five minutes or less by heading over to public.com front slash rich habits to claim your 1 % match today. Paid for by public investing. Full disclosures in the podcast description. All right, Robert. So our first question comes from Xavier D. Xavier says, I've been following your podcast for the last three years, and I've been maxing out my Roth IRA for the last 10 years. I'm 29 years old. My annual gross income is$230 ,000. My total debt is$19 ,000. that's with student loans and I've been trying to pay them off.

4:05I'll be financing a new vehicle as my used vehicle that I purchased after college is coming to an end. My combined monthly debt payment between my new car that I'm financing as well as my student loans come to about$1 ,700 a month. I also live out of the country so my cost of living is dramatically lower coming in at only $1 ,200 a month. With all of this extra money that I find myself with on a monthly basis I'm kind of not sure what to do with it. I could put more in my savings account. I could use it as a down payment one day, but I just want y 'all suggestions on what to do with all this extra money.

4:37This is a pretty cool situation to be in, right? So we got a guy that's making about$230 ,000 a year. He lives out of the United States. Therefore, he is able to keep his cost of living very low. So combined, I mean, he's spending about$3 ,000 a month of this$230 ,000, right? So let's call it, I don't know, Robert, maybe$15 ,000 a month that he's taking home, only spending three. So now he's saying, wait a second, what should I do with the other, you know, 12 ,000 or so, right? It's about 150 grand a year post tax. So Robert and I always say match beats Roth beats taxable. That's sort of the one, two, three, as it relates to investing, because you want to invest up to the match at your 401k to get that free money.

5:19Then you go max out the Roth IRA because you have autonomy over those investments, and you will have all this money in retirement. If you have autonomy in your 401k, you go back to that. You max that out. But if not, because a lot of us don't, we then shovel as much as we can into that taxable account on public.com, which is also dubbed the bridge account. So Xavier, I think that's the move for you. You didn't mention an emergency fund in your question here. So definitely go put three to six months of spending in some sort of emergency fund, high yield savings account. You can do that on public, on Wealthfront, on SoFi.

5:51is a bunch of different ways that you can go earn some interest on your money there. But after you have that three to six months of expenses saved up and put to the side, I would just start shoveling money into ETFs and index funds that are inside of your taxable brokerage account. Let that grow for you over time. And maybe you'll be able to retire early. Yeah, I think that's a great breakdown. And it's important for everyone listening to really understand you have to make your money work as hard for you as you work to get it. Write it down, get a tattoo, put a post-it note next to your desk, whatever you need to do.

6:23Because in this instance, and I like the term shoveling the money, you literally need to get that money working. I don't want to see a bunch of it sitting in a savings account. Like Austin said, get the high yield savings loaded up so you've got that three to six months emergency fund. Everything else is going into that taxable brokerage account on public. And you're going to be investing consistently to build that up so you can retire early. I love this playbook, Austin, and I think everyone needs to follow it if they want to be able to be financially free sooner than later. Well, I mean, tactically speaking, like that is the playbook.

6:56You're totally right. You want to be investing toward your retirement via up to the match with your 401k so you can get that free money. And then, of course, the Roth IRA. But our goal, of course, as human beings is I don't dream of labor, right? What's my dream job? I couldn't tell you. I don't dream of labor, right? I want to retire early. And so when it comes to retiring early, the only way you're going to be able to do that is if you have access to money that is not penalized or, you know, isn't, there's no barrier between you and that money like there are with these retirement accounts, right?

7:26So a Roth IRA, specifically the earnings in your Roth IRA, and pretty much everything in your 401k can't be touched unless you're 59 and a half years old. And if you're someone who has hundreds of thousands, if not millions of dollars, like it seems like Xavier D here is on track to achieve in their 40s or 50s, you got to wait until you're in retirement age to play with this money and use it and benefit from it. where if you've built this taxable bridge account, we like to call it, and go open one up on public.com, you now have money that's working for you that's accessible. Yeah, it's taxed, but that's okay.

8:01It's accessible. That's what matters most. And you can always offset those taxes with long-term capital gains, direct indexing, automated tax loss harvesting. There's a bunch of different tax-saving strategies that you can implement to offset those taxes later on in the future. Wow, that's a great breakdown. So our next question comes from O on Instagram. O says, hey, Robert Nostin, you can call me O. You talk about rebalancing your investments and taking profits. But my question is, when should we actually do that? Is it a time of year? Is it when we experience a big profit in a specific part of our portfolio?

8:34Thank you so much for your help. So, Robert, let's kind of take a step back for a second. I want you to walk our listeners through how you personally manage your portfolio, both from a risk perspective, from different types of asset classes and risk profiles with those investments and how often you are rebalancing, which is defined as selling parts of your portfolio, using the proceeds to buy different parts of your portfolio. So walk our listeners through that. Yeah, I think this is a great question and very important for everyone to understand and I'll give it a shot. And then Austin, you can give me your take on it.

9:08But for me, it's all about, like you said, rebalancing. So like with Nvidia, it's been a very outsized position for me. So as I go throughout the year, maybe in Q3, Q4, things are really going well. I'm going to sell off a position of that. So I generally, once I get up, I have a rule of thumb is once I get up 50 % of a position, I sell off 25. Once I get up 50 % again, I sell off 25 % again. And I do that throughout the course of the position that I'm in. And so when it comes to my overall portfolio rebalancing, I try to look at it from a totality of how risk on am I and what is my risk tolerance within my own portfolios because everyone is different and personal finance is personal.

9:52So if you want to be really risk on, you might stay heavier in these secular growth trends. Whereas if you're looking to dial it back a little bit, you might want to have a higher percentage in bonds or some of these ETFs that we talk about. So for me, I try to rebalance once every couple quarters or maybe once a year. I don't think you need to do it constantly. Some people do. I think Austin does it more frequently than I do, but Austin is also very, very good at this. But for me, I'm more of a long-term holder. So rebalancing isn't as important unless there are these outsized returns like we've seen this past couple of years with the NVIDIAs of the world or the Palantir's or the Microns of the world.

10:31So that's my take on what to do. And then what you can do when you do this and you sell off some of that position is then you roll it over into something more risk off or to rebalance the portfolio. Let's say you want to up your international exposure and you're a little light. You could then move some of that money away from say NVIDIA or something like that into a fund like AIQ to rebalance along the way. So walk me through more of your rule. You mentioned you get up 50%. So let's say you put in$10 ,000 into a single stock. That single stock is now worth$15 ,000. It's up 50%. So you're saying that you would sell$3 ,750 of the$15 ,000 total aggregate balance there.

11:19Where does that$3 ,750 go? Does it stay in cash? Where else does it get deployed in your portfolio? Yeah, that's a great comeback question. For me, it always gets deployed. I don't really sit in cash like many people do. I just feel that money sitting, you know, parked money is dead money. You guys hear me say that all the time. So for me, it's going to get repositioned somewhere. I don't always know right out of the gate, but I always have a list, kind of a waiting list of where am I light in my portfolio? Oh, man, I really want to up my stake in this stock, or I really want to get some more money put into this ETF.

11:54And I might even rebalance into more gold and silver or whatever I'm working on at that time. So that's how I look at it. I know everyone is different, but that's how I do it. I think it makes a ton of sense. The only thing I would add is twice a year is when I like to do my portfolio reviews. You know, kind of like a summertime portfolio review. Like, all right, it's halftime. We're halfway through the year. How am I performing? Did I see wilder swings to the upside and the downside than the S &P or the NASDAQ? Am I outperforming or am I underperforming? If I am outperforming, why? Am I invested into more high beta stocks or am I invested into sectors that have just generally outperformed the S &P?

12:31If I'm underperforming, why? Am I invested into a specific position that has really underperformed my expectations or was it maybe a sector bet that I had made that is not coming to fruition? And then eventually, right, like you ask yourself these questions and you say, okay, what changes do I want to make, right? Do I continue to stay excited about this underperforming name or this underperforming sector, if that's the case? Cool, right? Investors have investor theses as to why they're buying and selling things. But maybe if I don't have the same conviction as I did in the beginning, where am I deploying that capital elsewhere?

13:05And then I think again, at the end of the year is a good time to do it too. hey the S &P is up 14 percent my portfolio is up 18 percent that's great what allowed that four percent you know difference there or hey the S &P is up 14 percent my portfolio only went up nine percent okay what happened to the five percent like why did that happen and I think something people forget to do is those check-ins and they instead see like their portfolio swings and they say whoa I'm up a whole ton right now for a year to date this is great I'm outperforming or they say, oh no, I'm down so much compared to the S &P, I need to sell things.

13:38And that's just where the emotion kicks in. And I think as long-term investors, what's really important to understand is if you are not going to retire at that exact moment in time, you can never get mad at yourself for not selling the top or trying to time these markets because no one can time the markets. No one can time the markets. And now as we're seeing a general market pullback across the indices, right? The Nasdaq is down about four and a half percent from late October. Same thing for the S &P 500 and much more than that, depending on the sector of the market you're specifically invested into, you can't be beating yourself up and saying, oh my gosh, I can't believe my portfolio is down since October.

14:19Like I can't, I'm getting so upset with myself. Why didn't I sell? Why didn't I take profits, right? Why didn't I do these things? When in actuality, you have to tell yourself, I wasn't going to retire at the end of October anyway. Why would I have sold? I'm a long-term investor. I'm a net buyer of assets. My portfolio will continue to grow over the years and decades. Why am I beating myself up for not having perfectly timed the markets? That is a losing mentality. The winning mentality is the opposite. You say, I'm a net buyer of assets. I love dollar cost averaging into different sectors. That makes sense to me.

14:54And to Robert's point, when I am overexposed to a specific sector, I take my profits and I redeploy it elsewhere in my portfolio where I feel, like Robert said, underweight. So that is a really cool way, O from Instagram here, to consider and thinking about a framework for not just building a portfolio, but maintaining it over the coming years and decades. And that really highlights something that we talk about and have talked about since the day I've known you. And that is, we really struggle with these advisors and these firms that have this set it and forget it mentality for people's money, and they just don't adjust along the way.

15:30And something that you do really well, Austin, is always making sure people are keeping their eye on the prize and adjusting accordingly by having that active management. Now, by active management, we don't mean get into your portfolio every day and make changes and buy and sell and try to time the market. We just mean keeping your eye on the prize over the long term and doing those check-ins on your money and your portfolios, like Austin said, a couple times a year to make sure your money is heading where you want it to head and where you expect it to head because you're keeping an eye on it.

16:02So our next question comes from Laura C. on Instagram. Laura says, Hey, y 'all, I love the podcast and I've learned a lot from the content. Thank you so much. In Thursday episodes, Robert has talked about five cryptocurrencies that he believes people should learn more about. I think I understand more than the average person about crypto, but it's still very confusing to me. There are so many crypto names out there, literally thousands. Can you talk about these specific names, what makes them special, and why you think people should learn more about them? And then she goes on to mention HBAR, XLM, XRP, and a couple others.

16:34So Robert, I'll give you the floor to explain what these cryptocurrencies do and why you believe people should learn more about what they do and why they could be important and perhaps even part of a well-diversified portfolio? Yeah, this is a great question. And the cryptos that she's speaking of are the ones that are called ISO 2022 compliant. What does that mean? We have been on the SWIFT banking system for decades and decades, and we are currently under full migration away from the SWIFT banking system to the ISO 2022 compliant system, which is on the blockchain. And these coins that I mentioned, HBAR, XLM, XRP, ADA, QUANT, these are all ISO 2022 compliant coins that will have a purpose in this migration to how all of our central banking system money is handled in the future for processing payments and everything cross-border, all of the international trading that happens and wires and all of that in the money system.

17:34So that is why I think everyone should be keeping an eye on this specific sector in these coins, especially because these coins are also U.S.-based tokens. So they are going to get to enjoy the advantages of the taxation rules that are in favor of these American-based coins. So that is why those specific ones, I feel, are very important over the next 18 to 24 months because this migration is happening right now as this episode is being filmed. And I think it goes fully live on November 22nd. So keep an eye on those coins. That is the importance from my perspective. I'm not saying all of them are going to skyrocket and go to the moon.

18:14But I do believe these coins, along with Link, will be very important to own in a well-diversified crypto portfolio. Well, speaking of well-diversified crypto portfolio, got to address the elephant in the room, which is like, hey, guys, Bitcoin's at$95 ,000. What's going on? So Robert and I, since we started this podcast in February 23, said, hey, add Bitcoin to your well-diversified portfolio. It should make up between 5 % and 15 % of your invested capital. We think that Bitcoin is something to have in your portfolio over years and decades. And we were right. Obviously, Bitcoin, I think the stat is like 6, 7 or 8x, Stephen, since those lows of 2023.

18:55I'm just going to actually pull up the price of Bitcoin here. If we go back to, yeah, April of 23, we started the show back in February of 23. So it was$23 ,000 a coin. If you bought and hold and did that stuff, you'd be up multiples upon multiples of your money, which is exciting. And that's what I was doing. That's what Robert was doing. And we encourage people to do that as well. Five to 15 % of your invested capital should be in Bitcoin slash some cryptocurrencies. I'm sure a lot of you got, you know, red pilled into not just buying Bitcoin, but a bunch of altcoins as well. I've got a handful of altcoins.

19:28I've got some Chainlink, Ethereum. I've got some XRP. And I've got a handful of others, some Solana, some Sui, things like that. But it doesn't make up like it's like a fraction of my crypto holdings, right? Like Bitcoin has always been sort of that like, dominator part of my portfolio. And now that we've seen Bitcoin start to falter, I would argue that we should be prepared for what could become a Bitcoin bear market. It's trading at about 95 ,000 right now. It peaked at about 126 ,000 in late October. So about two weeks ago, three weeks ago, what to look out for from our experience of looking and kind of riding these cycles is two weekly closes below the 50 week moving average for Bitcoin.

20:10We just experienced our first weekly close below that 50 week moving average at about 103 ,000 a coin. It's now again at 95. If we have another week go by, where Bitcoin is below that$100 ,000,$200 ,000,$300 ,000 range, I would argue that the cycle top is in and that you should expect to see Bitcoin come down dramatically to, I don't know,$40 ,000,$50 ,000,$60 ,000,$70 ,000. I have no idea how low it can go, just like no one knows how high it can go. But I think it is always smart to be a prudent investor to play and invest in the market that's being presented to you and not the market you want to see.

20:44And so if you are someone who, like me, you're up hundreds of thousands of dollars on your Bitcoin position and your cryptocurrency position in general. Take some profits. I took some profits over the summertime. I think I told you guys that. Sold some Bitcoin. I used it to buy a boat, which was a great decision. But yeah, just if you are someone who has not been able to handle a lot of the volatility and again, you're up a ton and you are ready to rock and roll, take some profits, be our guest. Maybe we have a relief bounce above 100 ,000 and our altcoins do some stuff and some Bitcoin goes up.

21:14Generally speaking, a lot of people, including ourselves, believe that the top is in for Bitcoin on this cycle. Again, could we be wrong? Of course. But I think at the end of the day, what's important to consider is it's not about timing the market perfectly. It's about making and taking profits on much of the move, right? So like if you were someone like us that bought Bitcoin in the 20, 30, 40 ,000 range, and you want to take some profits at this 95, 100 ,000 range, like nice, you look three extra money. Now, could you have perfectly time the market, Robert, and try and sell it$127 ,000 or whatever it was, I guess.

21:51I can't do any of that. But I think this is still really exciting. And again, we're not telling people to abandon cryptocurrency out of their portfolio. We're also not telling you to do anything. This is not financial advice. We're just sharing what we're doing with our own portfolios. But I think what's important is to think like, if you want to have crypto like myself in your portfolio forever, which I've Bitcoin in my Roth IRA for a reason, right? I think it's going to be an asset class to own. Great. But if you are someone who's trying to time these market cycles, these four-year cycles, I would argue now is a great time to take some profits.

22:23Yeah, I think that's a really good breakdown. And no one knows what the prices are going to be. We can do our best to deduce all of the research to figure out where things are going, but it changes daily. And just make sure you're always keeping an eye, taking profit, and rebalancing as things change and as things move along. That is the goal for any long-term investor in building wealth is to just keep an eye on the prize and make sure you're doing all the things that we talk about so you are prepared. Austin always says it in the Rich Habits Network that if you are surprised by the markets, we're not doing our job.

22:57And the same thing goes for this podcast. We always wanna prepare you guys as well as we can to make sure you know what's happening in the market so you can adjust accordingly. Now, Robert, you know, all about transparency here. Are you planning on taking profits? You're just riding the Bitcoin wave. I know you've got a ton of Bitcoin in your own portfolio. Like, do you find yourself to be over allocated to Bitcoin and crypto like I have been the last couple of years or do you find it to fit well? Like, how are you kind of playing this, if at all? Yeah, that's a great question. And I am definitely over allocated from Bitcoin.

23:25But here's why it's okay in my position. I got into Bitcoin in 2011. And so since then, I have sold a ton of Bitcoin over the years. I sold a bunch at$1 ,700, a bunch at like$4 ,500, a bunch at$10 ,000,$20 ,000. And so along the way, I have cycled out all of my initial capital. And even though I still have dollar cost average along the way, it doesn't even compare to what I've taken from Bitcoin over the last 14 years. So for me, I might consider taking a little bit more profit, maybe with five Bitcoin, but the rest of it, I'm going to let it ride for a very long time because I've already made so much profit from Bitcoin trades that for me, I'm more risk off already because I'm playing with the house's money essentially.