Bogleheads® on Investing Podcast 019 – Dr. Jim Dahle, host Rick Ferri (audio only)

00:00:00.000 | (upbeat music)

00:00:02.580 | - Welcome to Bogle Heads on Investing,

00:00:11.920 | podcast number 19.

00:00:14.000 | Today, my special guest is Dr. Jim Dawley,

00:00:17.840 | the White Coat Investor.

00:00:20.080 | Jim is an author, entrepreneur, blogger,

00:00:24.560 | speaker, dad, and full-time physician.

00:00:28.160 | He's a busy guy.

00:00:29.340 | (upbeat music)

00:00:31.920 | My name is Rick Ferry,

00:00:38.900 | and I'm the host of Bogle Heads on Investing.

00:00:42.020 | This podcast, as with all podcasts,

00:00:44.860 | are sponsored by the John C. Bogle

00:00:47.220 | Center for Financial Literacy, a 501(c)(3) corporation.

00:00:52.220 | Each month, we have a special guest.

00:00:55.900 | This month, we have Dr. Jim Dawley,

00:00:58.580 | the White Coat Investor.

00:01:00.140 | I've known Jim for many years

00:01:02.020 | and watched him grow from a few small posts

00:01:05.340 | on the Bogle Heads forum

00:01:07.140 | up to a multi-million dollar enterprise.

00:01:10.180 | He's done a fantastic job.

00:01:12.180 | He's written a couple of books.

00:01:13.900 | He's running conferences,

00:01:15.940 | and he's still working

00:01:16.780 | as a full-time emergency room physician.

00:01:19.400 | With no further ado, let me introduce Dr. Jim Dawley.

00:01:25.260 | Welcome, doctor.

00:01:26.760 | - Thank you, and please don't call me doc.

00:01:28.300 | Just call me Jim.

00:01:29.380 | - Okay.

00:01:30.580 | You and I have known each other for quite some time.

00:01:34.980 | If I recall, we first met face-to-face

00:01:38.420 | at a Bogle Heads meeting,

00:01:40.140 | and I think it might've been San Diego.

00:01:42.020 | Do you recall that?

00:01:43.700 | - It was probably in Texas.

00:01:46.460 | - Oh, Texas.

00:01:47.300 | - I'll bet it was Fort Worth in 2008,

00:01:49.300 | 'cause that was the first one I went to.

00:01:51.700 | - And you were just a couple of years out of residency.

00:01:54.820 | In fact, you were still in the military

00:01:56.300 | at that time, if I recall.

00:01:58.260 | - Yes, I was.

00:01:59.080 | I was still in the Air Force.

00:01:59.920 | I was right in the middle of my service there,

00:02:03.160 | my four years of active duty.

00:02:04.540 | I think I had recently returned

00:02:05.940 | from a deployment to the Middle East.

00:02:08.060 | - How did you go from college to medical school

00:02:12.140 | to the military, and then what happened after that?

00:02:15.940 | Give us the whole picture.

00:02:18.300 | - Sure.

00:02:19.140 | I grew up in Alaska, a middle-class family.

00:02:21.700 | My father was an engineer.

00:02:22.940 | My mother stayed at home, had five siblings,

00:02:26.640 | and we were never going hungry,

00:02:28.540 | but we certainly didn't have a lot of wealth.

00:02:30.580 | But again, it wasn't a hand-to-mouth existence by any means.

00:02:34.700 | Went away to college knowing that my parents

00:02:37.420 | would not be able to support me in college.

00:02:39.940 | I knew I was paying for it on my own.

00:02:41.940 | And so I went from Alaska, where I grew up,

00:02:43.900 | to Utah, where I went to Brigham Young University.

00:02:46.420 | And my interest at that time was all science.

00:02:48.980 | My major was molecular biology.

00:02:50.780 | Almost all the classes I took were science.

00:02:52.740 | I took nothing in finance or business.

00:02:55.820 | Graduated and, of course, got into medical school

00:02:59.100 | at the University of Utah.

00:03:00.580 | Spent the next four years there.

00:03:02.100 | I got married between college and medical school,

00:03:05.620 | and we had no kids while I was in medical school.

00:03:09.220 | My wife got a master's degree during those years,

00:03:12.220 | worked in a physical therapy clinic,

00:03:13.900 | also taught some ski lessons.

00:03:16.020 | And then I matched into an emergency medicine residency

00:03:18.140 | at the University of Arizona, down in Tucson.

00:03:20.700 | And so we moved down there

00:03:22.580 | for a three-year emergency medicine residency.

00:03:26.000 | From that point, I had a military commitment.

00:03:29.260 | The military paid for my medical school.

00:03:31.060 | So instead of money loans, I had time loans.

00:03:34.040 | I owed them four years of active duty.

00:03:36.460 | And the Air Force stationed me in Virginia,

00:03:38.820 | Langley Air Force Base.

00:03:40.220 | The Air Force needed me there for a team

00:03:41.800 | that they deployed from time to time.

00:03:43.820 | And so I deployed to the Middle East,

00:03:46.740 | spent about five months in Qatar, or Qatar,

00:03:49.660 | depending on how you wanna pronounce that.

00:03:52.080 | And then had a shorter deployment to Chile.

00:03:55.300 | So I really kind of lucked out.

00:03:56.680 | A lot of people during my time period,

00:03:58.580 | from 2006 to 2010, when I was on active duty,

00:04:01.780 | were getting deployed for six out of every 20 months

00:04:04.380 | in the Air Force, for nine months at a time in the Navy,

00:04:07.020 | for 15 months at a time in the Army.

00:04:09.540 | And I really only spent about six months total

00:04:12.380 | deployed out of four years.

00:04:13.700 | So I kind of got lucky that way with the deployments.

00:04:17.660 | And then at that point,

00:04:19.420 | I decided we wanted to go live someplace with mountains.

00:04:22.840 | One of the things that bothered me the most

00:04:24.160 | being in the military was they tell you

00:04:25.520 | where you're gonna live.

00:04:26.400 | And it turned out I did not like living in Virginia

00:04:28.920 | very much with no mountains.

00:04:30.360 | So I started looking for a job in places with mountains.

00:04:32.400 | I looked at Anchorage and Portland and Reno and Boise

00:04:35.080 | and Salt Lake and Denver,

00:04:36.720 | and ended up with a job in Salt Lake.

00:04:38.560 | And I've been here ever since.

00:04:41.320 | - I have to say that if anybody from Virginia is listening,

00:04:44.280 | I disagree with Jim.

00:04:45.880 | There are mountains in Virginia,

00:04:47.880 | but you gotta go very far west to see them.

00:04:50.040 | - Yes, there definitely are mountains out there,

00:04:52.600 | but it's hard after living in places like Utah and Alaska

00:04:55.680 | to see them as the same type of mountains, for sure.

00:04:58.240 | - Fair enough.

00:04:59.560 | - You know, about halfway through residency,

00:05:01.560 | I kind of got sick of feeling ripped off.

00:05:04.760 | At that point, I realized I'd been ripped off

00:05:07.200 | by an insurance agent, by a financial advisor,

00:05:10.200 | by a recruiter, by a lender, a couple of times,

00:05:14.000 | by a realtor.

00:05:15.120 | And I just realized if I didn't start learning

00:05:17.120 | some of this financial stuff,

00:05:19.440 | this was just gonna be a pattern throughout my whole life.

00:05:21.800 | And it was getting old.

00:05:23.560 | So I decided I would go across the street

00:05:26.080 | from where we were living to a used bookstore,

00:05:27.800 | and I started reading books.

00:05:29.360 | And I read a lot of terrible financial books,

00:05:32.080 | but I found a few gems.

00:05:33.760 | And I realized that the good books

00:05:35.560 | were all saying the same thing.

00:05:38.200 | And so I moved my money away from the commission

00:05:40.720 | to financial advisor I had, to Vanguard,

00:05:43.080 | and started investing in index funds at Vanguard,

00:05:45.380 | like the good books all tell you to do,

00:05:47.560 | and then stumbled a few months later

00:05:49.520 | on the Vanguard Diehards Forum at Morningstar.

00:05:53.400 | - You first found out about the Bogleheads

00:05:55.640 | through Morningstar,

00:05:56.960 | but then the forum shifted off of Morningstar,

00:06:00.800 | and it went to its own website at bogleheads.org.

00:06:05.360 | - I can remember the post that got me to sign up.

00:06:10.000 | And back at that time, people might not know this,

00:06:12.680 | you had to pay money to use the forum.

00:06:14.840 | You had to pay $5 to join the forum.

00:06:17.600 | And the post that convinced me to pay my $5

00:06:21.100 | and become a Boglehead, make my first post,

00:06:24.040 | was called something like you might be a Boglehead if.

00:06:28.440 | And over the course of several years,

00:06:31.800 | some while I was in residency,

00:06:33.080 | not as much, obviously, because I was busy,

00:06:34.680 | but particularly while I was in the military,

00:06:36.800 | I made a lot of posts on the Bogleheads Forum.

00:06:39.120 | At one point, I think I was the eighth

00:06:40.800 | most prolific poster there.

00:06:42.560 | You know, in the beginning,

00:06:43.640 | I think like most people that come there,

00:06:44.840 | I was asking questions and getting answers

00:06:46.780 | and learning things and making tweaks to my portfolio

00:06:50.280 | and making improvements in my tax situation.

00:06:53.760 | I was learning.

00:06:54.800 | But as the years went by,

00:06:56.000 | I realized I was doing a lot more teaching than learning.

00:06:59.880 | And every time I'd find a doc,

00:07:01.200 | I was like, man, they got the same questions

00:07:03.320 | as the last doc.

00:07:04.280 | Same questions, same situations,

00:07:05.920 | over and over and over again.

00:07:07.740 | And that wasn't the only financial forum I was on.

00:07:10.340 | I was on a student doctor network forum

00:07:12.400 | and a forum called Surmo.

00:07:14.920 | And it was kind of the same story there.

00:07:16.320 | And I got sick of typing the same things

00:07:17.880 | over and over again into the internet.

00:07:19.680 | And so I decided, well, I'll just start a blog.

00:07:22.480 | And then every time I see these same 50 questions

00:07:25.120 | that every doctor has come up,

00:07:26.820 | I'm just gonna post a link to the blog post

00:07:28.840 | that answers the question.

00:07:30.040 | They'll get a lot better answer,

00:07:31.240 | and I don't have to type the same thing in

00:07:32.520 | over and over again.

00:07:33.520 | And that was a major motivation

00:07:35.160 | behind me starting the White Coat Investor back in 2011.

00:07:38.000 | - But you've done pretty well financially as well.

00:07:40.640 | - I said, well, I'm spending an awful lot of time online

00:07:43.000 | to not be making any money doing it.

00:07:44.560 | So let's start this thing as a business

00:07:46.680 | and see if we can actually make some money.

00:07:49.160 | Unfortunately, the problem is you can't post links

00:07:52.720 | to a for-profit business,

00:07:54.880 | or at least you're not supposed to,

00:07:56.360 | on the Bogleheads forum.

00:07:57.560 | And so one of the main points

00:07:59.680 | for me starting the stupid thing,

00:08:01.320 | to be able to not type the same thing

00:08:02.600 | into the internet over and over again,

00:08:04.540 | became outlawed within a year or so

00:08:06.600 | of me starting the website and putting ads up on it.

00:08:08.880 | And so, unfortunately, that was the case.

00:08:11.720 | - And it still is, by the way.

00:08:13.320 | - Yeah, still is, for sure, yeah.

00:08:15.080 | In fact, I've had a few interactions

00:08:17.520 | with Boglehead regulars and moderators over the years,

00:08:20.720 | and we've gotten very explicit

00:08:22.480 | as far as what is allowed and what is not allowed.

00:08:25.360 | And occasionally, I've stepped over the line.

00:08:27.000 | I think I even had a short banning.

00:08:29.920 | I think I had a two-week ban at one point

00:08:31.720 | for something I said.

00:08:33.420 | I can't remember what it was.

00:08:34.260 | It was just barely over the line.

00:08:36.440 | And so whatever.

00:08:37.280 | You know, moderation's good.

00:08:39.560 | Without moderation, you end up with a forum

00:08:42.000 | that reads like underneath every single article on CNN.

00:08:45.960 | - I've been banned, so don't feel bad.

00:08:47.920 | - Yeah.

00:08:50.000 | - I think I was banned for about a month or something.

00:08:52.160 | I'd said something or did something and upset somebody,

00:08:55.480 | and I got banned too.

00:08:56.320 | So, I mean, if you haven't been banned,

00:08:57.640 | then you're really not trying.

00:08:59.320 | - For sure.

00:09:00.800 | - All right.

00:09:01.640 | Well, so this whole website that you created,

00:09:04.800 | eventually, you decided to write a book.

00:09:07.840 | I recall sitting down with you in Dallas

00:09:09.920 | and talking with you about the book.

00:09:11.920 | I think you were getting ready to write it at the time.

00:09:14.960 | - Well, it was interesting.

00:09:16.560 | I have to give Mike Piper, the oblivious investor,

00:09:19.740 | some credit for this book.

00:09:21.240 | You know, one of the things about the website

00:09:22.840 | when I started, obviously, there was almost nobody else

00:09:25.520 | doing anything similar, and certainly nobody doing it

00:09:27.760 | as much as I was and promoting as much as I was

00:09:30.980 | on the website.

00:09:31.820 | And it was growing rapidly in 2011, 2012, 2013.

00:09:35.920 | Doctors were going, "Wow, here it is.

00:09:37.560 | "This is what I've been looking for."

00:09:39.160 | But what I didn't really know

00:09:40.880 | was how to run an online business.

00:09:42.840 | I really wasn't very good at it.

00:09:44.520 | And in fact, I told myself if I can't figure out a way

00:09:46.840 | to make $1,000 a month from this thing within two years,

00:09:50.320 | I'm gonna drop it and I'm gonna go do something else,

00:09:52.360 | you know, real estate side gig or something like that.

00:09:55.240 | And I just barely made that goal.

00:09:57.220 | At two years, I was making about $1,000 a month.

00:10:00.200 | And so I decided, well, I better take this more seriously.

00:10:02.420 | I better figure out this online business stuff.

00:10:04.620 | And I decided to go to a conference called FinCon.

00:10:07.500 | And at that conference, one of the sections

00:10:09.780 | was a panel on how to write a book.

00:10:11.800 | Mike Piper was one of the people on the panel.

00:10:14.280 | And as you know, his entire business is selling his books.

00:10:18.140 | And so at that point, he had self-published several books

00:10:20.940 | and was essentially an expert in the process.

00:10:23.660 | And so I realized, you know what?

00:10:26.060 | What my readers have been telling me

00:10:27.380 | that I should write a book for years is absolutely right.

00:10:30.700 | I should go write it.

00:10:31.620 | And so a week or two later, I was driving to Denver

00:10:35.200 | with my wife, we were going out there for a wedding.

00:10:37.140 | And I wrote most of "The White Coat Investor,

00:10:39.700 | "A Doctor's Guide to Personal Finance and Investing"

00:10:42.400 | in route to Denver.

00:10:43.500 | She drove and I typed.

00:10:45.340 | And certainly the skeleton, if not the vast majority

00:10:48.240 | of the chapters in the book were written on that drive

00:10:50.300 | between Salt Lake and Denver.

00:10:52.140 | It then took three or four months to figure out

00:10:54.000 | all the other parts to writing and publishing a book.

00:10:56.880 | You know, Amazon makes it relatively easy to publish a book.

00:10:59.820 | If you want the book to be really pretty,

00:11:02.120 | it's not nearly as good of a place to go.

00:11:04.420 | But if you actually want to make significant money

00:11:06.940 | off a book, because the publisher,

00:11:09.660 | when you publish a book in the traditional way,

00:11:11.860 | keeps a big chunk of what the book makes.

00:11:14.180 | If you actually want to keep the big chunk yourself,

00:11:16.820 | self-publishing is definitely the way to go.

00:11:18.660 | The problem is you also have to be the self-marketer.

00:11:21.620 | So if you're not gonna get out there

00:11:22.620 | and market your own book, it's not a great route to go.

00:11:26.140 | But certainly the book has been well-received.

00:11:28.100 | It's interesting, when you publish a book,

00:11:29.960 | you are instantly looked at as an authority.

00:11:33.360 | And so it led to lots of other invitations

00:11:35.980 | to write for other publications, to speak, et cetera.

00:11:39.300 | And it's been a fun journey to see a lot of people

00:11:41.580 | that wouldn't read a blog or wouldn't listen to a podcast,

00:11:43.940 | but will read a book, pick it up,

00:11:45.700 | and really get the message.

00:11:48.260 | - You know, I've written several books.

00:11:50.500 | The first one I wrote, I self-published.

00:11:53.500 | And I didn't have a very good luck

00:11:56.180 | because immediately after I self-published the book,

00:11:59.820 | and I had ordered like 3,000 books,

00:12:01.620 | I put it with a distributor, and within a month,

00:12:03.460 | the distributor went into chapter 11, chapter seven.

00:12:05.860 | - Oh, geez.

00:12:06.700 | - Yeah, so this truck backs up to my driveway

00:12:10.180 | and dumps off 3,000 books,

00:12:11.620 | which I had loaded in my basement.

00:12:13.420 | Nobody knew who I was, and those books sat in my basement

00:12:16.860 | for probably three or four years

00:12:19.060 | before I finally got them distributed.

00:12:22.380 | - If you wanna actually make money on a book,

00:12:25.140 | self-publishing it is the way to go.

00:12:27.460 | However, you need a platform by which to promote it.

00:12:30.740 | - Absolutely.

00:12:31.700 | - You know, you had the platform, so you went that route,

00:12:34.860 | and that then also drew in more readers.

00:12:39.300 | You ended up doing a second book.

00:12:42.380 | - That's right.

00:12:43.220 | I just published a second book about a year ago.

00:12:45.860 | This one grew out of an email course.

00:12:48.740 | I found a lot of people were coming to my blog

00:12:51.020 | and they were lost, right?

00:12:52.100 | At that point, they had years and years of blog posts

00:12:54.260 | and couldn't tell what was most important,

00:12:56.420 | what was not as important.

00:12:57.980 | They had no framework to place the information into.

00:13:00.580 | And so I put together an email course.

00:13:02.580 | When you signed up for my newsletter,

00:13:03.980 | my monthly newsletter, you got a series of 12 emails.

00:13:07.180 | You'd get one a week for 12 weeks,

00:13:09.460 | and each one would come with a task.

00:13:11.700 | For example, the first one was,

00:13:12.740 | "Go get yourself some disability insurance."

00:13:15.180 | And so that was the framework for the second book.

00:13:18.100 | The second book, each chapter

00:13:19.420 | was one of those emails, essentially.

00:13:21.980 | It turned out not to be quite as easy

00:13:23.740 | to convert them from emails to book chapters

00:13:25.740 | as I originally thought it would be,

00:13:28.180 | but basically fluffed up each of those book chapters,

00:13:30.620 | added some anecdotes from readers,

00:13:32.540 | and turned those emails into the second book, essentially,

00:13:36.820 | which is kind of a step-by-step, nuts and bolts,

00:13:39.580 | "Here's what you need to do to take care of business."

00:13:42.140 | Whereas I think the first book

00:13:43.260 | was a little bit more inspiration

00:13:45.380 | and less nuts and bolts compared to the second one.

00:13:48.220 | - So the title of the first book

00:13:49.420 | was "The White Coat Investor,"

00:13:51.500 | and the title of the second book

00:13:52.940 | was called "Financial Boot Camp,"

00:13:56.020 | with a foreword by Jonathan Clements,

00:13:57.460 | who I had on as a guest also.

00:13:59.060 | By the way, also had Mike Piper on as a guest,

00:14:01.100 | so you're hitting all of the right people.

00:14:03.220 | In "Financial Boot Camp,"

00:14:04.340 | you talk about the 12-step approach

00:14:06.740 | to bring your finances up to speed.

00:14:08.860 | And I do give you a lot of credit right at the beginning.

00:14:12.700 | The very first thing that you put in chapter one

00:14:16.140 | is disability insurance,

00:14:17.940 | and then chapter two is life insurance.

00:14:19.940 | And a lot of people that I speak with,

00:14:22.140 | they have that as like number 11, 12,

00:14:25.580 | or maybe not even on the list.

00:14:27.980 | And I give you a lot of credit

00:14:30.140 | for putting that number one and two.

00:14:31.980 | - Yeah, I think it's important

00:14:34.420 | because you always run into doctors that get disabled

00:14:37.860 | or even die during residency

00:14:39.540 | before they even get started investing.

00:14:41.460 | And until you're kind of in a position to do so,

00:14:45.500 | you have no business whatsoever

00:14:48.220 | paying a bunch of attention to your asset allocation.

00:14:50.540 | You got to take care of the basics first.

00:14:52.820 | - And a lot of people don't know

00:14:54.820 | how much disability insurance they should have.

00:14:57.580 | Do you have some sort of rule of thumb?

00:14:59.180 | What do you suggest?

00:15:00.900 | - Well, I think the first thing you need to know

00:15:02.340 | is how much you're spending,

00:15:04.060 | 'cause certainly your disability insurance benefit

00:15:06.580 | has to cover that at least

00:15:08.220 | in order for you to keep the same lifestyle

00:15:10.660 | if you become disabled.

00:15:12.220 | But what a lot of people don't realize

00:15:13.580 | is disability insurance only pays until you're 65 or 67.

00:15:18.260 | And so after that point,

00:15:19.300 | if you don't have anything saved up for retirement,

00:15:21.060 | you're gonna be all on social security.

00:15:23.420 | And so I tell people

00:15:24.860 | that you need to have enough

00:15:26.060 | of a disability insurance benefit

00:15:27.500 | to not only maintain your lifestyle,

00:15:29.700 | but also enough to save for retirement.

00:15:32.580 | The nice thing about it is

00:15:33.700 | because you generally are paying

00:15:35.220 | for at least individual disability insurance policies

00:15:37.780 | with post-tax dollars,

00:15:39.420 | the benefit is also post-tax.

00:15:41.620 | And so you don't need to have enough

00:15:43.180 | to cover your entire gross income by any means,

00:15:45.940 | but you need enough to cover what you're spending

00:15:48.260 | and enough additionally to save for retirement

00:15:51.820 | and meet your goals.

00:15:53.060 | So for a typical physician,

00:15:54.420 | I would suspect most of them have a monthly benefit

00:15:57.380 | of something like 10 to $15,000 a month.

00:16:00.860 | - And life insurance is somewhat the same calculation,

00:16:04.100 | correct, to determine how much a physician would need

00:16:07.860 | in life insurance.

00:16:08.900 | If it's a family and it's a husband and wife,

00:16:11.340 | just one of them is a physician,

00:16:13.300 | do you have a recommended amount of life insurance

00:16:15.620 | if they're sort of the breadwinner of the family?

00:16:18.020 | - Yeah, in that sort of a situation,

00:16:19.260 | you need a lot of life insurance.

00:16:20.500 | It's going to be a seven-figure amount,

00:16:22.300 | probably something between one and 5 million.

00:16:24.980 | Now it's gonna vary depending

00:16:26.180 | on what you want the life insurance to actually do.

00:16:28.860 | If you're the only breadwinner in the family

00:16:30.820 | and you want your family to have the exact same lifestyle

00:16:33.140 | with or without you,

00:16:34.500 | you need to have enough in there to pay off the mortgage,

00:16:36.660 | to pay for college,

00:16:37.900 | to create a nest egg at your death for your spouse

00:16:41.580 | to live the rest of their life, essentially.

00:16:43.980 | And so that's gonna be in the higher kind of numbers,

00:16:46.180 | three, four or 5 million kind of number.

00:16:48.300 | On the other hand,

00:16:49.500 | if your goal is to just provide enough for your spouse

00:16:51.860 | until the kids are out of the house,

00:16:53.340 | or give your spouse a few years to transition back

00:16:56.020 | into the workforce and maybe pay off the mortgage,

00:16:58.580 | you might have a little bit smaller amount.

00:17:00.380 | But I think there are very few attending physicians

00:17:02.180 | that should have less than a million dollars

00:17:04.380 | if they're the only breadwinner in the family.

00:17:07.620 | Now you run into some other situations

00:17:09.020 | where you got two docs married to each other

00:17:11.220 | and they might actually function

00:17:13.260 | as each other's life insurance in some ways.

00:17:15.780 | And so I think it's okay to have less insurance

00:17:18.260 | and maybe if you wanna roll the dice a little bit

00:17:20.700 | to not have insurance at all.

00:17:22.460 | But of course that doesn't insure against the possibility

00:17:25.500 | of both of you being wiped out at once if you have children.

00:17:28.460 | - One of the insurances that I talk a lot about

00:17:31.220 | with my clients is an umbrella policy.

00:17:34.860 | Once you start to accumulate wealth,

00:17:36.860 | especially if you start accumulating wealth

00:17:38.420 | outside of tax sheltered retirement plans

00:17:41.300 | or accumulating wealth outside of your home,

00:17:44.140 | it could be attached by creditors.

00:17:46.500 | What are you recommending for an umbrella policy?

00:17:49.380 | - You know, it's interesting.

00:17:50.220 | Everybody wants a formula for umbrella insurance,

00:17:52.740 | like some multiple of your net worth, for instance.

00:17:55.740 | And I don't think that's necessarily helpful.

00:17:58.220 | And the reason why is the amount you want

00:18:00.620 | is a little bit more than the biggest judgment

00:18:02.700 | that will ever be taken out against you during your life.

00:18:04.980 | And you simply have no idea what that is going to be

00:18:08.140 | until that incident occurs, if that occurs.

00:18:11.620 | And so I think the main thing you want to do

00:18:14.060 | is kind of the same approach

00:18:15.500 | you take to malpractice insurance.

00:18:17.380 | You want a big, big policy

00:18:20.100 | that will not only pay for a robust defense

00:18:22.540 | because the insurance company

00:18:23.660 | has a lot of money on the line,

00:18:25.340 | but there will also be enough money

00:18:27.300 | that if you settle something at policy limits,

00:18:29.760 | that person will feel satisfied

00:18:31.740 | and their attorney will not feel a need

00:18:33.980 | to come after your personal assets.

00:18:35.980 | So in general, again, I think that's a seven-figure number,

00:18:39.540 | something between one and five million.

00:18:42.100 | And the good news is it's dramatically cheaper

00:18:43.980 | than malpractice.

00:18:44.820 | I might be paying $16,000 a year for malpractice insurance,

00:18:48.060 | but my umbrella policy for twice as much

00:18:49.980 | might only be three or $400 a year.

00:18:52.180 | And so I think it's pretty wise

00:18:53.800 | to raise up those liability limits on your auto policy

00:18:56.740 | and on your homeowner's policy

00:18:58.220 | and stack a nice, big, fat umbrella on top of it.

00:19:01.200 | It's really not that much money.

00:19:03.720 | And I think it's important coverage to have.

00:19:05.980 | What a lot of people don't realize

00:19:07.060 | is about 80% of the claims on those umbrella policies

00:19:09.900 | are auto-related.

00:19:11.260 | So that is your big risk,

00:19:12.580 | is that you run over somebody that makes a lot of money

00:19:15.060 | and drives a nice Tesla,

00:19:16.620 | or your 16-year-old runs over somebody's kid

00:19:19.220 | or something like that.

00:19:20.060 | Those are your big liability risks,

00:19:22.660 | not so much the person tripping and falling

00:19:24.580 | on the sidewalk in front of your house.

00:19:26.460 | - One area you spend a lot of time on is student loans,

00:19:29.180 | which is a big interest for a lot of people.

00:19:31.960 | - Yeah, for sure.

00:19:32.800 | The student loan crisis is a big deal.

00:19:34.320 | You can tell just from looking at what our politicians

00:19:36.900 | are talking about these days.

00:19:38.740 | It really is the elephant in the room

00:19:42.100 | of certainly young physicians.

00:19:44.580 | About 75% of physicians graduate from medical school

00:19:48.060 | with student loans.

00:19:50.900 | It averages about $200,000 for MDs, $250,000 for DOs.

00:19:55.620 | It's about $270,000 for dentists these days.

00:19:59.300 | And then those loans usually go up during residency

00:20:01.940 | before they even get a chance to start paying them off.

00:20:03.980 | They're higher than that.

00:20:05.460 | And I've run into docs, lots of docs,

00:20:07.660 | with $400,000, $500,000, $600,000 in student loans.

00:20:11.180 | My record's about 1.1 million.

00:20:13.040 | - How did somebody accumulate 1.1 million?

00:20:17.460 | - Well, the amazing thing is this is a doc

00:20:19.180 | who came out of undergrad without any student loans at all,

00:20:22.340 | then went to USC for dental school,

00:20:25.520 | followed by orthodontics residency also at USC.

00:20:29.580 | So it's a relatively high cost of living area,

00:20:32.620 | a very expensive school.

00:20:34.620 | And then he let it ride for a few years at 7% or 8%.

00:20:39.060 | And so the interesting thing about dental residencies

00:20:41.900 | as opposed to medical residencies

00:20:43.260 | is medical residencies pay you a salary.

00:20:45.420 | It's only 50 or $60,000 a year, but it's a salary.

00:20:49.260 | Whereas you go to a lot of dental specialties

00:20:51.860 | and you go to a dental residency

00:20:53.180 | and you're still paying tuition.

00:20:54.820 | And so it's like going to three more years

00:20:58.100 | of medical or dental school in a lot of ways.

00:21:00.060 | And of course, all the old loans

00:21:01.400 | are continuing to compound interest.

00:21:03.100 | And so it can grow pretty quickly.

00:21:04.740 | And then if you ignore it afterward

00:21:06.140 | and you don't refinance it,

00:21:07.640 | boy, it's not that hard to get over a million dollars.

00:21:10.460 | - How do you pay a $1.1 million school loan?

00:21:12.700 | That must be tough.

00:21:14.300 | - Yeah, I don't think you do.

00:21:16.380 | I mean, the plan of this doctor,

00:21:17.680 | and he was on the front page of the Wall Street Journal

00:21:19.900 | for it a year or two ago.

00:21:22.940 | His plan is to run it out for 25 years

00:21:25.420 | and take advantage of the income-driven

00:21:27.980 | repayment program's forgiveness.

00:21:30.940 | So you make payments for 25 years and the rest is forgiven.

00:21:33.780 | The issue is you get the tax bomb from that forgiveness.

00:21:36.740 | So you have to be saving up on the side to pay the tax bomb.

00:21:40.060 | And by the time that runs out for 25 years,

00:21:42.500 | he's probably going to have an $800,000 plus

00:21:46.420 | tax bill due from it.

00:21:47.860 | So I hope he's saving for that.

00:21:49.900 | - All this has to be done

00:21:52.020 | even before you start thinking about investing

00:21:55.820 | and where are you going to put your money

00:21:57.500 | and how are you going to save it?

00:21:59.460 | But at some point you're living below your means,

00:22:02.020 | you're making money, you want to start putting money away.

00:22:05.340 | Where do you start?

00:22:06.580 | What do you tell people this is where you begin?

00:22:08.980 | - I think the place to begin,

00:22:11.700 | and a mistake a lot of investors make

00:22:13.500 | is they try to begin with the individual investments.

00:22:16.100 | But the place to begin is with your goals.

00:22:19.540 | And if you talk to most financial advisors,

00:22:21.780 | they'll tell you they spend a great deal of time

00:22:24.020 | trying to get their clients to determine

00:22:27.100 | and say what their actual goals are.

00:22:29.140 | Because once you have a goal,

00:22:31.220 | it simply becomes a math problem.

00:22:33.180 | But until you have a goal, everything is so vague,

00:22:36.100 | it's hard to make any sort of recommendations

00:22:38.100 | about what accounts to use, what asset allocation to use,

00:22:41.940 | what investments to select.

00:22:43.460 | So I think you start with your goals first.

00:22:45.780 | And then you choose what accounts you're going to use

00:22:48.260 | to invest for those goals.

00:22:49.380 | For example, if you're a physician

00:22:51.020 | and you are saving for retirement,

00:22:52.580 | you're probably going to be using a 401k of some type,

00:22:56.460 | maybe a defined benefit cash balance plan,

00:22:59.340 | a personal backdoor Roth IRA,

00:23:01.380 | maybe a spousal backdoor Roth IRA,

00:23:04.060 | and maybe a regular old non-qualified

00:23:06.140 | taxable brokerage account.

00:23:08.140 | And so once you determine those accounts

00:23:11.220 | that you're going to invest in,

00:23:12.340 | the next thing you need to come up with

00:23:13.900 | is some sort of a reasonable asset allocation

00:23:16.940 | or mix of your investments.

00:23:19.540 | You know, and that's likely some combination

00:23:21.460 | of stocks and bonds and real estate.

00:23:24.380 | And once you have that plan written out,

00:23:27.260 | picking the investments is actually the easiest part.

00:23:30.540 | But that is where people tend to go to first.

00:23:32.420 | They go, should I invest in this fund?

00:23:34.340 | And without knowing what their goals are,

00:23:36.100 | what accounts they're in,

00:23:37.180 | or what their desired asset allocation is,

00:23:39.420 | that question can't really be answered effectively at all.

00:23:42.660 | - Because you're a boglehead,

00:23:43.500 | I have to believe you're a big into index funds

00:23:45.580 | and this is what your philosophy is.

00:23:48.300 | - I'm absolutely a huge fan of index funds.

00:23:50.220 | And I have to credit you, Rick,

00:23:51.500 | for a lot of my investing philosophy, quite honestly.

00:23:56.300 | I read several of your books early on

00:23:58.860 | and they had a big influence, I think,

00:24:00.700 | on my asset allocation originally.

00:24:03.820 | And so thank you for that.

00:24:05.900 | I think there are a lot of bogleheads

00:24:07.980 | that owe you a great debt for your writings in that regard.

00:24:12.620 | All About Asset Allocation

00:24:14.020 | was a particularly useful book to me.

00:24:17.220 | You know, it's not the newest book these days,

00:24:19.500 | but when I started investing,

00:24:20.620 | it was fairly new and very, very useful.

00:24:22.980 | - Yeah, well, thanks for reminding me

00:24:24.620 | that I need to update it.

00:24:25.580 | It actually was on my bucket list to do.

00:24:27.780 | - But yes, I invest in index funds.

00:24:32.220 | I basically don't use actively managed funds at all.

00:24:34.500 | I don't pick stocks.

00:24:35.740 | I don't invest in individual bonds.

00:24:38.220 | When I am investing in publicly traded securities,

00:24:40.980 | I'm basically 100% index funds.

00:24:43.300 | So yes, I think that's the best way

00:24:45.180 | to get exposure to an asset class.

00:24:46.940 | It eliminates a lot of risks.

00:24:48.340 | You're no longer running manager risk.

00:24:50.860 | You don't have this underperformance risk.

00:24:52.700 | You're always gonna get the market return

00:24:54.500 | in that particular market.

00:24:56.740 | And you're gonna keep your costs very, very low.

00:24:58.700 | It's gonna be very, very tax efficient.

00:25:01.180 | And the nice thing about it is you don't feel

00:25:02.620 | like you have to watch it.

00:25:04.460 | I don't even have to look at my investments

00:25:07.180 | when the market goes up or down to know what I'm up or down

00:25:09.420 | because I know more or less what the market has done.

00:25:12.180 | And so I think index funds are great.

00:25:14.860 | - I had Paul Merriman on as a guest recently,

00:25:19.060 | and he was talking with me about a conversation

00:25:21.900 | he had with Jack Bogle.

00:25:23.060 | And what Jack Bogle said to him,

00:25:26.100 | I thought was very enlightening.

00:25:27.980 | Of course, a lot of things Jack Bogle said

00:25:29.700 | were very enlightening.

00:25:30.780 | But Paul is what we call the slice and dice guy.

00:25:34.700 | He likes to go to the four corners of the markets

00:25:38.220 | and do value growth, small, large, so forth,

00:25:42.180 | and put all these things together

00:25:44.340 | in a portfolio.

00:25:45.940 | And Jack listened to Paul,

00:25:48.020 | and then he said the problem with that,

00:25:52.300 | the problem with doing that slice and dice

00:25:54.500 | and type of an account is that people will accept

00:25:59.500 | the return of the market.

00:26:01.900 | So if the market goes down 10%

00:26:05.140 | and their stocks go down 10% because they're in index funds,

00:26:08.980 | just flat out straight market funds,

00:26:12.060 | that people will accept that.

00:26:14.420 | And you just said that.

00:26:15.980 | So that's what just reminded me of something.

00:26:18.460 | But what Jack told Paul was that

00:26:22.420 | if your account goes down 15%,

00:26:26.540 | but the market's only down 10,

00:26:28.820 | people won't accept that.

00:26:30.900 | And they'll eventually leave that strategy.

00:26:33.340 | And when they do,

00:26:34.180 | they basically locked in their underperformance.

00:26:35.940 | And so this is the problem.

00:26:37.620 | I thought it was interesting

00:26:38.540 | that you basically said the same thing.

00:26:40.380 | You don't even have to look at your portfolio.

00:26:41.980 | If the market's down, you know you're down.

00:26:43.380 | It's no big deal.

00:26:44.660 | But if you were doing active management

00:26:46.340 | or you were doing some sort of a slice and dice portfolio,

00:26:48.820 | you're gonna wanna know, well, where am I?

00:26:51.780 | And that alone, you going there looking at that

00:26:55.220 | and finding out that you're actually performing

00:26:57.100 | less than the market

00:26:58.620 | could cause you to capitulate on your strategy.

00:27:02.180 | And that will lock in your underperformance.

00:27:04.060 | So I thought it was just interesting

00:27:05.780 | what you said just fell right in line

00:27:07.700 | with what Jack Bogle had told Paul Merriman.

00:27:11.220 | - Yeah, let's talk about that for a minute.

00:27:12.620 | 'Cause I probably find myself somewhere

00:27:14.820 | between the total market purists

00:27:17.180 | and the crazy asset class junkie slice and dicers

00:27:21.860 | like Paul Merriman.

00:27:22.700 | I'm probably somewhere in the middle.

00:27:24.220 | I do have a small value tilt in my portfolio.

00:27:27.100 | Over the last decade, that has not paid off.

00:27:29.860 | There's no doubt about it.

00:27:30.860 | And the question you were left with

00:27:32.940 | after that decade of underperformance

00:27:35.500 | is that because the small value factor isn't real

00:27:40.900 | that it was just a product of data mining,

00:27:43.940 | of using retrospective data,

00:27:46.220 | or is this just one of the periods

00:27:48.100 | of inevitable underperformance that you would expect

00:27:51.300 | with tilting your portfolio to something like that?

00:27:53.940 | And of course I'm sticking with it.

00:27:55.500 | And so I obviously believe the latter,

00:27:57.340 | but it's entirely possible that it is the former.

00:28:00.540 | People talk about evidence-based investing

00:28:02.740 | and looking at what has worked in the past.

00:28:05.540 | And the problem is we don't have a lot of data.

00:28:08.700 | We've only got a hundred years of decent data,

00:28:12.020 | maybe another hundred years of okay data.

00:28:14.860 | And the problem is it's such a complex system.

00:28:17.220 | This isn't physics.

00:28:18.340 | Investing is not physics.

00:28:19.660 | There are no guarantees that small and value stocks

00:28:22.660 | or whatever tilt you want,

00:28:24.100 | momentum stocks or whatever is going to work out

00:28:27.140 | over your 30 to 60 year investment horizon.

00:28:30.780 | And so in some ways,

00:28:32.300 | you are making a little bit of a bet doing that.

00:28:35.660 | But I do believe the risk story

00:28:37.340 | behind small and value stocks,

00:28:39.140 | I think in the long run,

00:28:40.340 | I'm probably going to be rewarded for that.

00:28:42.700 | But I think it's really important

00:28:44.740 | not to tilt your portfolio more than you believe,

00:28:48.780 | because the worst thing you can do is, you know,

00:28:51.380 | stick with a small value tilt, for instance, for 10 years,

00:28:55.460 | and then bail on it just in time

00:28:57.180 | for small value stocks to outperform the market.

00:28:59.860 | You've got to stick with the plan in the long run.

00:29:02.220 | If this sort of a factor tilt is going to work,

00:29:05.060 | it's only going to work in the very long run.

00:29:08.220 | I call it a lifelong investment strategy.

00:29:13.220 | If you're going to go down that path of saying,

00:29:17.260 | I'm willing to take more risk with small cap value

00:29:21.780 | because I want to potentially get a higher rate of return.

00:29:25.260 | It's not something that you can just do for a few years.

00:29:30.060 | You have to make it a career, like a marriage.

00:29:33.940 | I mean, you're marrying it for the rest of your life.

00:29:37.980 | I will say also that I agree with you on the idea,

00:29:42.980 | evidence-based investing, smart beta, strategic beta,

00:29:48.340 | all of these very scientific sounding ways of investing

00:29:53.620 | have made it appear as though this stuff is a certainty

00:30:00.660 | when it is not a certainty.

00:30:03.100 | It is a risk.

00:30:04.500 | And if you're going to go down this path,

00:30:07.620 | you have to realize that it is a risk

00:30:09.340 | and you may not be rewarded, but no matter what happens,

00:30:13.980 | you have to stick with it for the longterm.

00:30:15.780 | And if you're not going to stick with it for the longterm,

00:30:19.780 | then don't do it to begin with.

00:30:22.220 | Just do total stock market, US, total international,

00:30:27.220 | a bond fund on your public markets and be done with it.

00:30:32.980 | - Absolutely, I agree with that.

00:30:34.340 | If you cannot stick with the longterm,

00:30:35.860 | you are far better off with even something more simple,

00:30:38.980 | maybe even a target retirement type fund.

00:30:41.540 | The other thing a lot of the slice and dicers

00:30:43.140 | don't realize until they've been running

00:30:45.100 | a slice and dice portfolio for a number of years,

00:30:48.180 | especially if they're like the typical physician

00:30:49.940 | and they have their assets spread across six or eight

00:30:52.060 | or more different accounts,

00:30:53.940 | is this is a management nightmare

00:30:56.300 | to have 10 asset classes spread across eight accounts.

00:31:00.420 | I mean, it is, you've got a seriously complex spreadsheet

00:31:04.180 | just to rebalance your portfolio.

00:31:06.180 | And that's going to cost you some time,

00:31:08.180 | maybe some errors, maybe some tracking error.

00:31:10.780 | And there's some additional expenses,

00:31:12.740 | buying and selling across all of those accounts,

00:31:14.740 | especially if they are in a taxable account.

00:31:18.100 | And so don't underestimate just how much work

00:31:21.020 | it's going to be to manage

00:31:22.140 | a really complex portfolio going forward.

00:31:24.260 | - I do want to get into one area though

00:31:26.940 | that you have a big interest in.

00:31:28.980 | And I can tell by going to your website

00:31:30.980 | and just looking at your sponsors and your advertisers,

00:31:34.220 | it's real estate.

00:31:35.620 | I find it interesting that you are a proponent

00:31:40.620 | and a pretty big proponent of doing real estate.

00:31:44.340 | So could you get into this in quite a bit of detail

00:31:46.660 | if you can?

00:31:47.500 | How do you view it?

00:31:48.780 | How do you get into it?

00:31:49.940 | Why should people, if they're going to get into it,

00:31:52.980 | do it the way that you're talking about on your website?

00:31:56.300 | - Sure, well, let's talk about real estate.

00:31:58.020 | And there's obviously a lot of different ways to do it

00:32:00.780 | if you want to do it.

00:32:02.300 | But the first thing I think that is worth saying

00:32:06.140 | is what drove me to start looking a little more closely

00:32:08.980 | at real estate in the first place.

00:32:10.540 | Now, my investing background is kind of Boglehead-ish.

00:32:13.100 | You know, it came from books like yours,

00:32:14.740 | like those of Larry Swedrow,

00:32:15.980 | those of Jack Bogle and William Bernstein,

00:32:18.580 | and a lot of time spent on the Bogleheads Forum.

00:32:21.020 | My background in investing is certainly mutual fund

00:32:23.860 | and index fund in particular based.

00:32:26.780 | But I kept running into these people

00:32:29.060 | who had built substantial wealth,

00:32:32.100 | substantial passive income,

00:32:33.620 | and had substantial success investing in real estate

00:32:37.140 | in various different ways.

00:32:38.780 | And I said, you know what?

00:32:39.740 | This is not a flash in the pan.

00:32:41.340 | This is not Bitcoin.

00:32:42.980 | These are serious investors who are taking this seriously,

00:32:45.620 | who are managing risk, and who are having good returns,

00:32:49.940 | and who are finding success.

00:32:51.820 | And they have 80% or more of their portfolio

00:32:54.660 | invested in real estate.

00:32:56.300 | And so I thought, well,

00:32:57.260 | let's look at it a little bit more closely.

00:32:59.380 | And real estate has a few big advantages.

00:33:02.740 | The first is that the returns are both high

00:33:06.980 | and relatively less correlated with the stock market.

00:33:11.100 | And which is exactly what you want

00:33:12.500 | when you're adding an asset class to your portfolio.

00:33:15.100 | It's great to have something

00:33:16.140 | that doesn't have any correlation to your portfolio,

00:33:18.620 | but if it's beanie babies

00:33:19.940 | and there's no actual long-term return,

00:33:21.940 | that's not actually gonna help all that much.

00:33:23.860 | You need high returns and low correlation with your stocks.

00:33:26.700 | And so real estate meets that requirement.

00:33:29.420 | Another exciting thing about real estate

00:33:32.100 | is the fact that it is much easier to leverage safely

00:33:36.940 | than a stock portfolio.

00:33:38.860 | You know, as you know, if you go decide to invest on margin,

00:33:41.420 | you can only invest so much.

00:33:42.900 | If the market really tanks,

00:33:44.420 | you're gonna get a margin call

00:33:45.740 | and you're gonna have to come up with cash

00:33:47.020 | at the worst possible moment.

00:33:48.780 | But when you're leveraging real estate,

00:33:50.660 | you're often doing it with a fixed mortgage

00:33:52.780 | that might go out 10, 15, 30 years,

00:33:55.820 | which gives you time to write out any inevitable downturn

00:33:58.940 | so long as the property is cash flowing.

00:34:01.540 | So that leverage I think is a big advantage.

00:34:03.820 | Another big advantage is depreciation.

00:34:07.420 | And a lot of people don't understand

00:34:08.900 | just how valuable of an advantage that is.

00:34:11.380 | The idea is as you carry this investment through the years,

00:34:14.580 | you're getting income from it,

00:34:16.420 | but most or even all of that income

00:34:18.780 | is sheltered by depreciation.

00:34:21.380 | And then, so over the years,

00:34:23.140 | five, 10, 15, 20 years, you're depreciating this property.

00:34:26.700 | And then instead of selling it

00:34:28.540 | and having to recapture that depreciation,

00:34:32.980 | even though you're able to recapture it

00:34:34.180 | at a lower tax rate,

00:34:36.420 | instead of recapturing that, you exchange the property.

00:34:38.980 | You know, it's the classic monopoly thing.

00:34:40.860 | You go from houses to hotels, you exchange the property,

00:34:43.980 | and then that depreciation isn't recaptured at all.

00:34:47.500 | It's basically moved into the next property.

00:34:49.460 | And so you exchange, exchange, exchange, exchange, die.

00:34:53.100 | And at the end, your heirs get to step up in basis at death

00:34:55.940 | and nobody ever recaptures that depreciation.

00:34:58.980 | And so that's a really big tax benefit.

00:35:01.500 | One of the big downsides of mutual funds

00:35:03.900 | is they don't pass through a lot of the tax benefits

00:35:07.420 | that I would love to see them pass through.

00:35:09.420 | You know, it just doesn't happen

00:35:10.460 | because of the way they are structured.

00:35:13.060 | And so those are, I think, the big poles with real estate.

00:35:16.580 | The question then becomes, well, how?

00:35:18.860 | How do you invest in it?

00:35:20.580 | And what most people think about

00:35:22.220 | is they think about buying the property down the street.

00:35:24.620 | They think about buying a single family home,

00:35:26.940 | managing it, getting tenants in there,

00:35:29.140 | taking care of the tenants' 3 a.m. toilet calls,

00:35:32.340 | you know, evicting the tenants

00:35:33.500 | when the tenants stop paying rent.

00:35:34.820 | And it sounds like a big headache.

00:35:35.940 | It sounds like a second job.

00:35:37.500 | And so people go, I don't want a second job.

00:35:39.940 | I'll just stick with mutual funds.

00:35:41.980 | What they don't realize,

00:35:42.940 | especially for an accredited investor,

00:35:45.660 | is there are other options.

00:35:47.140 | You know, you can look at two options

00:35:49.140 | if you're a non-accredited investor.

00:35:50.900 | The two options are basically buy single family homes

00:35:53.380 | or duplexes, manage them yourself or hire a manager.

00:35:56.180 | And on the other end of the spectrum,

00:35:57.820 | just going to the publicly traded markets

00:36:00.060 | and buying a real estate index trust index fund.

00:36:03.860 | Very passive.

00:36:04.780 | You don't get all the benefits of real estate.

00:36:07.580 | You know, for example,

00:36:08.420 | you don't get the depreciation passing through, et cetera.

00:36:10.500 | It's not very tax efficient.

00:36:12.060 | It tends to go up and down with the market a lot more

00:36:14.100 | than individually held real estate.

00:36:16.380 | But it's very hassle free.

00:36:17.860 | So if you put that on one side of the spectrum

00:36:19.860 | and you put these single family homes

00:36:21.180 | on the other side of the spectrum,

00:36:22.500 | you start asking yourself, well, what is there in between?

00:36:25.900 | And there's a number of things that are in between.

00:36:28.020 | They're generally only available to accredited investors.

00:36:31.740 | They tend to be syndications or funds,

00:36:34.860 | which basically buy multiple syndications.

00:36:37.660 | So by a syndication,

00:36:38.620 | I mean that you get together with 20 or 50

00:36:42.140 | or a hundred other investors

00:36:43.860 | and you buy an apartment complex.

00:36:45.900 | Maybe it's 300 doors in the apartment complex.

00:36:48.620 | You're never gonna have enough money

00:36:49.860 | to buy this $20 million apartment complex by yourself.

00:36:53.060 | But if you pool your money together

00:36:54.480 | with a hundred other investors,

00:36:55.860 | you know, just like in a mutual fund,

00:36:57.480 | you can go in and you can buy this apartment complex.

00:37:00.620 | You get some efficiencies of scale there

00:37:02.540 | rather than trying to buy two or three single family homes.

00:37:06.020 | You get, you're bringing in enough money there

00:37:08.820 | to pay for professional manager

00:37:10.780 | and you still get the depreciation

00:37:12.620 | and other benefits passed through to you.

00:37:14.540 | And once you select the syndication,

00:37:16.780 | it's essentially passive.

00:37:18.180 | You know, just like an index fund would be

00:37:20.700 | that you're just getting mailbox money every quarter

00:37:22.740 | or every six months or whatever the deal is

00:37:24.860 | with the syndication.

00:37:26.420 | The downside of course,

00:37:27.780 | is that there are significant level of fees.

00:37:30.140 | You know, the people running the syndication

00:37:31.660 | are not gonna do this for free.

00:37:33.780 | And they're gonna charge some of those fees,

00:37:35.700 | whether the syndication or the fund does well or not.

00:37:39.380 | And then some are typically performance-based.

00:37:41.980 | And then of course the other big downside

00:37:43.940 | is these investments are not liquid.

00:37:46.060 | You cannot go and sell these any given day in the markets.

00:37:49.420 | Once you invest, you are basically stuck

00:37:52.100 | for two, five, maybe 10 years in this investment.

00:37:55.940 | And so I think you probably get paid a little bit

00:37:59.140 | of an illiquidity premium for doing that,

00:38:01.820 | but I can't prove it.

00:38:03.220 | And if you're giving up your liquidity

00:38:04.720 | for no additional premium,

00:38:06.660 | that might not be that smart of a move.

00:38:08.460 | So you need to limit it to enough of your portfolio

00:38:10.940 | that you're okay being illiquid on that.

00:38:14.140 | - You talked about having these limited partnerships

00:38:18.620 | in an account.

00:38:20.100 | Do you find that they're better in a tax deferred account

00:38:23.900 | or a taxable account?

00:38:25.380 | - In general, the equity syndications,

00:38:29.340 | I like having in a taxable account.

00:38:31.820 | And the reason why is if you put them

00:38:33.400 | in a self-directed IRA,

00:38:35.420 | you end up with an unrelated business tax.

00:38:38.700 | And so this UBIT tax that affects it.

00:38:42.740 | Now you can get out of that in a self-directed 401k,

00:38:45.140 | but most people, if they're trying to put these things

00:38:47.140 | into a tax protected account,

00:38:49.940 | they're doing it in a self-directed IRA

00:38:51.700 | or self-directed Roth IRA.

00:38:53.100 | And so the equity deals,

00:38:54.820 | I kind of prefer in a taxable account.

00:38:57.660 | But other deals are actually debt deals.

00:39:01.220 | For example, if you go to a private lending fund

00:39:05.580 | and you give them $50,000 or $100,000

00:39:08.260 | or $250,000, and they are using that,

00:39:11.340 | they pooled it with a bunch of other investors

00:39:12.980 | and they're using that to lend to developers.

00:39:15.660 | People that are basically taking out these short-term loans,

00:39:18.020 | six month loans, 12 month loans.

00:39:20.060 | These people borrowing the money might be paying 10 or 12%

00:39:23.140 | plus a couple of points on the money.

00:39:26.060 | And then of course, this fund has got 50 or 100

00:39:29.140 | different of these loans in it.

00:39:31.720 | But then basically all of this income is taxable

00:39:34.380 | at your ordinary income tax rate every year.

00:39:36.820 | And so it's not a very tax efficient investment.

00:39:39.740 | So if you're investing in a debt fund or a debt deal,

00:39:42.460 | that's probably a pretty good thing

00:39:44.020 | to put inside a self-directed IRA or a self-directed 401k,

00:39:47.940 | just because it's not very tax efficient.

00:39:50.120 | - Now, most IRAs and 401ks

00:39:53.780 | do not allow these type of investments.

00:39:56.180 | How do you get around that?

00:39:58.820 | - Well, you're not gonna be able to go to Vanguard

00:40:01.380 | or Fidelity or Schwab and open up your typical IRA

00:40:05.100 | and be able to invest in these sorts of investments.

00:40:07.500 | You have to go to a smaller shop

00:40:09.020 | that basically offers a self-directed IRA

00:40:11.980 | or a self-directed individual 401k.

00:40:14.460 | These are checkbook IRAs,

00:40:16.900 | where basically it forms an LLC with a bank account

00:40:20.740 | and you can write checks out of the bank account.

00:40:23.900 | So anytime you invest in something,

00:40:25.580 | you write the check out of this bank account

00:40:27.340 | inside the LLC that's owned by the IRA.

00:40:30.540 | And when it pays off income,

00:40:31.940 | it goes back into that bank account

00:40:33.680 | that's owned by the LLC that is owned by the IRA.

00:40:37.380 | And so obviously this can't be a summer home

00:40:39.740 | that you're gonna live in, that's not permitted.

00:40:42.420 | And you can't take the money out and spend it,

00:40:45.260 | that's an IRA withdrawal.

00:40:46.900 | So you're gonna end up paying taxes and penalties

00:40:49.180 | if you take the money out of there,

00:40:51.020 | at least while you're in the accumulation stage.

00:40:53.240 | So you have to be very careful to keep it separate

00:40:55.460 | if you're gonna do that sort of a thing.

00:40:57.560 | But there are plenty of people

00:40:58.880 | that have these self-directed IRAs.

00:41:01.380 | The fees are a little bit higher

00:41:02.740 | than you're gonna pay at Vanguard.

00:41:04.060 | For example, you go open a Roth IRA at Vanguard,

00:41:06.580 | there's basically no fees

00:41:07.980 | other than the expense ratio on the mutual funds.

00:41:10.100 | But if you go to one of these shops,

00:41:11.300 | it might cost you $500 to open the fund

00:41:14.180 | and you might be paying something like $125 a year

00:41:17.360 | to keep that self-directed IRA open.

00:41:19.620 | So the fees are definitely coming down.

00:41:21.260 | There's a lot more of these around than there used to be,

00:41:24.320 | but there's no doubt that it costs a little bit more

00:41:26.300 | to invest this way.

00:41:27.660 | And you've got to make sure that it is worth it to you

00:41:30.700 | to have the additional diversification

00:41:33.140 | and to have the potentially higher returns.

00:41:37.660 | Whether that's actually the case or not, it's hard to tell

00:41:40.140 | because there is no morning star for these investments.

00:41:43.580 | There's no Jack Bogle database common sense on mutual funds

00:41:47.760 | that has looked at all of these.

00:41:49.500 | And so in a lot of ways, it's a little bit similar

00:41:53.440 | to being out there trying to choose the winners

00:41:56.420 | and avoid the losers, which as we've seen

00:41:58.460 | with picking stocks in particular

00:42:00.780 | is a very difficult thing to do.

00:42:02.380 | - So that was actually my last question on real estate.

00:42:06.460 | And that has to do with how many of these deals

00:42:10.420 | do you want to do?

00:42:11.380 | I'm thinking, okay, if I want to put $250,000

00:42:15.380 | into these real estate limited partnerships,

00:42:18.340 | personally, I would say, what's the minimum?

00:42:21.340 | Yeah, is it 25,000?

00:42:22.540 | If it's 25,000, I want to buy 10, 10 different ones.

00:42:26.060 | Is that?

00:42:27.100 | - That's exactly the issue is the minimums

00:42:29.480 | tend to price a lot of people out.

00:42:31.260 | And so if your nest egg is $500,000,

00:42:34.460 | I mean, you're probably shouldn't be investing

00:42:36.100 | in these things at all because they're almost never

00:42:38.860 | have minimums less than $25,000.

00:42:42.020 | Those minimums are often 25, 50, sometimes $100,000.

00:42:45.900 | The really high end ones are sometimes 250,000

00:42:49.540 | or a million dollars a piece.

00:42:51.460 | And they often require you to be a qualified purchaser,

00:42:53.940 | which is even more than just being an accredited investor.

00:42:57.220 | And so you have to be realistic about this.

00:43:00.240 | You want to be diversified.

00:43:02.300 | You're not going to put 40% of your portfolio

00:43:05.660 | into one limited partnership.

00:43:08.060 | For example, my portfolio calls for having 5% of my money

00:43:12.860 | in these private lending funds.

00:43:15.180 | And so if you're going to have 5% of your money in a fund

00:43:19.000 | and you want to have at least three of them or so,

00:43:22.800 | so you're at least somewhat diversified there,

00:43:25.580 | then you're obviously going to have to have a portfolio

00:43:28.060 | that is substantially sized.

00:43:30.100 | Because if you only have a million dollar portfolio,

00:43:32.140 | 5% of that is only $50,000.

00:43:34.220 | If these things all have $50,000 minimums,

00:43:36.220 | you're not going to be able to be diversified

00:43:37.660 | in that asset class.

00:43:39.300 | And so I think there's some wisdom in avoiding this

00:43:41.980 | until you have a portfolio of a certain size,

00:43:44.220 | not necessarily because you have to invest differently

00:43:47.040 | at a large portfolio size,

00:43:48.780 | but simply because you have to have something that big

00:43:51.680 | in order to maintain a reasonable level of diversification.

00:43:55.140 | - So Jim, just to put a cap on this real estate,

00:43:58.920 | you've mentioned different ways

00:43:59.940 | in which you can invest in real estate,

00:44:01.820 | through REITs, through debt funds,

00:44:04.060 | through private limited partnerships

00:44:06.980 | that invest in apartments and so forth.

00:44:09.840 | Could you tell us what your own portfolio,

00:44:12.300 | how much you have allocated and how it's allocated?

00:44:15.740 | - Sure, absolutely.

00:44:16.820 | So my portfolio is still 85% index funds.

00:44:20.840 | So it's 60% stock and 40% of the portfolio is in U.S. stock,

00:44:25.580 | a total stock market fund and a small value fund.

00:44:28.920 | 20% of the portfolio is in international stocks,

00:44:31.640 | basically the total international stock market fund

00:44:34.420 | and the international small fund there at Vanguard.

00:44:38.620 | And then I've got 20% in bonds.

00:44:41.100 | I use the TSPG fund for most of them,

00:44:43.380 | but I've got some money

00:44:45.340 | in the Vanguard Intermediate Muni Bond Index Fund.

00:44:48.860 | And then 10% of my portfolio in a TIPS fund.

00:44:53.680 | And then the last 20% is in real estate.

00:44:56.160 | So 5% of that is in the

00:44:57.360 | Vanguard Real Estate Investment Trust Index Fund.

00:45:00.300 | And then the last 15% is in these kind of private investments

00:45:04.340 | that I've talked about.

00:45:05.180 | About 5% in debt funds and 10% in equity deals,

00:45:09.340 | whether they're individual syndications or private funds

00:45:13.820 | that are basically eight or 10 or 15 syndications

00:45:17.580 | rolled up into one big fund.

00:45:19.840 | - You know, Jim, we hear a lot about the FIRE movement,

00:45:23.200 | Financial Independence, Retire Early.

00:45:26.000 | Everything you write about,

00:45:27.000 | the 12-step program and everything,

00:45:29.220 | that is the FIRE movement.

00:45:31.200 | Do you consider yourself part of this movement?

00:45:33.640 | - You know, I don't think I'm actually part of the movement.

00:45:37.900 | I'm technically financially independent.

00:45:40.520 | I don't need to work for money at this point.

00:45:43.020 | But obviously, I'm not only working, I'm doing two jobs.

00:45:45.840 | You know, I'm running the White Coat Investor

00:45:47.280 | and I'm still practicing medicine.

00:45:49.280 | And so, the Retire Early part doesn't quite fit me.

00:45:53.280 | I think I'd probably be bored if I wasn't working at all,

00:45:56.040 | although I have lots of outside interests.

00:45:58.000 | Mostly, I just feel really passionately

00:45:59.560 | about what I'm doing, both at the hospital

00:46:01.520 | and in helping high-income professionals

00:46:05.400 | like physicians and dentists and attorneys, et cetera,

00:46:08.280 | to get a fair shake on Wall Street.

00:46:10.180 | And so, I don't know that it fits me so much,

00:46:12.140 | but certainly the principles are all the same.

00:46:14.040 | I mean, FIRE is really just a matter of saving up

00:46:17.240 | 25 to 30 times your annual living expenses

00:46:21.720 | and then realizing you don't have to work for money.

00:46:24.000 | Now, you might still work for money,

00:46:26.440 | but you don't have to work for money.

00:46:27.840 | And that's really all FIRE is.

00:46:30.020 | That said, I think a lot of people that are into FIRE

00:46:33.960 | might just need a different job,

00:46:35.520 | a job they feel more passionately about that is more fun.

00:46:39.960 | I meet a lot of burned out docs, and you know what?

00:46:43.320 | If they would just cut back to full-time even,

00:46:46.560 | 'cause so many of them are working more than full-time,

00:46:48.160 | they just cut back to full-time,

00:46:49.820 | they would remind themselves of the joy

00:46:51.680 | they found in their career in the first place

00:46:53.560 | and why they spent their entire 20s training to do it.

00:46:56.920 | And so, I think there's a lot of people

00:46:58.360 | that are maybe not in jobs they enjoy,

00:47:01.720 | that if they could just find out

00:47:03.060 | what they wanna do for their life,

00:47:04.800 | they might realize that it actually does come

00:47:06.840 | with a paycheck, and that's okay.

00:47:09.800 | So, I don't know that I'm a specific FIRE groupie

00:47:13.040 | by any means.

00:47:13.880 | I understand the principles.

00:47:15.760 | I think it's useful, but it just would seem sad to me

00:47:20.760 | to punch out of the workforce at 35

00:47:25.000 | and spend the rest of my time rock climbing

00:47:27.760 | and traveling around the world.

00:47:28.840 | What I suspect would happen is I'd be back by 40

00:47:31.620 | trying to do something that I found meaning in

00:47:34.360 | with the life.

00:47:35.200 | But the nice thing about being financially independent

00:47:37.960 | is you can choose something that you find meaningful

00:47:41.760 | that doesn't come with a paycheck

00:47:43.200 | or doesn't come with much of a paycheck.

00:47:45.560 | And so, I think it would be good

00:47:47.080 | if more people understood the principles of FIRE,

00:47:49.660 | even if they choose not to necessarily retire early.

00:47:53.080 | - Jim, every time I have a guest on the show,

00:47:56.080 | I'll post who that guest is going to be

00:47:59.280 | a couple of weeks prior to the interview

00:48:02.040 | and the Bogleheads on bogleheads.org

00:48:04.480 | will come up and ask their questions

00:48:07.120 | that they would like me to ask you and the other guests.

00:48:11.280 | So, the following questions I'm gonna ask you

00:48:13.480 | came from the Bogleheads forum.

00:48:16.560 | And of course, one of them has a near and dear to my heart.

00:48:19.760 | And so, I'm gonna ask the question,

00:48:21.520 | what's a fair fee to pay an advisor

00:48:26.160 | for both the asset under management model

00:48:29.700 | and under the hourly fee model?

00:48:32.880 | Now, be careful because you know I'm an hourly fee advisor.

00:48:35.880 | - Yeah, I think the general advice

00:48:39.120 | for somebody who wants to hire somebody

00:48:41.440 | to do both financial planning and asset management

00:48:45.840 | is that a fair price is a four figure amount per year,

00:48:49.520 | somewhere between a thousand and $10,000.

00:48:52.400 | If you are paying more than $10,000 a year,

00:48:54.920 | I can almost surely find you an advisor

00:48:58.280 | who will do at least as good of a job for less money.

00:49:01.960 | But whether that is charged as an asset under management fee,

00:49:05.520 | an annual retainer or an hourly rate,

00:49:08.040 | I am not as particular on,

00:49:09.760 | so long as you do the math each year.

00:49:12.160 | The problem is some people don't do the math each year.

00:49:14.600 | When you have a $100,000 portfolio,

00:49:17.460 | paying 1% a year is a screaming deal.

00:49:21.200 | When you have a million dollar portfolio,

00:49:23.040 | it's not nearly as good of a deal.

00:49:24.740 | When you have a $5 million portfolio,

00:49:26.760 | you're being ripped off.

00:49:28.320 | And so, you've gotta do the math each year

00:49:30.360 | and compare that to what you could get it for

00:49:32.840 | as a flat fee or as an hourly rate.

00:49:36.000 | Certainly, there is more of a push in the last few years

00:49:39.040 | to move from asset under management fees

00:49:40.960 | toward hourly rates or toward a set annual fee

00:49:44.920 | for asset management or for creation of a financial plan.

00:49:49.240 | And I think that's a good thing.

00:49:50.640 | I think having more options there is very, very helpful.

00:49:54.840 | And I think that we're gonna see

00:49:58.120 | a lot more financial advisors charging under that model,

00:50:01.520 | maybe being a little bit more transparent

00:50:03.320 | and encouraging people to actually understand

00:50:06.040 | what they're paying in fees.

00:50:07.880 | So, a lot of people these days are really anti-AUM.

00:50:11.000 | I don't think we necessarily have to be anti-AUM,

00:50:14.360 | but the problem is a lot of AUM charging advisors

00:50:17.440 | do not scale back those AUM fees as the portfolio grows

00:50:21.160 | nearly as fast as they should.

00:50:23.200 | And so, at that point, as your portfolio grows,

00:50:25.840 | you've either got to be able to negotiate that rate down

00:50:29.080 | or you gotta start looking for another advisor

00:50:30.760 | because it just doesn't make any sense

00:50:32.280 | to be paying $30,000, $40,000, $50,000 a year

00:50:34.640 | in advisory fees as that portfolio grows.

00:50:36.840 | AUM itself isn't inherently a bad way to charge.

00:50:42.720 | It's just that it has to be aligned

00:50:45.480 | with the amount of work the advisor is actually doing.

00:50:47.960 | And as you said, for $100,000, it is aligned,

00:50:51.920 | but when you get up to a million-dollar account

00:50:54.480 | and you're paying 10,000, it's no longer in alignment.

00:50:57.240 | It doesn't take any more time

00:50:59.080 | to manage a million-dollar portfolio

00:51:01.240 | than it does a $100,000 portfolio.

00:51:03.120 | It's just that the fee is 10 times more.

00:51:05.400 | - Agreed.

00:51:06.400 | - Let me get to another issue here.

00:51:08.280 | It has to do with robo-advisors.

00:51:10.600 | I'm talking about Wealthfront, Betterment,

00:51:12.240 | and a number of others.

00:51:14.440 | How do you feel about these robo-platforms

00:51:17.480 | where you just send them money

00:51:19.480 | and they invest in a series of ETFs

00:51:22.280 | and do rebalancing and tax management and everything else?

00:51:25.900 | - I think they're great for a few reasons.

00:51:27.920 | First, they kind of put some downward pressure

00:51:31.360 | on advisory fees, on asset management fees.

00:51:34.880 | When somebody says, "Well, I can go to Betterment

00:51:36.580 | "for 0.3 or whatever they're charging right now,

00:51:39.040 | "and you want to charge me 0.8.

00:51:40.460 | "What are you doing that's better

00:51:41.560 | "than what Betterment's doing?"

00:51:43.120 | So I like that aspect of it.

00:51:45.400 | The problem is I don't think these are very practical

00:51:48.520 | for very many physicians.

00:51:50.520 | And the reason why is they generally don't do your 401(k)

00:51:54.080 | or other employer plans.

00:51:56.480 | So they'll do your taxable account,

00:51:57.960 | they'll do your IRA or Roth IRA,

00:51:59.880 | but they generally won't do your 401(k), et cetera.

00:52:02.920 | And so that leaves you in a position

00:52:04.640 | of what am I gonna do with the 401(k)?

00:52:07.440 | And you either have to learn to do it yourself,

00:52:10.880 | which brings on the question,

00:52:11.880 | "Well, if you can do the 401(k) yourself,

00:52:13.500 | "why can't you do the IRA yourself?"

00:52:15.880 | Or you hire an advisor, which brings on the question,

00:52:19.260 | "If you need an advisor for your 401(k),

00:52:21.460 | "why aren't you just having that advisor

00:52:22.760 | "manage the entire portfolio?"

00:52:24.840 | And so I think there's actually a pretty small niche

00:52:27.120 | of people for whom a robo-advisor is the right solution.

00:52:31.400 | The other issue I think people run into,

00:52:33.120 | particularly in a taxable account,

00:52:35.640 | is they might have these rather complex portfolios,

00:52:38.320 | and they're usually low cost and they're usually reasonable,

00:52:41.120 | but they're fairly complex.

00:52:42.880 | And so all of a sudden,

00:52:43.980 | you've been in this robo-advisor account

00:52:45.760 | for two or three years, it's made some money,

00:52:47.920 | so you have some capital gains in there,

00:52:49.880 | and you decide you don't wanna do that anymore,

00:52:52.640 | but now you've got 15 different holdings to unwind,

00:52:56.000 | because that's how the robo-advisor has been managing it,

00:52:59.560 | between all the tax loss harvesting

00:53:01.340 | and trying to be diversified

00:53:03.160 | and trying to be complex enough to earn their fee.

00:53:05.660 | And so I think people run into a few problems like that

00:53:08.880 | if their goal was only to use the robo-advisor

00:53:10.800 | for a couple of years,

00:53:11.920 | and then either go to a regular advisor

00:53:14.600 | or do it on their own.

00:53:16.360 | I think in a lot of ways,

00:53:17.360 | people would be better off just choosing a life strategy

00:53:19.480 | or target retirement fund for those years

00:53:22.040 | when a robo-advisor is the right thing for them to do.

00:53:25.000 | - I think you're absolutely right

00:53:27.640 | about robo-advisors in tax-deferred accounts,

00:53:30.440 | where when you decide to leave the robo-advisor

00:53:34.120 | and go do something else after a while,

00:53:37.100 | you could sell all those securities

00:53:38.520 | and not have to worry about taxes.

00:53:39.800 | But I just looked at a,

00:53:41.760 | one of the robo-advisors did a portfolio

00:53:45.320 | for a client of mine, 40 different, four zero,

00:53:49.080 | 40 different ETFs in a taxable account.

00:53:52.840 | I mean, it is so convoluted and so confusing.

00:53:56.720 | This was a well-known robo-advisor.

00:53:59.120 | I mean, this is not an obscure one.

00:54:02.020 | And as you're doing this tax loss harvesting

00:54:04.720 | and taking losses here, taking losses there,

00:54:08.200 | and swapping from these funds to those funds,

00:54:10.720 | in a taxable account, it becomes a growing furball.

00:54:15.200 | And if you try to get out of it, it's just a mess.

00:54:17.800 | You really lose track of what this thing is.

00:54:20.960 | So I'm all for the robos and IRA accounts

00:54:25.240 | and SEP IRAs, simple IRAs, things like that.

00:54:28.520 | But when it comes to a taxable account,

00:54:30.760 | I just prefer a total stock market index fund,

00:54:33.420 | total international index fund, leave it at that,

00:54:36.560 | do all the other stuff and tax-deferred accounts,

00:54:39.280 | my view of it.

00:54:40.240 | - Yeah, I think there's a lot of wisdom there.

00:54:42.440 | And in fact, if you look what's actually

00:54:44.040 | in my taxable account, it's total stock market,

00:54:46.760 | total international stock market,

00:54:48.680 | a municipal bond fund and some real estate holdings.

00:54:52.280 | - Well, let's get into the last Boglehead question

00:54:54.320 | before we wrap up.

00:54:55.200 | And it has to do with investments for the future

00:54:58.960 | and particularly cyber currencies.

00:55:02.800 | Do you see a future for this?

00:55:05.240 | - Wow, my crystal ball is cloudy as always.

00:55:09.840 | I thought it was fascinating to watch the Bitcoin bubble

00:55:13.080 | a year ago or so.

00:55:14.240 | I mean, it was a classic mania.

00:55:17.080 | But instead of it happening over a few years

00:55:19.560 | or at least a few months, it happened over a few weeks.

00:55:23.080 | It was like something out of all these financial history

00:55:25.960 | books you've been reading over the years,

00:55:27.440 | but you got to watch it in real life.

00:55:29.600 | As all of a sudden the nurses at the hospital

00:55:32.000 | and the housekeepers were talking about their Bitcoin

00:55:35.080 | and it went very rapidly up to, I don't know,

00:55:37.780 | 20,000 of Bitcoin and then collapsed and lost,

00:55:40.880 | I don't know what it was, 75, 80% of its value

00:55:43.520 | over a matter of a couple of weeks.

00:55:46.200 | You know, I thought it was really fascinating to watch.

00:55:48.880 | I don't think it's a good investment.

00:55:50.360 | It doesn't have a place at all in my portfolio.

00:55:52.720 | It's entirely a speculative instrument.

00:55:55.200 | And I try to avoid putting serious money

00:55:58.280 | into speculative instruments like that.

00:56:00.240 | I like things that, you know, are actually productive assets

00:56:04.720 | like stocks in profitable companies

00:56:07.520 | and real estate that pays rent

00:56:09.480 | and interest-bearing investments like bonds, et cetera,

00:56:14.320 | rather than just pure speculative investments

00:56:16.440 | like gold and Bitcoin and beanie babies.

00:56:20.000 | And so it doesn't really have a place in my portfolio.

00:56:22.920 | - So we've got a big conference coming up

00:56:25.360 | and then also you've got an online course

00:56:27.040 | that people can take.

00:56:28.280 | I watched the preview, it looks very interesting.

00:56:30.080 | It's about the 12-step program.

00:56:31.840 | So just tell us a couple more of these other things

00:56:33.960 | that you're expanding into.

00:56:35.760 | - Sure, well, my idea is just to get this same information

00:56:39.160 | into whatever format people prefer.

00:56:40.800 | If they read blogs, that's great.

00:56:42.880 | If they like forums, you know, we've got a forum.

00:56:45.640 | If they like Facebook groups, we've got that.

00:56:48.120 | Podcast, if you like listening to podcasts, you name it.

00:56:51.200 | But the conference, this will be our second one.

00:56:54.080 | It's going to be in Las Vegas.

00:56:55.760 | And I thank you for being willing

00:56:57.000 | to come out and speak at it.

00:56:58.680 | We've got almost 800 people coming.

00:57:00.600 | Most of them are physicians and dentists.

00:57:02.840 | And it's called the Physician Wellness

00:57:04.720 | and Financial Literacy Conference.

00:57:06.800 | And it qualifies for some continuing

00:57:09.360 | medical education credit, mostly the wellness stuff,

00:57:11.840 | not so much the financial stuff.

00:57:13.760 | But it's a great three-day rendezvous

00:57:16.160 | where you can come and talk to people about money,

00:57:18.720 | a subject that maybe there's nobody else in your life

00:57:21.080 | that has a similar situation

00:57:22.480 | that you can talk to about money.

00:57:24.600 | You hear from some of the best speakers out there.

00:57:26.920 | We always have a sweet swag bag.

00:57:29.000 | Our swag bag this year has six or seven books in it.

00:57:31.920 | And so you leave with plenty to read on the plane home,

00:57:35.480 | which by itself would provide a fantastic education

00:57:38.360 | to an investor, even if you do nothing but show up,

00:57:40.960 | pick up the swag bag and read the books.

00:57:43.160 | And so we're excited for that.

00:57:45.200 | The other thing you asked about was the online course.

00:57:47.560 | And I came up with the online course

00:57:49.440 | because I found a need for people

00:57:52.160 | that wanted to be do-it-yourselfers,

00:57:54.800 | but weren't quite ready to do it.

00:57:57.680 | And so, you know, there wasn't a lot in the space

00:58:01.640 | between sending them to an advisor,

00:58:03.400 | a full service advisor,

00:58:04.400 | that might charge them several thousand dollars a year,

00:58:06.560 | versus telling them, go ask some questions on a forum

00:58:09.160 | and read some books at the library.

00:58:10.880 | But this, the idea here, is to help somebody

00:58:14.280 | put together a written investment plan by themselves

00:58:17.040 | that they understand and that they can follow.

00:58:19.000 | And so it takes them step-by-step

00:58:20.640 | through how to write a financial plan.

00:58:22.680 | And it's about eight hours of videos

00:58:24.880 | of my voice over screencasts,

00:58:28.320 | you know, slides and that sort of a thing.

00:58:30.240 | Each section has a quiz.

00:58:31.920 | There's a pre-exam and a post-exam

00:58:33.880 | to show you how much you learn during the time period.

00:58:36.240 | And the idea is that at the end,

00:58:38.160 | you come out with a written investing plan,

00:58:41.120 | a written financial plan for your student loans,

00:58:43.120 | your insurance, your investments, et cetera,

00:58:45.160 | that you can follow to investment success.

00:58:48.200 | I called it Fire Your Financial Advisor,

00:58:50.440 | which didn't make a lot of the financial advisors

00:58:52.560 | who advertise on my site happy.

00:58:54.280 | But the truth is, the whole first module

00:58:57.880 | is how to interact with a financial advisor.

00:59:00.320 | And a lot of people take that course and just say,

00:59:03.120 | you know what, this isn't for me,

00:59:05.280 | but now I'm much better prepared to select

00:59:07.760 | and work with my financial advisor.

00:59:09.920 | And I'm perfectly fine with that.

00:59:11.320 | I think that's a good use for the course as well.

00:59:13.760 | - Sounds like all great stuff, Jim.

00:59:15.960 | Thank you so much for your time today.

00:59:18.360 | And we're all looking forward to great things ahead.

00:59:21.080 | - Awesome, thank you for having me on.

00:59:22.720 | - This concludes the 19th episode

00:59:24.880 | of Bogleheads on Investing.

00:59:26.920 | I'm your host, Rick Ferry.

00:59:29.120 | Join us each month to hear a new special guest.

00:59:32.440 | In the meantime, visit bogleheads.org

00:59:35.840 | and the Bogleheads Wiki.

00:59:37.560 | Participate in the forum and help others find the forum.

00:59:41.800 | Thanks for listening.

00:59:43.600 | (upbeat music)

00:59:46.200 | (upbeat music)

00:59:48.800 | (upbeat music)

Bogleheads® on Investing Podcast 019 – Dr. Jim Dahle, host Rick Ferri (audio only)

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