WCI #394: Index Funds, Real Estate, and Buying Into Your Practice
48:56 Share

This is the White coat investor podcast where we help those who where the White coat get a fair shake on wall street. We've been hoping doctors and other high income professionals stop doing dumb things with their money since two .

thousand eleven. This is White con investor podcast number three, nine, four. Today's episode brought to by so far up in medical professionals like us, bank are invest to achieve financial wellness, so I offers up to four point six percent API on their savings accounts as well as an investment platform financial planning student on refinancing feature an exclusive rate discount for mid professionals one hundred dollars th payments for residents check out all the sofa offers A Y code investor dotcoms flash socii ones are regional by soap I bank and a analytic and sixty nine one buys resources by soap I wealth hello sea brokers products is often by soap security I L C M S I D C best comes to the rest conclusion risk lower edition ms and conditions may apply all right, we are back to a regular by code investor podcast episode. I'm not gonna spend all day today talking about climbing.

If that was super boring for you the last couple of weeks, i'm sorry. IT was a big part of our lives for a while here. And so we felt like there are enough people interested in the story and we thought was an interesting enough story that they would decide to spend some time sharing IT with you.

But we're not going be doing that today. We're going be talking about finances, a lot of finances. And that's okay because, uh, this is what we do.

My goal is to help you to be financially successful. This is just as important to me now that was a year ago and ten years ago. And uh, that's because I believe in what you do.

I think what you're doing important whether your doctor and I have an obviously a great new appreciation for doctors, uh, whether you are a uh, attorney, whether you are a business owner, whatever you're doing, you're doing some great work person people out there and get to be proud of yourself. And thank you for doing that is a big deal and we want to help you to be successful. You worked way too hard to not be financially successful.

All right, let's start with a few corrections. The first one, thankful, not even my mistake, but we are corrected. Uh, this is something larger, said, and just got a little bit backwards.

I think he understood this, but uh, just the way I came out didn't come over quite right. SHE said that you were allowed to rule money over from a rough I R A to a five twenty nine. That is not the case, right?

The new thing that came out with the security to point out is that after you've had the money in a five twenty nine for fifteen years, you can actually roll some of IT out to a roth I array in place of your regular or the beneficial is regular roth array contributions a total of thirty five thousand dollars. Now obviously, I can take a few years to get thirty five thousand dollars out of the five twenty nine into a routh array. But that's the way IT works.

IT does not work in reverse. You still can make roth I ra to five twenty nine rollos. Uh, a more important correction has been, you know, coming in over the last few months in response to some of what i've written and others on this podcast of said about H S S.

And when they should be used. And I think the moral, the story is that we need to put a little more new ones into this discussion of whether to use, uh, high duck of health plan or not. Uh, you know, obviously we all think is great because you get this cool triple tax free accounts and you can put more eight thousand dollars in there a year if you're a family and it's really cool, right?

Because you can invest ate sa and then I can be a healthy I array. You know it's a it's a great, great account to investors. First thing we we max out every year.

I mean, this is first week, january kind of stuff around here at the dolly household, but there is some new wants to this discussion that maybe we need to have today. The first one is some interesting data that was provided to me by email from one of you listeners. And basically, i'm going to read a little bit from this.

This listener said, I think it's important to emphasize to the White code community that the hydro's health plans that allow the use of an nature, say may Carry some downsides, which the H. S. Says may only partially counteract in a ticket junes. A, S, C, O, the american society of clinical oncology meeting just embarrass from washington university, gave a talk demonstrating the individuals with hyde's cable health plans or more likely to be Younger, privately insured and have a higher income than those with none I D duck will help plants.

Okay, what kind of expected? right? And yet, cancer survivors among the hydeman cable health planes describes have an increased risk of death as compared to survivors with non high deductable health plans, to the tune of a hazard ratio of one point four six.

That confidence interval is significant, one point one nine to one point seven nine. This is fascinating to me, right? I've never heard this before that anybody has studied this. Basically, people with hybrid cable health plans were more likely to die from cancer than those who did not have adductor health plans.

So, uh, doctor bornes, I prothesis that the a hydrogen alth plans may financially disincentivize cancer survivors from using necessary medical care, compromising their outcomes even among patients with good prognostic features like higher education and income. The emails that not presented in the talk, but reference by the presenters that the A C S has shown that an H, S, A might mitigate the access risk. Now there's some limitations.

Is that analysis right? There's some selection bias, maybe generated definition of a hydro tal health land, right? The arrest in that definition and the one time assessment of patients who might recently transition to or from hyderabad able health plans and of course, the small number of patients that are diagnosed with cancer.

So this is not gospel until IT is um you know shown to happen over and over and again in confirming tory studies, but is something to think about, right? Maybe I druck help plan. Isn't the cats me out? Even when he gives you access to a health savings plan, I have always empathized for years that you need to choose the right plan for you and your family first.

And then if that right plan happens to be hyde duct oil plan, then using aga. Now there are some additional benefits, the H, S, A, that maybe ought to be added into that decision, right? But don't do anything to get an H S A, I think, is the point is possible.

We'll even lead you to get worse health health care outcomes. So I think that was an important discussion to have an important thing to add to our discussion. Another email, uh, I got recently was an interesting situation that a doctor had. And that also made them wonder about, you know, the kind of rules of thun around hs, around there. This, uh, listener said, my husband are both employees of large academic medical center research foundation.

One of the executive compensation benefits provided to positions and scientists on is a reimburse sen account of ten thousand dollars per staff member per year that can be used to reivers oneself for qualifying dental services or orders for copies for some out of network medical services because my husband, I each qualify for this benefit do to our employment rules as a family have access up to twenty thousand dollars per year of free money for qualifying expenses while navigating A H. R. System to change your medical insurance elections to hydrocyanic.

I discovered that making the switch would eliminate eligibility for our reimbursement accounts, and they typically use like three thousand knowledge per year of those reimbursement dollars. The point that the email was making was IT didn't make sense for them to use a hydrogen health plan, right, even though, he say, because they were given up this other huge benefits that the employer offered. Now I don't think this particular employer benefits very common at all.

But if you have IT, you lose IT by using a hydrogen health plan. There's a good chance that's not the right plan for you. The bottom line is, is really hard to make rules of thumb about what health insurance plan you should use.

You got ta look at your situation. You ve got to run the numbers both ways right for high deco plan verses, you know A P P O plan or some other type of non hydro plan and you have to make a decision is right for you. You had to taken the tax benefits of the health savings account into that discussion.

Run the numbers, make the best guess you can. Now obviously, some years you're still gna pay your max out of pocket. Twenty twenty four was a year like that for us.

We generally don't pay our max out of pocket. We usually don't even pay our ductor. Most years, educable health plan works very well for us. But guess what? This year I spent an awful a lot of money on health care.

My three day I C U stay where the main treatment there was, uh, me sitting up in bed for three days, know the bill for I was over hundred thousand dollars even after insurance. He was over fifty thousand dollars just for that portion of my care. But I hit my max out of pocket before ever got to the hospital.

So you know, if you're using a lot of uh of health care, if you're consuming a lot of health care, there's a good chance that whatever has the lowest max out of pocket is going to be the best deal for you, even if the premiums are a little tired or even if that means you can use an H S C. But you've got to run the numbers, okay? Um I don't think we can just use rules of thun and you make that decision as easy as I would like IT to be.

Just you gotta put a little more to choose in the right health plan each year. I'm sorry, I wish our medical system wasn't so complicated. Um but IT is and most of are just trying to to live with in IT or incomes and a take care of families is best weekend.

All right, let's get into some other questions. Now this one comes from Chris. He has a just about index funds, so let's take a listen to that.

Hi, dog. This is Christian florida. First of all, thank you for all that you do. I had been bingeing the podcast for the last two years or so while keeping up with new podcast that have come out as well and almost caught up.

Obviously, after listening to all that content, I know how much of a failure of the low cost index one. I was even at your keynote address about index funds at this year's W. C.

Icon in orlando. I was hoping you could explain more about how these phones actually work in regards to their top ten holdings. The information about the top ten stocks held in these funds is easily found in a basic google search, but how, for example, and a total star market index.

To the top ten stocks in the fund come to account for nearly thirty percent of the total fund at the time of asking this question. Twenty nine point six nine percent of v ti is made up of the top ten front holdings despite heading over thirty seven hundred stocks in the fund. Can you walk us through how this came to be?

Is this the goal of the fund? Is new money in the fund buying more or less of these companies? Are there any regulations or by us the funds have to follow? Any inside you have would be gracious, appreciated. Thanks again.

Okay, good question. Uh, let's talk a little bit about index funds. okay. Index fund is a passively manage mutual fund s mutual funds we like, mutual funds are good.

They give you professional management, they give you an economy of scale on the cost of running to fund, they give you wide diversification, they give you daily liquidity is a good thing, and that that is very clear that in the long run, passively manage funds, A K A index funds are likely outperformed the vast majority of actively managed funds investing in the same stocks. So I I think it's pretty clear that index funds are the way to invest in stocks. I don't think there's a lot of doubt about that.

I think most W, C, I S. Know this, but this didn't do a little bit of tell about this. Now everything, all the facts you listed in your question are true.

You know as I go to morning star and look up B T I or B T sax, which is a mutual on version uh of the backyard total start marketing next fund, I see the apple makes up six point one percent of the fun. It's a big company, right? Look in your pocket what's in there as right? There's a fifteen hundred doors computer in your pockets that contains the world's knowledge.

Uh, they make a lot of these. And guess what, the computer sit on my desk, both of them are apples, right? We buy a lot of apple crap, and the apple makes a lot of money, is a very valuable company.

And when IT makes money, I make money. When IT makes money of you own V, T, I or V T sex or some other index fund, you also make a lot of money. But because it's such a big company, IT does make up six percent of that index fun index funds.

The best majority of them in way are capitalization. Visit, right? Bigger the company, the more of the index IT makes up.

IT turns out that apple is a bigger company, capitalization wise, then hundreds of the smallest companies in the country is a very, very large company. IT makes a lot of money. IT has a lot of employees as a great deal of profit, a great deal of sales.

IT set right is just really big, and that is how funds are designed. Now there are some great benefits to a capitalization waited index. Basically, you are the owe the next apple. Whatever IT may be, whatever is, is gonna huge.

Fifteen years or now you are the own IT you probably bought IT low IT wasn't worth nearly as much and in fifteen years you can be super happy that you got to write IT uh you know enjoy its ride to the top of the charts but that's the wake capsizing works. Um you basically taking the stock Price times the number of shares that are out there as the market capitalization. You know the next biggest companies, microsoft, five point seven percent.

Then in video, five point one percent. You know they weren't big deal. They mostly just made like graphics chips for gamers for a while, but IT turned out that those chips were really important when A I came along.

Now, in video is the third largest company in the U. S. Amazon's fourth, three percent.

Meta, right? Facebook, two percent. Alphabet or google, almost two percent.

But cha has away, right? Warn buffets insurance company is one point five percent E I lily, right? We've heard of that one before.

Um IT comes next alphabet, uh, class c right. So the class a shares are one point seven percent. The class c shares are one point four five percent.

So together a google basically three percent of the U. S. Stock market index capitalization and broadcom h comes last.

Uh in the total of now. Is the U. S.

Market currently a little more concentrated in the top ten holdings than use? Or yes, IT is IT is more concentrate, but always IT has been concentrated in the top and odds because its capitalization waited. These are the biggest companies.

So um you know I think historically, if you look back and might only be you know fifteen or twenty percent of whatever on average, I don't know what the average is, but is less than twenty, twenty nine percent whatever is now. But this just reflects the incredible run that number one, U S. Stocks have had, number two, large stocks have had, number three, growth stocks have had, number four, tech stocks have had.

So these large U. S. Growth tech stocks have grown dramatically in comparison to the rest of the U. S. Stock market.

And that is resulted in them being at the top of the list and then making up such a large percentage of the overall stock market. And that obviously the pendulum swing s right. We don't know when it's going to swing, but IT does swing.

The stock market look at is similarly back in early two thousand and then IT swan is swung g away from the large growth y techy stocks right in small and values and boring stocks. And the international stocks did Better for like a decade. The U.

S. Overall stock market index didn't do very good from two thousand, two thousand and ten. He was basically flat, I think was slightly Better than flat, but not by much.

Where's international stocks did Better. Small stocks did Better. Values stocks did Better.

So this is something you worry a lot about. You might want a portfolio to look somewhat similar to mine. And when we look at our U.

S. Stocks in our portfolio, we've got twenty five percent of the portfolio in boring all B T I or V T sex right a total U S. Stock market which is of course dominated by large growth y tech stocks.

But we've also got fifteen percent of our portfolio in small value stocks, right, which is like three or four percent of the stock market by capitalization. Um but there's some data out. There's suggestion that in the long run, small and values stocks outperform.

That has not been the case over the last twenty years, right? That has been the wrong way to bed over the last twenty years because of this outperformance of large growth tech sox. But I think that pension swing at some point, I have no idea where or win.

But what we're to stay the course with the portal all day. We've had the last twenty years. And when small and value stocks out perform, we're going to read the rewards of doing that.

If this is something that worries you a lot, the fact that your money and in a total market index is concentrated in a few stocks, you might want to consider tilt in some of your your portfolio towards something like small and value stocks as well. But othe wise, this is a feature of a capitalization waited index, not a bug. So I wouldn't spend a lot of time line awake at night about IT even after the penguin swings.

And small value out performs large growth for a while. The top ten holdings in the market are still gonna fifteen and twenty percent of the market, right? That's just the way is going to work because it's a capitalization waited market.

The alternative to the capitalization waited market is like an equal waited index fund and that, that was the same amount of money into every stock. And that's really hard to run for a lot of reasons. IT is uh uh you know more complex and more expensive to run.

And h mostly all you're doing is giving your portfolio small and the value till. So if you want to do that, I just encourage you to put some your money into a small value fun. And we've talked about that on the podcast before, certainly have blog about at many, many times on the blog, but I think that's probably Better option.

And then using an equal waited index, but you will see a few of those out there. And if you think those are cool and cast me, you can invest in map instead of a capitalization waited market index. But I think, uh, I think the capitalization waited ones like B, T, I or B T, sex, the fidelity swab or eyes shares equivalent are are just fine to use and obviously make up a huge percentage of our portfolio.

And obviously, of the last twenty years, that is road as well. Helps that helpful. Hey, if you need a little little extra income and don't want to spend a lot of time or a lot of effort doing IT, I encourage you looking into some of these physician surveys we have out there.

You got a White investigate com slash paid surveys. You can look at what's available for some special there's a lot of well for other specialists is less. But the more you know expensive drugs and treatments you tend to use in your specialty, the more likely you are to have lots of surveys available to you.

These companies, whether their farmer or device companies or whoever they want your opinion, they're willing to pay for IT and sometimes on an hourly rate that works out Better than your clinical work. And you can often do this in canada time. You know what you said watching A A really boring high school foobar game or while you're commuting on the train or you know why you're washing T V.

And vegin at the end of the night, you can knock out a survey or two, and you'd be surprised this stuff can add up. Uh, I know a few dogs are making tens of thousands of dollars a year on just doing paid surveys. So take a look at check in out. I can invest that com such paid surveys. Let's take our next question from mike.

I, dr. Di, this is mike from the midwest. Appreciate all that you've done. Uh, for, uh, I had a moderate in the weeds question to ask.

I have a solo for one key through my solo for one key that net, which I greatly appreciate your recommendation on, I had taken out a loan on the solver, a adresse in some real estate this year um partially because of those real state investments. I'll have a lower w two income year than most. I therefore one to roll my solo four one k into a rock vira.

Um my question is I know I can rule what I have currently in my solo for one key into the rose. I have no pro rada issues. The question is, can I also put the indeed part of my solo for one k which i've borrowed into the house and pay off in the rough, I guess is no.

But if I could be pretty cool as a double secret backdoor roth, and i'd be pain. My uh solo and four kale back with nine percent interest. Uh preciate your thoughts and appreciate the show. thanks.

Okay, my greg question. I love IT. I don't think i've ever had this question before. Uh, we are saying a lot after a you know, whatever run four hundred podcast or something, I R S can have loans you can borrow from your I R A.

So if you converted this to an I R A, know whether there is a traditional I ra or rose I R A, basically that loans can be treated as withdraw and can be a non qualified withdrawal. So you going to pay taxes and penalties on that as no boy, no. So I think before you move this money into an I R A of any kind, whether there's a rough conversion involved or not, I think you need to paid alone back.

I, I, I wouldn't do that. You know, four one k loans are convenient, but really they need to be looked at as pretty short term loans, right? If you need money for a few months, fine, get out your four one K A back fast, right?

The limit on this is fifty thousand dollars or fifty percent of your of your baLance, whatever smaller. So is never a huge loan. So I would hope that you'd be able to pay that back first before doing any sort of roller.

The other thing look into is you may not have to take this money out of the four one k to do a conversion, right? You can likely you likely have a solo for one ky this customer solo one ky, you set up, you know you pay a hundred and twenty five box a year whatever IT is, but you get some great features from that. One of wish is the ability to do some in plan conversion so you don't have to take this money out of the foreman.

Kp, you can just roll IT over from the uh text to bird side to the rot side. And ah I don't think you have to pay the loan back to do that now whether, uh you know you can convert alone or not, i'm not entirely sure that's a question I would probably give to the myself for one kid on that guys and h and ask them whether they would allow you to do that. I suspect they may not they may roll over money.

That's not alone. But I don't know that for sure. I don't know how that alone. Being a converted with be treated is a very interesting question I don't think i've ever heard in, but he ever discuss that.

Maybe somebody out there that really knows the answer can send me an email and will running this kind of a correction clarification later. But I you know, i'd try not to do that sort of the thing is just getting really complex. I'd probably try to keep IT in the four one k if you want to do a or conversion.

But I, I, I might take the money I was going to use to pay the taxes on that conversion and just pay off the loan instead. first. Think about the ross conversion later.

Hope that helps. All right, we're going talk for a few minutes. You know, uh, mike mentioned realest. We're going talk for a few minutes about real day. We've got blog sponsor paul more here reading the short interview and talk about what about the current real state market as well as what they do over at the walling's fun, which is one of our sponsors here on the pod gas to that interview and then will give back to your questions. Our guests on the right code investor podcast today is pull more to managing partner for uh wellings capital.

You may know from the willing's real state income fund or from his books that is written or from you know the contributions he makes uh with bigger pockets, but today is a obviously a sponsor of the y code investor podcast. And we just wanted talk with them a little bit about not only what they do at well in capital, what about real state investment in general? Now, paul, welcome to the podcast. First of all, thanks.

jim. Great to be here now.

The walling's real state in compounds, a little bit unique from a lot of responses. Lot of our sponsors pretty much only in multi family real state in the apartment complexes a century. But one of the fun things about the walling's real state government is that IT invest in several non traditional asset classes, particularly self R V parks, manufactured housing, and there's still a fair amount of multi I family in the fund. But i'm curious if you could explain to the audience what you see is the main advantages of having these other asset classes in the fun.

Well, you know, I wrote a book on multi family and I called IT the perfect investment, which I think is a pretty humble title. But um we found over the years that multi family, for us at least uh a lot of the value at opportunities had already been extinguished by great Operators who have already acquired these, who have already upgraded these assets.

And we found that there are a lot of mom and pop owned opportunities in some other recession resist and asset types, like you said, self storage, mobile home parts, R, V parts where the mom and pop Operators typically don't have the desire or the knowledge or the resources to upgrade these assets to provide a Better situation for tenants to increase the income and maximize investor R O. I. So by taking advantage of these opportunities, were giving the cellar the moment pop seller a great exit, were also increasing the viability of these, the profitability, I should say, of these assets.

And we're actually creating a very nice margin of safety for times, profitable cash flow and hopefully a profitable exit on these assets as are Operating partners grow the value and as they continue to add value to these assets. So for example, in self storage, a typical self storage asset is owned by a mama pop Operator. You can acquire these.

Sometimes those, hey, there are six makers out back. We don't really use well. You know, sometimes you can travel or pave that and add storage for boats in r VS.

You can put a billboard out front. I've seen some put prop in filling stations. A, T, ms.

Out front. There is a chance to put a cell tower in the back. In some cases, you can expand the asset. You can add retail items like locks, boxes, take and scissors. You can add u ha, uh, you hall rentals can add thousand tens of dollars a month to the net Operating income, can pay for an additional employer or more and sometimes create an additional, let's say, million dollars of value at the asset. Doing these things, you know, uh, IT is a hassle. But a professional company like the kind wee partner with our fund, they do this as a matter of course, for this would be a huge heavy lift for the previous owner, the mom, a pop Operator.

Now now the main value proposition of the wellings fund is that the investors get pretty dn broad diversification as well as the services of your team doing the due diligence for just a minimum investment of fifty thousand dollars. You can hear investing across twenty states, bunch of different other classes, bunch different Operators, course, that comes at a Price in exchange for additional labour of fees on the majority of the fund. Can you make the case to pay wellings for those services? That diversity .

in that due diligence? Yeah, you know, jim, last year, we reviewed five hundred and fifteen Operators and assets. And you know honestly, if you are a White cope professional or even if you're retired and you're spending time with your family, with your hobby, it's pretty hard to imagine hell.

You can even really do do diligence on more than ten percent of that many if you have the skills and if you have the knowledge. And if you have the software in the different programs that we have, we have a twenty seven point due diligence checks. St, and we you we really like to say no, Warren buffer t said that the best investors say no a lot.

The very investors, very best investors say no almost all the time. And that's what we do as well. We have the five hundred and fifteen deals we review last year.

We only invested in four new Operators and eleven opportunities total. And so we do say no a lot, just some examples. We do very deep dive criminal checks, background checks, reference checks on these Operators.

We fly out to their headquarters. We see how they talk about their spells. We see how they talk to the waiter.

We see how they talk about their investors. We do criminal and background checks on some of their vendors. Last year, we were about to invest with somebody.

We found out that one of their vendors was in jail for fraud, and that raised a big grand flag with us, and we eventually did not invest with that. Operator. We just do all types of due diligence. Are h one of our folks on our team is actually trained by former C I A agents and uncovering facts, uh, that you wouldn't know on the surface. We actually do N O I audits on these assets as are being required to prove the net Operating income really came from where the seller said IT did. We do a lot of things like this that an individual investor probably wouldn't have access to even if they had the ability to you take fifty thousand dollars and somehow spread across, you know twenty or thirty different investments.

Now lots of professional real state fund managers feel like credit and prefer equity is more attractive than common equity. Right now. Degree was added. If so, what do you think that is? You know.

warn buffett invested five billion dollars in golden sex when nobody else would touch them in the very worst weeks of the great financial crisis in the fall of two thousand and eight. And we believe that was a good investment because he limited his downside risk, but he got preferred or priority returns when things went well.

And at times like this, when there's uncertainty the convey and it's really hard to get double digital returns cancelled out, we really feel like limiting the risk in getting a contractual return, even if it's limited, uh, is a very nice place to be. So we're investing in preferred equity in real state. A lot of these deals or multifamily, these are not rescue capital deals.

These are actually either requalification or acquisition. Basically, what that means is if the debt comes in instead of IT, seventy five percent like IT was five or six years ago or last, but saying the debt comes in at sixty percent and the equity instead of being able to fill that forty percent gap, only, let's say, only twenty five, thirty percent is there. We come in the middle and we typically get a personal guarantee from the sponsor, which is worth a lot.

We get depreciation just like common equity. We get cash flow. Typically nine or ten percent contractually write on the front end and then on the back end, when we are taken out, we typically get another five, six or seven percent.

Sometimes more, and that a crowing compounded upside, plus the regular cash flow we get along the way can return I R S of seventeen to nineteen percent for the small checks sizes that we're writing. When I say small, I mean two or three up to five or six or seven million dollars for a lot of institutional players won't play. They're calling us, and we are filling those gaps on behalf of our investors right now.

Awesome, paul. Thanks so much for coming on for those are interested and learn more about paul, about wellings capital, about the investment opportunity available there. You can go to White code investor that com flash wellings and get more information. Thanks to come .

on the pod cable. Thanks.

jb kay. Our next question comes from dnl. SHE wants to ask about buying into a partnership and home bunch other questions. So let's let's take a listen hi.

I dally. This is Daniel from illinois. Have a mathematics question for you. I'm going to be buying into partnership in the fall.

And historically, the partnership has paid about nine percent dividends on the funds put into the partnership. I have a mergers at five point five percent interest and student loans ranging from five percent to seven percent interest. I also have three kids and contribute to five twenty nine for them.

And lino, I gives a five a tax break on after twenty thousand dollars. And when my tax start about five percent on income. So the question is how much should I max out the partnership my husband thinks that we should put in as much as we possibly can since IT pays nine percent dividends.

But there's no guarantee am there's also no limit on the amount I can put in, at least that's feasible to me at this point. And so I could endlessly contribute even on the dividends. But to me, pain off the loans makes more sense, sense that is a guaranteed debt that we are going to have to pay. The question is just how much do I put into partnership? And at what point do I stop and start focusing on paying down the loans as fast as possible?

Thanks for your help. Alright, Daniel, great question. This is classic doctor financial stuff, right? We all have these questions ah, especially the first few years out of training, right? We got all these great uses for money, but enough money to do more. So we have to choose we have to choose what our financial goals are, then worked toward those goals in the order that they matter to us.

I think you've already identified the key points in this decision, right? You have the potential to make nine percent on this money, which is how higher interest rate than all of your loans, but is not guaranteed, right? And in a risk adjusted way is probably not even higher, right? This is a pretty risky thing to do.

We put money into a small business right now. Would I still do somebody? Absolutely, I would.

You know, I like taking rest. I like ownership. I like the benefits that come from owning your job and owning your business.

I think it's a great place for money. I would much rather see people, you know, buying practices and buying homes, for instance. But you got to baLance everything right. So what I would do is I would sit back and look at your financial goals.

What is your goal for paying off your student bones? When do you want to be rid of them and how much money needs to go toward them each month in order to reach that goal? So I thought that much toward the students.

Same thing with the mortgage, right? When do you want to be rid of the mortgage? How much you have to put the words of each month in order to reach that goal, but that much toward the mortgage, how much you need in the five twenty nine in order to reach your goals?

Now you're talk and you get a tax benefit um on your state in contact nAiling way up to twenty grand. I don't know that's per student, but that's a lot of money for most doctors put in five twenty nine every year. I mean, if I run the numbers here, if I pull up my excell spread ed sheet and I look at putting twenty grand into an investment, let's say, makes five percent real, eighteen years.

I put twenty grand in there a year that adds up after eighteen years to five hundred and sixty thousand dollars. That's a lot of money in a five twenty nine, right? I don't think you have to put twenty grand a year and to every kids, five, twenty nine, no matter where going to send the school, maybe if you're going to send them to, uh uh, really expensive private college and then they're going to go to a really expensive medical, maybe you could blow through five hundred and sixty two thousand dollars um which would further increased by the way, during those years during school.

Maybe you could blow through that. But I come on, that's that's a lot of money for education. I mean my kids five twenty nine are around one hundred and fifty thousand.

I think they're all gonna overfunded, right. Just not going to use that much for college given the cheap schools they're talking about. Attendant, so I ve already really probably funded all my grandkids five twenty nine, and that's far less than five hundred and fifty thousand dollars.

But you can look at your goals, how much money do you want to have saved up for college? How much do you need to put in the feature? So I would look at all those things, how much for the student loans, how much toward the market, how much told the five twenty nine to reach your goals.

Now if you can still invest more, uh, and the partnership seems like good, you will put some money into partnership, but don't put all your investment money partnership right. You probably have some one k and the available might want into a taxable account. You probably don't want to all go into the partnership.

So figure out the baLance, put some money in there though, right? Nine percent sounds awesome. It's good. Be invested in your business, but don't put all your eyes in one basket, right? Find some baLance.

There are many right answers to this question, but all you have to do is find right answer for you. Uh, IT doesn't not be the right answer for me or anyone else out there. Sorry, how's that for a non answer? But uh, I hope the reasoning is helpful to our quarter.

The day today comes from epic to us. I'm not sure if that is a greek or a roman, but is somebody from the classical world. We said wealth consists not in having great possessions, but in having few ones. There's a great deal truth to that, of course. Okay, let's take this question from bob is got a question about portfolio management, behavioral economic.

Hi doubter deli. I'm a question about portfolio management and behavioral economics is specifically concerns the topic, the recommended frequency of balancing I D I Y. My portfolio, about one point two million and liquid assets, about eighty five percent equities and fifteen percent bonds, all broad market E T S. For mutual funds. I've heard that the the recommendation in general for time based for balancing about one year to eighteen months, and the evidence shows no benefits and more frequent intervals.

I've also heard that four criterion based balancing the recommendation is to trickle rebalancing when asset class D V S, more than five percent say, and these something here, is that triggering at smaller deviations doesn't ld any creative benefits? My problem is that I like to tinker. I think on the one hand that what gives me the way with all to D I Y.

But I also know I need to keep IT in check all the time. For example, I have urged to check my portfolio to change asset allocation based on market predictions to performance, chase by and sel individual stocks, all the things that I know what get me in trouble. My theory is that frequent rebalancing satisfies this maximized urge and allows me to systematically billow and so high.

So my question is, really, what is the problem with balancing too frequently for a relative perspective? Wouldn't rebalancing a portfolio with a fixed asset allocation always lead to buying low and selling high? I mean, it's done in a tax conscious way. And if it's ratched in IT, what's the harm of doing IT monthly or even weekly when there are a big market ring such as those in April, may and to ly August this year? Looking forward to hearing your thoughts.

Thank you. All right, bob, we ve got to get you a new hobby, right. Rebalancing your portfolio every month, every week, every day is not a good hobby, all right? Uh, I maybe you shouldn't take a brock climbing now.

I heard bad things can happen when people do that, but you need to look around and see what other ways you can use your time in a way that will improve your life, right? We've only got limited resources. We've got limited money.

We've got limited time. We've got limited health. And uh, is not all about just maximizing the money aspect. You've also got time and health to consider. So maybe that time out to be spent out walking rather than rebaLanced ing your portfolio, you know, I know that might not meet your desire to tinker with your portfolio, but maybe there's something else in your life you can tinker with, right?

As this is not an effective way to do IT rebalancing, somewhat important, right? This is not a really important part of personal finance or investment management is interesting to look at the data. The data suggest the proper interval is, yes, between one and three years.

You know, as far out as every three years, rebalancing once is okay. You don't have to be rebalancing any more frequently than that. And the same data suggest to rebaLance ing less, more, more frequently than once per year is actually detrimental.

Well, how can that be how can I be detrimental if you're selling high and buying low also because the highs and go higher first, right? For example, let's consider twenty twenty four stocks are basically gone up throughout the year now has been some up and downs, but mostly throughout the year. So at any point this year, the you sold stocks and bought bonds, you come out behind for IT. Your portfolio is now smaller. Yes, your risk is a little bit lower as well, but your portfolio is smaller.

And if you had waited until the data record in this pot gas, which is late october and rebaLance IT all now and if you have done at any point earlier in there, and that's why frequently balancing can hurt you, you is because those stocks still adds some more time to run or more time to drop or whatever the case might be, but you didn't need to worry about this too much, right? I mean, for the most part, I don't rebaLance my portfolio. I just direct new money where IT needs to go.

And so for example, I smack my head a few months ago, you might heard about IT. And I didn't touch my portfolio for months afterward, right? And so just this week, as i'm recording this again, this is late october, just this week, I went in, had some money investment last couple of months.

And I look well, what's behind in my portfolio? Well, guess what's behind after twenty twenty two bonds are behind my real stays? Don't OK stocks have done great, especially U.

S. stocks. Um and so my new money needs to go toward bonds to bring the portfolio back and baLance.

So every bit of my investment for october and really for september as well went toward bond, and that's okay. You know IT doesn't have me perfectly in baLance. If you're a percentage per percentage down, that's okay.

So you don't get any major rewards to being perfectly baLance. And besides, even if you did perfectly baLance your portfolio, two minutes later is out of baLance again, right, the next day is out of baLance again, the next week is out of baLance again. You don't have me perfectly baLance IT.

Really doesn't matter if you have a seventy five percent stock allocation or seventy percent stock allocation. So how much can I possibly matter that you're out of baLance by five percent IT doesn't matter that much. Now you don't want to ignore this and end up uh, having your portfolio go from sixty, forty to ninety ten, you never rebalancing and always just contributing in those same percentages, but you don't have to spend a lot of time worrying about rebaLanced.

You figured out the two reasonable ways rebaLance. One is on a time nerval. This is how I do. My parents portfolio is rebaLanced one, two year. And uh, the other way to do IT is on you know when IT goes up and down by a certain amount of an asset class, goes up by twenty five percent relative or five percent absolute.

That's a trigger to rebaLance and rebaLance the hope portfolio, also a reasonable way to do IT, but you do not pay more attention, particularly in dow markets that might be triggered and maybe that's not great behaviorally. We paying more attention in the downed and might lead you to do something done. And so maybe that's not a good thing.

So I hope i've talked you out of tinkering too much. You really don't have to tinker with your portfolio, be successful. K, D, M, I have reach all of our financial goals.

And how much tinky have i've done last three months? None have done no tinky. After three months, I kind added up what we had updated the sprayed sheet and made one purchase as all the tinkering i've done in last three months.

And that worked just fine. We reached all our financial goals for plenty wealthy. You don't have to mess with your money all the time in order to be successful.

In fact, you are probably Better off if you do not mess with your money all of the time because you're probably hurt in yourself. Now usually that takes the form of you know buying individual stocks, messing around with the option or something caused you to lose money. But in your case is taking the form, just rebalancing too frequently and that is hurting your return.

You should stop doing IT and find another hobby. I don't mean that any sort of the mean way, but I want to be direct. So you got the picture of a, you know, this hobby and what is costing you in order to do this, how because IT is costing you something to rebaLance every day or every week or whatever um that you went be paying if you were spending less time messing around with IT.

okay. Uh, as I mentioned, the top of the podcast sofa is helping medical professionals like us bank borrowing and best to achieve financial wellness, whether your resident were close to retirement. So by offers medical professionals exclusive rates and services to help you get your money right, visit their dedicated page to see all the sofa has to offer White code investor dot com slash sofa one more time as W W W, that White code investor dot com slash so fast ones original by sofie bank and a animals, six, nine, sixty nine, one by resort, by sop.

I wealth. I'll see the broken products offers by supply security. Remember, in red and I P, C, this thing comes with risk, including risk of laws.

Traditional terms and conditions may apply. All right, don't forget about the paid surveys I told you about. Why could investor comes flash paid services? Check those out. They may work for you, they may not, but he doesn't hurt you to see. Thanks for those of you leave in the five star review and telling your friends about the podcast.

Uh, a recent review said, uh, empower ing physicians, the White conductor podcast hosted by doctor ali stands out as a beacon of financial education for positions offering valuable insights that has been as influential in my life as my actual medical education. Whatever lesly delivered content and a lineup of knowledgeable guest speakers about guests are not only informative but remarkably easy to listen to and enjoy. Able on my commute since two unions, that fellow in twenty nineteen of witness to remarkable growth in our network, so are passing two million and less than five years of the I tribute to the wisdom Green from W.

C. I. Despite having developed in doctor all these books, blog post or the podcast, the newly released material continues to provide Price perspectives, nations advice, making an indispensable resource for physicians navigating the world with personal finance.

I feel like I need to put that into my resume or some. That was awesome. Thank you so much. Blimp a for that five star review.

And we do appreciate you guys putting those in because they help us spread the word about the pod test. The more five star reviews you get, more people hear about the podcast. The more people this their finances, the more people are able to concentrate what really matters in life.

And, uh, and that's an awesome so give your head up of shoulder back. You've got this. We're here to help.

Thank you so much. What you do and thanks for me in part of the White on investor community. See next time .

the hosts of the White code investor are not licensed to countless attorneys or financial advisors. This podcast is for your entertainment and information only. IT should not be considered professional or personalized financial advice. You should consult appropriate professional specific advice relating to your situation.