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By Dr. Anthony Ellis, WCI Columnist
Writing this article was difficult. Tallying up one’s financial mistakes and putting them in front of a savvy investing crowd like White Coat Investor readers with my real name attached . . . just begs for some serious criticism. But I said I would write it, and here it is. Some mistakes are clearly mistakes. Others seem so in hindsight. And some are highly subjective (like paying for private school or not, owning new cars or slightly used, or buying an expensive home). I would ask that if you have something to say, you might consider putting one of your own financial mistakes in the comment section so that readers can try to avoid my past mistakes and other common errors. It’s not easy to admit mistakes, but our mea culpa might help other WCI readers, especially the youngest white coat investors.
Before I get to the list, I would like to say I’m just a regular person. I’m no financial guru. I’ve written no financial books. Like most people over the age of 5, I’ve made plenty of mistakes of all sorts, and I’ve learned from most of them. I am the proverbial physician investor who mostly lucked out due to being a high-wage earner, and I made some good mid-course corrections. My mistakes were also partly mitigated by working two jobs at times and many side gig weekends for the past decade when my “on-paper” wealth had been cut in half by the brutal market drop of 2007-2009.
In no particular order, here's where I went wrong.
My Money Mistakes
1) I did not have a detailed financial plan until about age 48. The plan from age 30 to about 2012 was “max out the 401(k) plan with equity mutual funds.” I never calculated a yearly return against a benchmark on this autopilot, 100% equity plan. This was from 1994 to about 2012 and included the stock market crash of 2007-2009 and some of its recovery. One saving grace here: I sold nothing when my half million-dollar 401(k)-only portfolio was cut almost directly in half from 2007-2009, and it subsequently recovered fully by around 2014. That was only eight years ago.
2) For several years around 2001-2004, I was not contributing to my work 401(k) when I took a new job that had an “executive defined benefit pension plan.” This could have been cured with a phone call. I don’t remember exactly how and when I found out that I could actually contribute to my 401(k) while in that defined benefit pension, but I missed several years of contributions and the tax breaks associated with them due to this mistake. I shudder to calculate the total compounded loss associated with this error and simply hope we enjoyed spending that money. We have always been great at spending money. One nice win here. The defined benefit pension plan is either worth $25,000 a year from age 60 to the grave (and continues for my wife who will likely live to age 95) or a buyout amount to be announced this spring. The preliminary amount was impressive, and it seems the advice on this is to take the lump sum, especially since the pension is not indexed to inflation. Still, I should have been stoking the 401(k) and the 457 plan available at that time. We would have had to take fewer vacations.
3) On a relative whim, I bought physical gold and paid to store it inside an IRA from 2014-2019 (it should be noted that this was NOT part of my written investing plan). To do this, I moved $30,000 out of the market, bought American Eagle gold coins (for about $1,275 each), held them for about five years, and then sold them when I was up about $4,000. Minus the high commissions, storage, and gold IRA fees, I only netted about 2.5% per year in returns—similar to having kept the funds in cash. Clearly, I would have done better to leave it in equities, and I have little in terms of explanation. I must have been watching too many zombie movies or something. I think it was about 3% of my portfolio. At present, I think owning physical gold has little utility, and it was just folly. If you need to rely on physical gold assets, then the world may have reached a point where a couple of firearms or a basement fallout shelter might be a better purchase.
4) I have never done a Backdoor Roth, and I have zero Roth IRA money. My rationale, as I remember it, was that it was “too complicated” (lazy), and we didn’t have money left over after maxing out all my tax-deferred accounts. Surely, we could have carved out this money from the budget and made this happen, and we simply did not do it. We spent too much instead. There are step-by-step instructions available on WCI, and it seems most folks can figure it out. I also remember thinking I did not trust the government not to change the rules retroactively to negate the benefit of this tax avoidance maneuver. Either way, I’ve made peace with not having any Roth money.
5) I hired a non-fiduciary advisor and paid him $1,000 a year, in addition to layers of asset management and mutual fund fees for a proprietary cookie-cutter allocation and for automatic rebalancing (from 2013-2017). I calculated the return for 2013 alone, and it was half the return of the S&P 500. Of course, it was not a 100% equity portfolio. Having experienced the 50% drop of 2007-2009, I changed to a 60/40 portfolio with this company. I think it was called “moderately aggressive” and then later “moderate.” I was disappointed in their performance across five years and discovered the WCI book and blog at about this time. In November 2017, I took over my own money management again—after having done it all myself from 1994-2012—using Personal Capital to track all my accounts. In defense of this arrangement, I did get a look at my “whole plan,” and it was more detailed than my previous “top-off-the-401(k)” equity-only plan.
6) We built a large home in a non-growth area. Selling it 20 years later, we netted no gains. We would be much better off financially now if we had just stayed in the 1,900 square-foot starter home and built a room over the garage. This is a difficult calculation, as it is not all financial. The house was built on four acres of riverfront woods in a gated neighborhood of similar homes. We put $60,000 into the home across 20 years. It sold for $65,000 less than our basis, minus commission and closing costs. The homes nearby had ALL just barely regained their 2005 values despite the huge pandemic bubble valuation rocket. The house, land, and subdivision were beautiful. We raised our children there, and it was a wonderful 20 years. I calculated the difference in cost and expenses and figured I could have retired perhaps a decade earlier if we had stayed in the starter home. I’m ambivalent about calling this a mistake. It was nice in the McMansion, but was it worth it? Did we really have to go over budget by $75,000 after buying the biggest lot on the river? The error was a trio of marginal location, poor local market growth, and the actual degree of McMansion expansion. I think most physicians upgrade from their “starter home,” but we could have been more restrained. We certainly upgraded and paid for it. I can say the kids loved living there, and they miss this home. It has been converted to tax-free proceeds that folded into our retirement plan, and we have lots of great memories. One more caveat: our starter home was burglarized once, and the new home had an alarm and a large dog from the start. I never felt safe in the old house after the break-in. In the McMansion subdivision, there was no crime, ever, in two decades. That peace of mind was worth something. Overall, I’ve learned on WCI that your house is not an investment; it’s your home.
7) We did not buy pre-paid education contracts for college. In hindsight, these $25,000-$30,000 chunks (in the late 1990s) were bargains. Instead, we funded an UTMA account for our eldest and bought individual stocks (the WCI crowd groans). It took 20 years to double, implying a return of about 3.6%. We used 529 plans for the other children and did better with those, as they were based on index funds or age-related auto-balanced allocations. Another error: I also did not put enough in these plans, and later, I had to shift some side gig money toward college expenses that otherwise could have helped us to an earlier or a better-funded retirement. The mistake here was spending too much money in general and not putting enough away to meet the goal of funding a four-year degree for each of our four children. I met the shortfall by working extra in my side gig . . . a lot of weekends and holidays.
8) I compiled and edited a niche running book across one summer. Then, I self-published it and printed too many copies. I lost $10,000 on the deal despite a lot of work. This enterprise was supposed to help fund the kids' college accounts. I drew up a pro forma that planned out a $30,000 profit but ended up with a $10,000 loss. You know that adage about physicians sticking to what they know? While everyone may “have a book in them,” remember that it might not be a profitable book. It’s not as easy as it seems. In three ways, it was not a mistake: I enjoyed the process. I learned a lot. And it was enjoyed by many who read it. It was not fun trying to sell it on Amazon and making a few dollars per copy after shipping. At some trade shows, I sold more socks and mugs than books. That was tough.
9) I regret not buying vacant canal-front land in Florida in 1998 for $9,000 per lot. We also passed on a variety of waterfront condo deals that seem great in hindsight. I thought I’d mention at least one missed opportunity as a mistake. I’m sure everyone has a few of these. I could list more, but the idea is that if you identify a great opportunity, you should cut funds from elsewhere to make it happen. Otherwise, why even look at opportunities and incur regret, if you have no budgeted funds to follow through?
10) We kept our starter home as a rental with a property management company and then did not sell it when it was not making money. This rental property was eventually sold for $6,000 over its original cost after 20 years of renting it. It lost money every year for a decade, and after almost 20 years, it produced a meager $27,000 capital gain after paying it off. We managed it ourselves for over a decade to improve the margin, and this put me off being a landlord again—possibly forever. In my defense, the real estate downturn from 2007-2013 made selling it then a hard pill to swallow. We finally dumped it in 2019, thankfully before the pandemic “Sorry, you get no rent” scenario. Having a rental and no rent for a year or two would have made this story worse, but then it would have sold for more in 2021. I can say I had a party in my mind when it was off the books.
11) We bought several new cars: a 2006 Toyota Highlander Hybrid for $46,000 (we sold it for $9,000 with 93,000 miles) and a 2006 Toyota Avalon XLS for $36,000 (we sold it for $4,000 with 228,000 miles). The depreciation on these two alone was about $70,000. My point is that buying a new car is not a good financial decision. Interestingly, my older brother who has never owned a new car recently told me that if he came into a notable amount of money, the first thing he would buy would be a new car. I did buy my dream car one time in my life at age 50. It was a used 2013 Jeep Wrangler Rubicon 10th Anniversary edition. It depreciated so little in the six years I drove it that I owed tax money on its sale in 2021 (any excess depreciation is recaptured at the time the car is sold). The topic of buying reasonable used cars has been covered on WCI in the past.
12) I played with market timing. I sold some equities after the 2020 pandemic flash crash and day-traded with some of my liquidated bond allocation after the Fed’s actions propped up the bond market. While this may have worked to a degree, it was very risky. It’s likely that I would have done better leaving my core allocations alone, as I had when prices fell roughly 50% from peak to trough from October 2007-March 2009. The 60/40 portfolio allocation that has been popular for several decades has average returns of 7.87% in the past 10 years and 8.00% across the past 30 years. However, Vanguard’s Total Bond Market ETF (BND) fund has posted a meager 0.65% 10-year return and a 4.32% 30-year return. My decision to not dive back into the bond market for the past two years has mostly been lucky, as bonds have had their worst performance in decades. It’s still just rationalized market timing. I will say that in the mostly up market from July 2020-2021, the market doubled from its pandemic lows. So did my accounts, but I had 40% of my money in cash during this time instead of bonds. I made about $60,000 day trading my bond allocation inside my retirement accounts in the one year after the pandemic low (March 2020-March 2021). In the meantime, bonds . . . well, bonds have been hammered. But they are getting a nod from some market timing sorts in the final quarter of 2022.
13) I have bought individual stocks throughout my investing life. Several became worthless. One that comes to mind was Borders, a bookstore we frequented. I bought $1,800 worth in the UTMA for my daughter, and the company went bankrupt. I bought another niche transport stock (luckily only $1,000 worth) that became worthless. There were others I’ve conveniently forgotten. Mostly, people remember their winners and not the losers. I also bought individual stocks in my wife’s IRA account that have had almost zero returns in recent years due to my poor stock picking. I have records showing it to be $36,000 in January 2015 vs. $53,000 now. That’s about a 47% total return in 7 1/2 years or about 6% per year, less than a 60/40 portfolio average over the past five years but with higher risk. Who do I think I am, Warren Buffett?
14) We took a lot of pricey vacations. The intensity of work that made it possible for me to afford these vacations was exactly what tended to burn me out enough to need them. At times, the relaxation effects dissipated quickly. I don’t really think of this as much of a mistake since the family vacations were awesome, and they provided the best of times and memories. Like the new car buying, it’s a matter of spending more than one should. We stepped back from flying all the time after our fourth child and drove the family van on many of these to save money.
Even until recently, I’m still making mistakes. I bought a chunk of Amazon stock after selling my Michigan McMansion. In three months, the stock is down about $7,000. I still stink at this. Hopefully, it’s a lesson I’ll eventually learn.
Despite these mistakes, all easily identified in hindsight, things have worked out mostly, proving you don’t have to get it right all the time to win the game. I retired to part-time work at 58, and I couldn’t be happier about it, especially after moving to the mountains of North Carolina. It also helps that I was investing during one of the longest bull markets in history after the debacle of 2007-2009 and that I had a scalable side gig to make up for some of our budgetary and investing decisions.
I think if you learn from your mistakes (and those of others), then they have served their purpose. Currently, I’m learning a lot about how not to invest from the cryptocurrency crowd. Does anyone want my Bored Ape Yacht Club NFT for half price? Just kidding . . . I'm going to HODL that.
What do you think about my mistakes? Did you make any of the same ones? What are some of your biggest follies? Comment below!
Thank you for this post. Not easy to air out financial (or any) mistakes in front of others. However you will help many by doing this
Thank you. The WCI readership has helped me these past six years.
Not a huge mistake, but when setting up our solo 401k I made Roth contributions without realizing the issue with the 199A deduction. Not sure there’s a “correct” answer there, but at least something to be aware of before you decide Roth vs traditional. I feel it should be broadcast a little better in all the internet articles about the solo 401k .
I can’t write everything in every article, but this certainly has been a subject we have covered multiple times:
https://www.whitecoatinvestor.com/199a-impacts-401k/
https://www.whitecoatinvestor.com/section-199a-deduction-qbi-and-retirement-accounts/
https://www.whitecoatinvestor.com/section-199a-pass-thru-business-deduction-tips-for-physicians/
Yup, WCI has been good with this issue. Now just fix the rest of the internet and all will be solved.
hey man that doesn’t actually sound like a mistake. A roth contribution shouldn’t really affect your QBI, right? it’s if you made the traditional contribution then then your QBI is lower. If I understand it, making tradtional contribution makes your qbi lower where now the traditional contribution is only 80% deductible (since the solo401k contribution is about 20% of earned income on your business). am I undertanding this wrong?
It affects QBI if, as a physician, your income is phased out of QBI eligibility without the pretax deductions from a traditional 401k.
The 10K loss from selling the book:
1)How do you quantify the amount (in $) for what you learned from loosing 10K? Have you?
2) How much $ you saved by learning from this experience (such as avoiding a bigger mistake)? For example, you could have made 10K profit from selling that book. Then, you could have gone “all in” for a bigger adventure only to realize a bigger (or total/fatal) loss.
“There is always some element of profit by learning from a mistake. There is no element of profit by repeating a mistake.”- Me.
Good point.
Losing money on a project could protect you from a future loss on say…another book.
I’m likely to write another book. So it could turn out to helpful.
Like many readers here, I lost $5k when forfeiting a whole life policy. My boss at the time told me to buy it, and I trusted him so I did without doing my own analysis. I was in my mid-20s so was significant for me then, but that process lead me to find this blog, and to never put trust in others’ recs/calculations until I run them myself. I have received much more than $5k of knowledge here over that time (just with I could have paid that to Dr. Dahle, and not NWM!)
Other (minor) error has been to miss a few years of backdoor roth because I did not realize I could do that after moving out of the income range. But much worse mistakes to be made!
There are other mistakes (and likely will have many more to come) but thank you for keeping us generally on the right path.
Thank you for your comment.
I never bought whole life insurance, but I did buy a level term policy at age 30 that only lasted until I was 50. At that time I had to buy another 10 year level term policy that cost twice as much for a half as much coverage.
Another mistake. I should have bought a 30 or 35 year level term policy at the beginning. Any notable health issue that develops between age 30 and 50 can make one uninsurable or raise premiums a lot.
Ditto- don’t assume at 20 or 30 that you won’t have a kid to put through college still when you’re 50 or 60 (or 70 for some fellas and crazy gals)! I should have gotten the 20 year term I did get before kid 1, but also a 35 or 40 or 50 year term maybe together totaling the amount I got for that initial 20 year then the amount for a 15 when 7 years later we started another kid.
hey dude, $5k, pah! I lost $50,000 to whole life insurance!!! don’t feel bad man. stupid NWM!
#9 is not a mistake.
It’s like saying “I should have put all my money in Monster Beverage stock in 2003”. It’s a gamble; sometimes it works out, other times it doesn’t.
We were always on the lookout for a real estate deal with all the travel.
Unfortunately, we spent a lot of money…so the opportunities we explored were never pursued.
As I say, many have passed on a deal and then found out later it was a great opportunity. As you say…like a FANG stock back in 2009…
I think you’re being too hard on yourself. Money is a means to an end, and not a end in itself. And eventually, all money is spent. A lot of that “wasted” money was spent on your family, such as the home and vacations. Your family is an accomplishment that you should be very proud of. Also, learning about personal finance/investing takes a lot of time. With your other commitments, it wouldn’t have been easy to find such time. And without a doubt, some of the other commitments were much more important than learning about personal finance/investing. You did make some mistakes, but you’re very far from the first physician to do that. There may be few – if any – physicians who don’t have a lot of financial skeletons in the closet. I don’t exclude myself.
I’ve made plenty of mistakes, but luckily made most of them early on with small amounts of money.
But you’re right that the financially optimized life probably isn’t the best life to live.
Thank you. I would say my family is my biggest accomplishment…not my investing.
I certainly know a lot of doctor investor anecdotes from this blog that shows some stumbling blocks.
Hard to call nice vacations and a large home a mistake, particularly since you said you and your family enjoyed them and you still retired at 58. You could have had more house appreciation if you lived in San Francisco, but then you might have only been able to buy a 1800 square feet or smaller house for the same price as your 4 acre place.
Excellent point.
The nice house and vacations provided a lot of memories and enjoyment.
Striking a balance is important. It’s also true that in areas with high price appreciation, you likely lose out on cost of living.
Mid Michigan is a rather inexpensive area.
Hindsight is 20/20 as they say. I don’t believe family vacations are a mistake. I rarely go but try to find places that are not too pricey. My biggest mistake was getting married. I should have gotten a sperm donor and called it a day Attorneys and most people including financial advisors only see $$ not physicians. I will be unable to retire as I had to pay for someone else’s depts. Another is assuming people have as much pride and knowledge in their field as we do ours is a big mistake.
Of the “mistakes” I don’t regret the vacations. We went to many wonderful places and I was working so hard, they were some of the best times I had with our children.
Sorry to hear you were assigned someone else’s debt, especially if it affected retirement. Perhaps with some luck, you will still get there.
I cannot fault the house. At least not based on what is said here. The house is a consumption item and it seems the Ellis family used it and enjoyed it. Sure, it would have been nice to turn a profit at sale but that is largely a matter of luck. Sometimes real estate goes up, sometimes it goes down. Hard to predict.
We never spend much on travel, so no regrets there. But some people love that and it is not necessarily wasteful, provided you can afford it.
For me, “vacation” is a set of days when I do not have to go to work. I would far rather spend those days at home than go anywhere. If I am tired, the last thing I want is to have to plan and pack for a trip, then unpack when I get back. If I do not go anywhere, then that time is truly free.
My biggest financial loss, but not a mistake, was taking a job that, while interesting, is not nearly as lucrative as it would be if I spent no time on research, teaching and administration.
The difference in pay in the same field can be stunning. I have always been employed. That has its positives and negatives.
The best jobs in Psychiatry buy your 40 hour M-F with no weekends and all eleven holidays off along with 4-6 weeks of vacation and a comprehensive benefit package.
You are then free to sell your weekends to the highest bidder in other venues, primarily inpatient psychiatric units.
My weekends were worth half again as much as my base salary which always included being medical Director if possible, which also pays a small 10-15% premium.
As I mentioned before, this allows one to potentially maximize 401 and 457 accounts, while also stalking children’s college accounts, and helping to pay for a retirement, home and nice vacations.
Was it hard? Yes. Was it worth it? Yes.
Thanks everyone for disclosures especially this author. We’ll never know since we’ll be dead or perhaps demented at the end if we managed our finances right, which would imply running out of money the month or year after death of both spouses with all legacies and gifts made. We have always congratulated ourselves on “not living like other doctor’s families” when we realized how many one Army doc dad/ stay at home mom families bought new cars every year or two, had a huge house and several kids, paid for church/ private school, bought their kids new cars every few years, paid cleaning and landscaping folk, etc. when we with 2 Army doc incomes salted away lots of money to retire early if we wanted (and have ended up doing so).
Yet I would say, having now more money than I think we need and spouse saying “Well then let me buy this costly/ costly to maintain toy since we can afford it” if I try to discuss that with him, that I wish we had spent more along the way, and found work (or paid helpers so work was not unbearable on top of our other hobbies and chores) that we were happy and willing to work at longer (speaking for myself here, spouse vehemently disagrees). But that’s also sort of wishing medicine was a 40 hour fulltime job not 60-90. And for Dr. Ellis to regret past spending but still be cutting back to part time before 60- well, you obviously didn’t spend too much to retire young! Though I can hear you might wish you’d worked less weekends.
*We’ll never know we saved too much- we may find out earlier if we saved too little.
It’s true that you can’t really know if you saved enough or too little unless you have a rather fixed set of retirement expenses…and things go according to plan with no huge surprises.
At present, I’m finding my planned budget didn’t account for everything. I didn’t budget anything for birthdays and the holidays…that was a notable oversight.
We did downsize in a major way, cutting out a huge amount of fixed costs. Thankfully, my wife was on board with this plan.
We are spending more on vacations, renovations, and libation than I planned out, but I sort of love those…
Fortunately, I can always work a bit more if I absolutely have to. It’s impossible to get burned out working two days a week and a long weekend per quarter.
Thank you for your insights.
Good article and thanks for the courage to share it! Although I’m PT now at 59 and very lucky to be several times FI, this is a good one to laugh at many years later:
Bought a piece of land in 2005 to build our “dream house” on, for $450 k. Spent about $80k more on plans, engineering, land surveys, landscape architects plans, etc. When we brought the plans to local builders, they wanted twice what we’d been told it would cost to build the house.
In 2010, sold the land. For 200k.
Wow. That’s a tough one.
It seems you recovered very well, proving we don’t have to always get it right. Other decisions must have made up for this one.
Thanks for sharing.
Anthony, thanks for the article. I too have made mistakes but unlike me, it seems you are super happy, FI, and have a loving family that you have raised right. I am still paying for my financial mistakes by working hard, having my anesthesia wife take more call, and my ADHD son hitting his sister and my wife thinks it might be because we work too hard and taking too much call to make up for losing $50,000 in whole life insurance and still being in medical school debt.
Point is you dominated this game of life despite your financial mistakes. I am envious and hope to be in your shoes, but at this time in my life me, my wife, and my kids are paying the price of living a life with some unnecessary misery as a result of our financial mistakes. We do have a plan to resolve this though and hope to be in your shoes soon!
Thank you for the reply. I definitely worked “extra” from 2010 to now with the weekend/holiday side gig. Nothing like the 50% equity drawdown of 2007-2009 to make one feel “poor”. Very motivating…
Working extra has its drawbacks and I often wonder what my kids thought of this past decade. The weekend gig was inpatient psychiatry and the hours weren’t that bad, frequently 8AM to 2PM. Even though I worked ten Thanksgivings in a row, I was home for dinner. I was able to at attend all their school and sports events.
My situation was part “extra work”, part luck (I earned a small pension at one eleven year job), and I had access to a 5% 401A match and a 457 plan for seven years. The side gig brought in enough cash to stoke college funds, pay for vacations, pay the retirement home mortgage and allow me to max out these accounts. That last bit is crucial. You can’t benefit from these accounts unless you can fund them.
Also…when there is a recession or financial debacle, refinance to the lowest rate possible. I had the McMansion at 2.5% (as of 2012) on a 15 year note, and the retirement home at 2.5% also (as of 2020).
In seven years of maximizing these few accounts, they grew to over a half million dollars despite the 2018 down draft. At the same time, 25% of after expense earnings went in to a SEP IRA and that grew to several hundred thousand.
It took my original 401K from 1994 to 2014 to reach a half million due to the 50% drop from the 2007-2009 debacle. It was the subsequent bull market this past decade in synergy with the side gig, tax deferred accounts, and pension to “get there”. It was a confluence of forces.
Make a plan, mostly stick to it, max out these accounts, avoid errors, have a side gig, and plug away for a decade. That’s the WCI message I got. Best of luck to you!
Best of luck getting things going in the right direction. Reading the blog here can certainly help. When I started following WCI, there was no course to take, but I read the book and the blog.
When I think of losing any money on crypto or Defi stocks or similar, I think of celebrities who lost millions…makes me feel less regret.
My tiny “basket of crypto” bucket dropped 75%…and was dumped for a loss, but prior Bitcoin gains offset this. Overall, many people have made and lost a lot in crypto. Well, except Warren Buffett…he bought none. Ever.
If you are led to the writings of Malkiel and Bogle as I was, Investing in the Accumulation phase is 2nd Grade Material
Unfortunately too many highly educated investors still believe they can beat the markets
Look at data that shows how many funds actually do this over 10yrs; over your 40 yr career many a handful
Yes, and there are hundreds of businesses built on the idea that if you give them your money, they will beat the market…for a 1.25% fee. Some do, for a while.
In a recent post, WCI said that if you are paying 1% on a million for comprehensive planning, that may be worth the AUM fee. In that case you are buying more than just stock picking and allocation.
Active investments have done a bit better just recently because the circumstances are odd (war, inflation, post pandemic, fed interventions, etc.). Any three to five year time frame can be a deviation, but across decades, the passive index approach is hard to beat.
I hope your approach is treating you well. The 60/40 allocation has has a butt whoopin’ this past year, posting its worst losses since the Great Depression. Some have declared it is dead. Probably not.
Munger calls Crypto Turd and fraud and delusion. One smart 98 yr old
I read an article recently that said half of all crypto account are in a loss situation…implying half are not.
Of course you have to look at the same $$ invested in some other class to see if it’s a relative win.
I mean I made some money in gold…but it approximated holding cash…
I have no crypto at present. I’m not invested in the cryptocurrency market at all. The most I’ve ever had in cryptocurrency was about $20,000 and 80% of that was 0.25 of a Bitcoin.
Excellent article! Tx for sharing! I learned a lot!! As a retired doctor/investor, I’d personally love to learn about about places to earn yield that are not equities or bonds. Tx!! Scott 🙂
I’ve been using YieldStreet and Fundrise as well as high yield savings accounts. There are other companies, like Equity Multiple.
Recently, high yield savings accounts and shorter maturity CD’s have been paying 3.0 to 4.5%. Some here have mentioned short term treasuries.
YieldStreet’s short term notes have been paying 4.5 to 5.5% for 3 to 9 month maturities, with higher yields (and risk) on supply chain financing and other private debt. My IRR track record there with a mix of products and durations is about 5.5%. Some short term notes yield up to 7.25%.
They also sell structured notes with more risk based on equities.
Of course the higher the yield, the more risk you take and these platforms and products require due diligence.
10) “I can say I had a party in my mind when it was off the books.” –Loved this line; don’t miss the rentals I’ve sold.
Being a landlord was one of my least favorite ways to make money.
If I had $300,000 and was choosing between buying a property and renting it versus investing that money with a private REIT or similar…I’d take the private equity company.
There are several WCI posts on this issue and now they also have a real estate course. I’d rather write a check to a successful company than be a rental landlord again.
Thank you, thank you, thank you!! I felt so alone in my anxiety about many of the same things I have been a good doctor but remained in the dark about finances due to always being busy and overworked (in academia). Trying to turn it around. Thanks so much!
You are welcome.
I started getting less anxious here with the WCI book and this blog.
There are so many helpful affiliates and contributors and I have learned more about money and retirement here than any other source.
Dr. Ellis – thanks so much for sharing your experiences in this article. I worked in finance in my previous career and at that time, everyone was picking stocks and ignoring their 401(k)s. I’ve gambled away significant amounts trying to outsmart the market that could have accumulated value even as I then took on debt to pursue medicine. It’s shocking how many people who majored in finance are actually financially illiterate (myself included, before I started med school and picked up the WCI book).
Your article “How I Went From…to Early Retirement” was incredibly impactful and helped my wife (new attending psychiatrist) and me (EM resident) see the bigger picture with our finances as we start our journey. Just wanted to say thanks for sharing and look forward to reading more.
Thank you for your kind words. Made my day.
You are ahead of the game if you read the WCI book so early in your career.
As you know from my prior article, I was largely clueless early on and put NO money away until age 30.
I would suggest reading the blog daily if the topic applies to you. I’ve learned a lot from the blog.
Offense – make more money = side gig and a good contract at the main job
Defense = appropriate insurance and tax planning and available asset protections.
Best of luck!
I told Jimbo Dahle, the esteemed doctor and colleague of ours, that you’ll be forced to pick stocks now. Sadly, he doesn’t realize that the index era is over. Don’t trust me? Ask Mike Green. Even Bogle foresaw that passive flows would fail, eventually. Now the Fed doesn’t have your back and most of you have blind spots. You can time the market, you can pick individual stocks, and you WILL HAVE TO, because the index era is over. Why is this now the case? The Fed and central planners destroyed real markets. This is actually pretty obvious stuff. I’m surprised Jimbo calls me political for understanding the reality of it all.
Best of luck in the New Year. Yes, I shorted a couple weeks back, and like Emperor Palpatine, “Everything is proceeding as I have foreseen.” Ha ha ha
*Spoiler Alert*
Didn’t Palpatine get chucked off the Death Star by his erstwhile apprentice?
How bad could it be if he showed up in Episode 9?
May the odds be ever in your favor.
Watch out for Yoda. The little dude is quick.
Good luck investing. Hope it works out okay for you. Actually I don’t, because of what it would mean for everyone else if your worldview turns out to be right.
One of my favorite posts in 2022 and one of the best guest posts I’ve seen on the blog. Thanks, Dr. Ellis!
Thank you! I’m glad you enjoyed it.
I have another coming up in next month that I hope is as popular as my mistakes!
Best to you in the new year.
This was a really great post. I’ve probably read every post on WCI over the past five or so years and have never left a comment. But, I felt compelled to on this one. Takes a lot to admit mistakes and put it all out there.
Let me do my part: I maxed my SEP IRA from 2010 to 2017. Like a good little investor. I wanted the tax break. But, because of 2008, my view was “banks are evil” and the “stock market is rigged.” So, roughly $50k a year went into straight cash (not bonds, CDs…just the settlement account at Vanguard). That mistake was dumb on just about any level. But, as they say, you don’t know what you don’t know.
On the other end of the spectrum, I took my wife to Rome for her 40th birthday. Actually a month or so before her birthday because it was a better “value.” We did lame tourist stuff. When we got home she admitted to me she was disappointed (which was hard for her since she is very appreciative of everything). So, I took a month off of work immediately, and spent $100,000+ flying her all over the world (including the Maldives, etc.). It culminated in an epic shopping spree on her actual birthday in Paris. Obviously that trip was not a good “financial decision.” But, any time I need a little pick me up at work, I scan through the pictures of that trip…and the many more we’ve taken just like it since then. I don’t regret any of them (nor the one I just booked last week for all of January 2023).
On a more WCI friendly note, since finding the blog in 2017, I’ve maxed my Solo 401k every year (no longer a SEP IRA since that was dumb too), maxed both backdoor IRAs (me and my wife), nearly paid off my house (can’t send the last $250k since it is financed at 2.25%…though I have the cash to do so sitting in a “mortgage account” consisting of 4% treasury notes), and managed to put together a nice taxable account as well. I’m officially a multi-millionaire (even with the downturn) and it is no exaggeration to say it is because of WCI and all the hard work you all put into it. And posts just like this one that keep me on track.
Of course, I still trade individual stocks like an idiot. But, I limit it to less than 5% of my portfolio. I track it as Jim suggests (easy in Fidelity). It is like therapy for me to deal with FOMO.
I lease, not buy, a new car every three years. Always over a $100k car. Dumb, I know. But, unlike pre-2017, we only have one car now (and not three!). The list goes on and on…
Anyway, the point is you can make some pretty dumb mistakes and still come out okay. But, to be fair, we are cheating substantially compared to many on this blog because we don’t have kids! I don’t know how you all do it with kids.
Anthony, the fact that you’ve retired early after raising all those little ones is nothing shy of a miracle. You should be incredibly proud of that accomplishment.
Thanks for your kind words.
I’d like to hear more about the two trips. Why was the Italy one lame and the other one so much better? What was the difference? Surely it wasn’t just the amount of money spent was it?
I think the trip to Rome would have ordinarily been exciting and fun. It certainly would have been for the overwhelming majority of folks. We even did a private tour of the Vatican and stood in the Sistine Chapel completely alone (plus our guide of course). I’m told this is extremely rare and was just a function of a security issue at the front (essentially we were let in and then there was a 10 minute pause for the next 1000 people). Anyway, I think the issue was that we just did tourist attraction after tourist attraction. Not a lot of romance…not a lot of adventure. But, my wife had some sort of epic fantasy in her head for many years for her 40th milestone. Rome just wasn’t what she had been fantasizing about for so many years.
I would like to say the second trip was not just about the money. And the point wasn’t to brag (here or anywhere else). I don’t even have a social media account to post pics! But, if I’m being honest, there is no way around it, that type of trip would have been impossible on anything in the realm of a reasonable budget. So it is a little bit about money I guess (depending on how you look at it). I was just so heartbroken by her disappointment for her 40th birthday trip I decided to basically book a fantasy. I was also disappointed in myself for being so “practical” about her first birthday trip. Particularly since I had a really good year financially.
So I booked us first class international tickets (not business) to Asia, the Maldives, Dubai and then Europe. Private driver in every location. $2,000 a night suites. Helicopter transports. Absolute reckless abandonment when it came to money. It was special to my wife on many levels. Obviously the trip itself was epic (and lasted over a month). But, it is not how I spend money. So to see me willing to do that for her meant more than the trip itself I think. The shopping at the end was a big deal for her too. I usually let her buy one or two crazy priced (in my view) items a year (Gucci, Prada, etc.). I basically let her buy everything she had been asking for over the prior five years on this trip. My wife is also completely checked out on our finances (and has been since day one). She grew up very poor and just knows we are comfortable and don’t need to stress about money. She can log into our accounts anytime she likes, but she never has. Anyway, I think she was pretty shocked that “people like us” could ever take a trip like that.
The trip was also twice as financially painful for me because of the charitable donation I felt I had to make when I got home to deal with the guilt of taking a trip like that!
Would my taxable account be a lot better off without the trip? Of course. But, I still saved over 25% of my salary that year. So, I guess why not? No kids, no debt, no responsibilities really … and I have a good income. And it still makes me smile to think about the trip. Bit ridiculous of course, but this blog post was about financial “mistakes.” So I thought I would share some of mine. 🙂
Not sure it qualifies as a mistake. In fact, I’m pretty sure it doesn’t, but don’t have all your financial info. If you put it on a credit card long term or saved nothing for retirement this year maybe it was a mistake, but I’m not getting that vibe. It sounds like a splurge that you could afford and that did make you guys happier.
Would you be willing to write the trip up with lots of juicy details as a guest post? We could run it anonymously. There are a lot of people that need to hear that story and it would generate a ton of great discussion.
Getting good at spending money is hard for many of us that tend to concentrate in a place like this.
The only part of the trip that involved a credit card was me cashing out some credit card points mid-trip for airport hotels while in transit to other destinations. I had never been on a trip long enough to use points generated from a trip while still on the same trip!
Joking aside, it was all paid for with cash and I still put away at least 25% of my salary that year. Again, sounds impressive maybe to some, but you all who are raising two, three or even four kids deserve the real credit for financial willpower. The stories (and financial numbers) I hear from friends about the cost of kids these days gives me anxiety. I can always downgrade my house, car, vacations, restaurants, … you can’t downgrade your kid. I would be the poorhouse if I had a little girl or two. I can’t imagine what the cost would be to stable their ponies! A son or two would probably be fine though. 🙂
As much as I would love to give back to WCI with a guest post, I would be too embarrassed to do a post and share all the details. Even though I’m not a doctor, I promote your blog, books, and podcast nearly like a religion to dozens and dozens of people at a large hospital in Texas. Enough of them know some of the details of the story above to put it together. My wife would absolutely kill me if the next time we were at the hospital our friends asked about the trip. Might even cheapen the experience for her.
I hear you though. These posts are very valuable because they discuss things just not talked about in polite society. And it is why Dr. Ellis should be commended for his contribution above. He is brave and selfless. My guess is he picked that up raising all those kids! What sparked all my commenting is in the above article Dr. Ellis says “I would ask that if you have something to say, you might consider putting one of your own financial mistakes in the comment section . . .” I didn’t want to leave him hanging!
Thanks for sharing as a comment anyway.
I enjoyed reading your comments. That trip sounded epic. Amazing!
Thank you for your kind reply and for sharing your mistakes.
Best of luck in 2023 and beyond and congratulations on your successes.
Nice post. If I even began to tally my mistakes, my post would be a lot longer and involve a lot more money Lol. Sounds like you’ve done a relatively good job.
Thank you. I think I probably missed a few.
Best wishes to you going forward.
Thanks Dr. Ellis for sharing. I think many people learn WAY more from mistakes than wins. Here are some of mine:
-speculated on tech stocks in 98-01 and lost 100% on a few….I was in my 20’s and dumb…I gutted my IRA
-sold 3 California rental condos around 2014 way too early thinking were at peak…only to see prices & skyrocket further – I should have kept these forever
-did not buy and instead rented when I moved to a high growth city in 2013…again was afraid economy was shakey
-paid many fines on filing taxes late over the years (lazy & procrastinate)
-I have lost a lot of opportunities being way too bearish over the years – in both stocks and real estate
Thank you for sharing.
As you say, we can learn a lot from our mistakes.
I remember staying in a rental in San Diego that I felt was worth $250K at the time in “Michigan dollars”. The woman who owned it told me it appraised for $750K. I thought “better sell it”. This was in 2005. I wonder what it’s worth now.