How to Think Clearly About Money Without Obsessing Over It with David Stein

INTRODUCTION

This is the White Coat Investor podcast where we help those who wear the white coat get a fair shake on Wall Street. We've been helping doctors and other high-income professionals stop doing dumb things with their money since 2011.

Dr. Jim Dahle:
This is White Coat Investor podcast number 462.

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Welcome back to the podcast. It's wonderful to have you here. Without you, it's not much of a podcast. You not only have to have hosts and production staff, but you have to have somebody to listen to it too, to have a successful long-term podcast like the White Coat Investor has been. It's been a wonderful journey. I've met so many awesome people.

I love that you all listen to the podcast. The reason why is because when you have this many people listening to a podcast, it's big enough that I can get some really great guests to come on. That makes for even more quality and more value for you as a podcast listener. Thank you for banding together with us to get all the wonderful guests that we've had on the podcast. We've had a whole bunch this winter and spring. We've got another great one today. We're going to talk with David Stein today.

Before we get into that, I want to share with you a few things. The first one is that we're finishing up a podcast sale, i.e. a sale on our online courses just for podcast listeners. If you will use code PODCAST20, you get 20% off all of our courses until March 16th. That's a few more days after this podcast drops until March 16th. You get 20% off our No Hype Real Estate Investing course, our Fire Your Financial Advisor course, our Continuing Financial Education course, all those online courses we have 20% off.

They still come with the same 100% no questions asked, one week money-back guarantee we've always had. Check those out if you think they would make a difference in your life. We put them together for you, thinking about you and what you need, what information you need, what inspiration you need, and trying to help you to accomplish your financial goals.

QUOTE OF THE DAY

Dr. Jim Dahle:
Our quote of the day today is from Nathan Morris. He said, “The speed of your success is limited only by your dedication and what you're willing to sacrifice.” I love it.

We have another podcast out, by the way. It's our newest podcast. We call it the Bootcamp Podcast or the Financial Bootcamp Podcast. You can find it at whitecoatinvestor.com/bootcamppodcast.

Whether you need to learn about disability insurance, the best way to negotiate a position contract, or how to do a backdoor Roth IRA, this podcast will cover all the basics. On Tuesdays, we publish an episode of this series. It's designed to get you comfortable with financial terms, terms you need to know as you begin your journey to financial freedom. Best of all, like all of our podcasts, Financial Bootcamp is 100% completely free.

What I've discovered over the years is there are people out there that are blog people. There are people that are forum people. There are people that are YouTube people. There are people that are podcast people.

When we're trying to bring people up to speed to get them the basics of financial literacy, we got to put it into all those different formats. We can't just have an email series like we've had for years because a whole bunch of you out there in podcast land don't read emails. You read the ones you have to, but you're not going to enjoy an email newsletter if we sent that to you. But you will listen to a podcast. That's the idea behind Financial Bootcamp, is we're trying to put this into the format where you like to learn it.

I hope that's helpful to you because we're so grateful for what you're doing because what you're doing is important, and I thank you for it.

Okay. I said we got David Stein today. It's a good interview. We're going to be at it for a while, but I think it's all super high yield, super high quality information. Let's get him on the line and start chatting.

FROM WALL STREET TO MAIN STREET: WHAT DAVID STEIN LEARNED ABOUT INVESTING, BURNOUT, AND HUMAN BEHAVIOR

Dr. Jim Dahle:
My guest today on the White Coat Investor podcast is David Stein, which you may know from being the podcast host of a popular personal finance and investing podcast known as Money for the Rest of Us. David, welcome to the White Coat Investor podcast.

David Stein:
It’s great to be here. Thanks.

Dr. Jim Dahle:
Okay. Let's start with the name of your podcast, Money for the Rest of Us. Well, who's your podcast not for?

David Stein:
Yeah, there's a question. That name, I have a marketing friend, Bernadette Giwa down in Australia, and she says, I got a name. You need to write a book. Here's what you should call it, Money for the Rest of Us. Without any explanation, it's like, “Oh, that does have a ring to it.” I wrote a book and realized I didn't have an audience, and so we launched the podcast in 2014 and eventually came out with the book in 2019.

Dr. Jim Dahle:
It works a lot better in that order, I discovered as well. It works a lot better if there's a podcast or a blog or something, and then the book comes out. It sells a lot better.

David Stein:
Yeah. Well, I quickly learned that. The idea, the rest of us, we're not Wall Street. We're individual investors trying to understand what's going on with financial markets and the economy, and so that's really the rest of us as opposed to those inside the financial regime.

Dr. Jim Dahle:
Okay, and you spent some time inside the financial regime. Let's bring people up to speed on what you did for a career before you started. You describe yourself, I don't know if you work full time, but you describe yourself as a full-time podcaster now. Tell us what you did before that.

David Stein:
Yeah, I spent 17 years as an institutional investment advisor. The firm is FEG Advisors. They're based in Cincinnati, and I went to graduate school. In a couple years of that, I answered a classified ad, which shows you how long ago that was, and they just said, you need to understand bank statements. I didn't really know what it was. It turned out to be this 25-person advisory firm that had a number of university clients and other private foundations, and they provided investment guidance to them. They helped them with asset allocation. They helped them draft investment policy statements, helped them select investment managers.

And that was in 1995, and I was there until 2011 and left as one of our senior partners, our chief investment strategist and the chief portfolio strategist. So, I was very involved in managing assets. I still had a number of clients such as Texas A&M University System, a handful of larger clients. But that was my background, investing, how do we help these universities generate essentially funds for their students and other programs.

Dr. Jim Dahle:
Very nice, and this was a large amount of money you were overseeing. We're talking Texas A&M, University of Puget Sound. The Sierra Club Foundation, I think, was one of the clients as well. It's not a small amount of money you were running. What did you learn running those billions?

David Stein:
I learned there's still very much a human element. When you think about these big pools of money, at the end of the day, there's still an investment committee or board members made up of seven to eight individuals, and they bring their human ticks to it and their emotion.

And so, the best-performing clients I had were the ones that there wasn't a lot of turnover on the committee. They had that consistency. They knew why they had made decisions in the past, and that allowed them to stick to their plan, which is something you've talked about on your show, the importance of consistency over the long term with whatever plan it may be to stick with it, and so we saw that on the institutional side also.

Dr. Jim Dahle:
Now, something a lot of our audience has dealt with, is dealing with currently, is burnout in their career. And I've listened to at least one interview where you talked about the time you left this institutional asset management business. You were feeling a little bit of burnout as well. Can you tell us a little bit about your experience with burnout and what you did about it and how you pivoted?

David Stein:
Yeah, this was 2011, and one of the things with managing money is you're measured against a benchmark every week or every month, every quarter. And I found myself as the person responsible for managing what's now called outsourced CIO, where you basically take discretion on the assets for these institutional clients, and I got tired of the game. I got tired of trying to outperform, and the way we had structured the portfolio, actually, because we had some hedge fund components to it, we needed the market to actually fall to generate some excess return, and I didn't want to root against the financial market.

I was just tired, and I remember my wife had encouraged me. We made it through the great financial crisis. I learned a ton, but around 2010, she said quit. And around that time, we had taken our kids out of school, and we went and spent two or three months in Maine just to be together, and we wanted to do more of that family travel.

I just remember at one time, just a really tough week performance-wise, I was speaking at a conference in California, and I just said, “I'm done.” And we were living in Idaho at the time, and I booked a red-eye flight to our executive committee meeting and showed up. They knew when I showed up in person that it was an issue, and I left. And so, it's been, gosh, 14 years ago that I left.

But yeah, there was some burnout to it, and part of it is I had partners, and I was just tired of saying “we” all the time. “We think this.” I just wanted to be able to do something on my own, investment-related, and say, “I think this.” “This is what I think. These are my views.” And so, I've done that, but now both my sons are partners in our business, and so now I get to say ‘we” again as we fitted a bill, what we're doing together.

Dr. Jim Dahle:
I've talked to some people that have done very well, been very successful, manage a lot of money for people, and we get to talking about careers. This was when I was spending more of my time practicing emergency medicine. And one of them related to me how jealous he was that he spent all day long basically making rich people more money and felt like I was doing something that was really making a difference in the world. As you pivoted toward money for the rest of us, did you feel like your work would be more impactful kind of working for the little guy rather than these big endowments?

David Stein:
Yeah. In fact, toward the latter part at FEG, we started managing assets for financial planners. And so, I did spend more time speaking in front of individual investors, some of our advisor clients, and I remember our head of marketing that came from that background. The word he used was noble, how noble, more noble it is to sort of be working and helping individual investors. And so, that's been our focus of money for the rest of us.

But the other focus is just back in 2000, I read a book called Soloing, and the whole idea was, “How do you get paid to learn?” And that's what we've structured here is most of my episodes are solo podcasts. It's what I happen to be interested in and what am I learning and just carrying our audience along with me as we try to explore all the AI right now and how that's impacting everything. Is it a bubble? Is it not? And that's what I do is just learn by teaching.

Dr. Jim Dahle:
Another person that pivoted from the institutional asset management space to doing at least some work to try to help the individual investors, David Swenson, who famously ran the Yale endowment for a while, and he wrote books. I recall, I think it was his second book that he put out, the one aimed at individual investors. He realized that maybe the game was different for the individual investor than it was for the institutional investor. Did you find that to be the case as well? And in what ways do you see the game as being different?

David Stein:
Well, the biggest difference for most institutional investors are non-profits, so they don't have to worry about taxes. Well, more do now. Sort of excise taxes have been passed on the larger endowments, including Yale, but back in the day, this wasn't an issue where with individuals, it definitely is. And that's what's so remarkable about ETFs and that whole area of the market is because they're naturally much more tax efficient.

And initially, a lot of the institutional asset classes weren't available to individual investors. And now, through ETFs, investors can invest in anything. Now, whether they should or not, that's different, but the taxes is a big thing when it comes to individual investors. And you mentioned it shouldn't necessarily drive the decision, but it is something we should consider in terms of asset location, but that would be the biggest difference.

HOW REAL INVESTORS ACTUALLY SUCCEED: PATIENCE, DIVERSIFICATION, VALUATIONS, AND AVOIDING BIG MISTAKES

Dr. Jim Dahle:
Now, you've said before, the typical institutional investor has about a patience level of three years. And so, if things aren't performing after three years, they want to make changes. Are individual investors better or worse? Or how do they stack up compared to the institutions?

David Stein:
I'd say they're about the same because, again, institutions are made up of investment committee members. And so, at an institution, you would select an advisor. And my biggest job, let's say a committee was trying to select a new small cap manager. And so you would have what we call a beauty contest. You'd bring in maybe three or four managers to be interviewed that have their pitch book, and they would tell stories, and they would try to convince the committee that they were the manager.

And my job is to try to get them to hire the worst performer, or at least that had underperformed over the short term because of their cycles even within small cap. And the worst performing client I ever had, and I inherited, they hired a bunch of managers at the same time, the ones that had done the best in the short term and the long term. And I remember one of those managers that went through an underperforming cycle. He said, yeah, this college is our worst performing client ever.

And if you can get a manager, if you can get them at a skilled firm, but it's underperformed, then you can catch that up cycle again. But if you hire at the top, sort of the first year, you can, “Yeah, well, I can justify it.” But by year three, it's like stepping in front of a freight train. You get this institutional group think committee momentum to, we just got to end the pain because if you're a volunteer on an investment committee, you want to make changes. And so you start looking at what seems like it's broken. And oftentimes that happens to be a manager that's underperforming.

And I think as individuals, we're similar because part of diversification is something is always underperforming. Otherwise it wouldn't be diversification. Everything would be the same thing. And so, there is this tendency to focus on what's not working and not like that pain of feeling like, “Well, maybe I made a mistake” or “We don't like to lose money.’ And part of investing is sort of understanding, “Well, why is it underperforming? What's going on?”

And some of the tools that we've built here is to help investors do that. Because you think about three years ago where US stocks have significantly outperformed non-US stocks. And if you were an advisor, an individual is like, “Why do I have non-US stocks?” Well, it's helpful to look under the hood why the S&P 500 is outperforming a non-US benchmark and realize, “Well, it's because valuations, what investors are paying for a dollar worth of earnings is added 4% to return over the past decade. And a weakening or a strengthening US dollar added another 2% to 3%.”

Once you know why something's happening, it's easier to be more patient. And now you've seen a year, like 2025, where non-US outperformed and continues to outperform US. And then the cycle starts over. Why? What's driving it? What are the underlying drivers of performance?

That's something I see a lot when people invest in index funds. They think it's a one and done decision. They don't spend time understanding what are the underlying drivers of that performance historically and looking forward.

Dr. Jim Dahle:
You talk a little bit about persistence of performance. And there've been some studies that have looked at this. They're usually done in mutual funds, not exactly the same thing as endowments, but similar institution type management of a large amount of money.

And what seems to show up in the studies that I've looked at is that performance is very persistent in the bottom quintile. Poor performers remain poor performers and not very persistent at all in the top quintile that those in the top quintile are much more likely to be average performers in the next time period.

David Stein:
Well, right, right. Yeah. In the institutional world, one of the things that you would show in our report is how is this particular manager performing relative to the index, but also relative to their peers. And so, always, you want a top quartile manager. And a lot of times they'll put that in the investment policy statement. We want a top quartile manager in that particular category.

And what I found is a top quartile manager over a 10-year period generally was below average about 30 to 40% of the time on a rolling three-year basis. Because in order to actually outperform a benchmark, you have to look different than the benchmark. You can't be a closet indexer.

Now, should you be using an active manager at all? Most active managers, and the studies support this, they underperform an index. And so, that's why most as individual investors, my portfolio and most should be mostly more passive ETFs.

Now, that still opens up a huge variety of different asset types. It doesn't just have to be a two-fund or a three-fund portfolio. There are other ways to add incremental value if you choose to, if you find that interesting, that can be done.

Dr. Jim Dahle:
Now, you talk about index funds and a passive approach and simplicity and buying and holding and sticking with your plan long-term. Would you consider yourself a Boglehead? And if not, how would you disagree?

David Stein:
I'm not sure what the definition of a Boglehead is. If the definition of a Boglehead is I own three funds or three ETFs and don't change, then no, I'm not a Boglehead. I like investing. And I have what I call an asset garden approach. I have a variety of asset types with a dozen or so different assets because I enjoy it and I like different return drivers and understanding what's going on.

I am more Boglehead in terms of, I like lower fees of ETFs. I tend to be a patient investor, but I own gold, I own crypto, I own preferred stocks. I'm in private capital investments. And so it's more of, let's say an institutional looking portfolio, perhaps unorthodox, but it's how I like to invest and that doesn't mean everybody has to invest that way.

But I teach investing for a living. And so, I like to experiment. I experiment all the time as a teaching tool to help individual investors. It's like, “Yeah, this was a good idea. This is perhaps not so good.”

Dr. Jim Dahle:
Maybe it can be compared to a big tent philosophy and a small tent philosophy with the political party, for instance. I consider myself a kind of a big tent Boglehead and people that care about passive investing, they care about low costs, they care about buy and hold. I put them in the tent. I call them a Boglehead. Whereas other people have a much more narrow.

David Stein:
Yeah. I would be a big tent Boglehead. Sure. I've participated in the forum in the past but I'm not one that says there's only one way to do things when it comes to investing. There's many different ways you have to choose an approach to investing that resonates with your makeup, your personality.

Dr. Jim Dahle:
Yeah. Many roads to Dublin as Taylor Larimore likes to say.

David Stein:
Exactly. Yeah.

Dr. Jim Dahle:
Okay. You mentioned an investor policy statement and I want to get your take on investor policy statement, this sort of idea, a written investing plan of some kind is something that I'm a huge proponent of. You mentioned it. Tell us why you think it's important, how you use it, how you think an individual investor ought to look at some sort of written investment plan and investor policy statement.

David Stein:
This comes down to individual sentiment in terms of their approach. Institutions have it and it's a policy statement outlines the objective. It outlines the strategic allocation, any potential restrictions. Sometimes it can be ESG type restrictions, but it’s a living document and it is a strategic plan for those investments. And the reason why is because there is turnover in staff, there's turnover in the board.

For an individual investor, for some people, they find it very helpful to write these things down, to have that strategic plan for how they invest because it helps control the emotion and helps them stick to that plan.

Not everyone needs to have an investment policy statement. I don't have a personal investment policy statement. I don't have a strategic asset allocation. I have an approach where I have a variety of asset types and almost equal weighted in terms of the different types of assets between stocks and bonds and more income strategies and private capital and crypto and precious metals, et cetera.

But one doesn't have to have a written statement unless it helps them. And in terms of how, just like not everybody needs to have a checklist in terms of what they're going to do that day.

Some people I call them list makers and non-list makers. I'm not a list maker. I don't find any satisfaction of checking off what I had on my list that day. Whereas other people, that's how they drive their lives and they find it incredibly helpful and satisfying. I'm more of a Zen-like person that wakes up and does what they feel like doing that particular day. This was the one meeting I had scheduled for the entire week.

Now I had things that I needed to do, but I didn't necessarily have to do them at any given time. So, there's different ways to go in terms of how we manage our time, our list, and the same with having an investment policy statement.

Dr. Jim Dahle:
Now, you mentioned that part of your asset allocation, your investments are driven by desire to learn, desire to teach, desire to experiment. Do you think your portfolio would have done better if you had set a strategic asset allocation, kind of a fixed plan and followed that day in and day out rather than experimenting and learning about other things?

David Stein:
No, not necessarily. My performance has been good. My goal was to just make sure that I earned more than inflation after spending. There was some real growth in the portfolio. Clearly anybody in the past since I left, I should have just bought the S&P 500. And one could say, well, that would have been it.

On the other hand, because I understand investing, I know why the S&P 500 outperformed, mostly because the dollar weakened and they've got people, the PE went from 18 to 27. And so, that means when valuations are higher, future returns are lower. But it wasn't the only reason. You had these Omega cap stocks, they did compounded earnings over the past decade at 8, 9% earnings per share. They had all the buybacks.

But obviously I've made mistakes. There are things I wish I would not have done in the past decade. An example is an asset class, master limited partnerships, which are these energy infrastructure assets.

Dr. Jim Dahle:
Pipelines and that sort of thing.

David Stein:
Yeah, yeah. We recommended those to our investors, institutional investors in the past, because they were always structured as sort of as a toll booth. There are hedge funds that introduced us to this. It was really a challenging asset class because of the structure. In some ways it was the complexity. And I remember, back at FEG, the analyst that covered that space, the real estate, I remember one time in exasperation, he says, “I wish I had never heard of MLPs”, and I had too much money in MLPs.

And they've had a great five, 10 years, but I don't own them anymore because this was an asset class that in some ways came about due to tax policy. And if you go to an MLP ETF, there's only about 25 holdings now. So, it's gotten more and more concentrated as these massive limited partnerships have moved to a different corporate structure.

One of the risks is falling in love with an asset. And, and I got my exposure too high in MLPs, but again, I'm still here. I didn't have 80% of my portfolio, but it's like I mentioned, we all hate to lose money. I might've had 5% MLPs and lost more than six figures on MLPs over the years. And that's done. I don't like to make mistakes, but we all do. And that's just part of investing. And I talk about this in my book, the goal is we're all going to make mistakes. You just don't want the mistakes to be so big that you're financially ruined. But mistakes are part of investing.

Dr. Jim Dahle:
Yeah. Now you mentioned PE ratios and let's talk a little bit about valuations. What do you see as the role of watching market signals or valuations like PE ratios for the individual investor? In a lot of ways, the market's been expensive for a decade. And if you're just watching for a higher PE ratio, you might've bailed out long before you got the 2023 and 2024 and 2025 returns. What is the role for an individual investor? How should they be thinking about things like, like PE ratios?

David Stein:
Well, they should understand when something is expensive. It's just like when you go to the store, would you rather buy a car that is selling for more than it's worth or buy a cheaper use car, like you've mentioned in the past?

And so, the PE is basically the price of what investors are paying for that future cashflow. And there is a statistic over the longterm, when you pay more for stocks, more than average or twice as high as average, your future returns are lower. And so if you care about the return in your portfolio, then you should at least have some understanding of how it's priced and what investors are paying for it.

And so, I do think it's important and I have found it frustrating how difficult that data is to get sometime, which is why we build an entire suite of software tools, because I got tired of not being able to get the data. And we tried so many different providers and eventually just signed a data license with MSCI and Bloomberg so we can get the data and we just built our own tool.

I use it to teach all the time. We launched that four or five years ago. I use it all the time in our teaching so we can show people. “Here's why this area has outperformed. Here's what is the least expensive area.” And these are index funds, this isn't individual stocks, this is all allocating in a Bogle-like way in index funds. But there's a variety of index, and that's kind of been our approach.

Dr. Jim Dahle:
It sounds like you would advocate for some sort of tactical asset allocation changes based on valuations, and that's hard because short term PE ratios don't predict a lot. In the long run, they predict broad cycles, but they don't give you any indication when to change. How do you make those decisions of when do you change? Sometimes you're going to be literally years too early and sometimes a little bit late.

David Stein:
Well, absolutely, but you're trying to get the season right. I have said for years that there are no truly passive investors, unless you just own one ETF. Even if you own two ETFs, at some point, you have to rebalance. And so, should you rebalance into the S&P 500 when it's selling at a price to earnings ratio that's two standard deviations more expensive than average, or do I allocate more to non-US?

As an institutional advisor, we would make several changes a year. But as individual investors, we don't have to make that many changes. But we do rebalance and it's helpful to know, let's take looking at the end of 2004, the S&P 500 was so expensive and it had done so well. And there you could see that real small cap value outside of the US was extremely cheap.

And we're not talking about moving all of our money, but on the margins, it is helpful, mainly so you can sleep at night. In terms of, I think many passive investors are naive investors, they just think the stock market goes up because it goes up. They don't understand that the stock market goes up because of an economy, it comes with earnings, but it also depends on, like anything, what is being paid for that future cash flow and for those earnings.

MONEY IS A TOOL, NOT THE POINT: ANXIETY, CRYPTO, FIAT CURRENCY, AND BUILDING A LIFE YOU DO NOT WANT TO RETIRE FROM

Dr. Jim Dahle:
Let's step back a minute and be a little bit more philosophical. You've talked about how to live without worrying about your money. What do you mean by that?

David Stein:
I don't want people to spend most of their life worrying about money or investing. There's just too many more interesting things out there. There are individuals that like to invest. I think for most of us, they don't have to be an investment expert. You just have to have a level of knowledge so you don't get taken advantage of, like you did. That's what led you to understanding investing, because you felt like you were being taken advantage of by so-called experts.

I think there is a level of knowledge that we need to have in order to invest, but it's definitely not the most important thing we do, which is why on my podcast, it is something we talk about, investing, but we talk about all types of philosophical things.

In some ways, they're more interesting, which is why you don't listen to our podcast if you want four bullet points, because the point is the journey. It's the narrative. It's the story. It's how it relates, how it all links together, which is why we spend a lot of time talking about, “Well, how does the economy really work?”

Here's an example. Right now, Bitcoin is down 50%. If you read the Financial Times, a lot of the columnists, it's like, “Who would ever buy this? It's worthless. Is it going to be worth anything in 100 years?” Coming from a traditional financial background, I could say the same thing about the US dollar. It's worthless because money is a trust network. In and of itself, it's just bits. Most of it's electronic. It is not worth anything.

But what is worth something is the fact that your neighbor is willing to accept this worthless thing for payment. It's important as individuals to be linked into this financial network, this fiat currency network and believe in it, not to run and hoard everything and think the world's going to crash.

Cryptocurrency is the same thing. Bitcoin has come out of the woodwork over the past decade. It is something that people trust. It's a trust network. Now, will the trust be there 10 years from now? Nobody knows. Will it be there in the US dollar? We don't know. Those are the type of more philosophical stepping back. What is money? When you know that money itself, the actual US dollar is worthless, that it is a trust network and there are some threats to that trust right now in terms of Federal Reserve independence and a lot of things that are going on, well, there's a reason that maybe we should allocate to some other areas that give us a little more monetary diversification.

Dr. Jim Dahle:
You brought up a couple of ideas I want to spend some more time on. But before we get there, I've found that for a lot of people, just getting more information, becoming more financially literate, knowing more about investing, whatever you want to call it, does not necessarily reduce their anxiety level about money. In fact, sometimes it seems it even increases their worry. It gives them more things to worry about. Now they found out about the sequence of returns risk and they want to start worrying about that too. Do you have any advice for people that tend to be anxious and carry that anxiety with them into their financial dealings?

David Stein:
Yeah, go outside. Stop. One of my intentions this year is less narration, more giveness. What is the grace and the things that are coming in the ceaseless creativity that you see in the world? You go outside and you get involved in physical things. I know you do mountain climbing, some people ski, some people just walk, tennis, hike, but just stop the narrative. Find a way to learn, and it's hard because everybody, I had a conversation with AI about this the other day because some people have a constant narrative all the time and they just constantly worry.

I'm not necessarily wired that way, but I do think the more we can focus on real things, embody things, things in nature that can help settle some of that, it helps us not get into these thought spirals. But it's hard. Sometimes it could certainly take professional help to do that, but I don't think it's having more knowledge. I just think it's more just their makeup and learning to figure out how do I manage that.

It's not like it's going to stop. We all do it. What I have found is the more I can focus on what is happening now in the present in front of me and stop leaning into the future or worrying about the past, but just focus on who's in front of me right now. What are they saying? Listen to them. That helps. We can only think about one thing at a time, and that can put some of those money worries on the back burner.

Dr. Jim Dahle:
Let's go back to crypto a little bit. You talked a little bit about Bitcoin, how you have some money invested in Bitcoin. Bitcoin is often criticized for being a nonproductive asset, a speculative asset that essentially requires somebody else, a greater fool, to pay more money for it later than you paid for it today. How do you view crypto as far as its investment qualities, as far as its place in a portfolio for a high-income professional like a physician?

David Stein:
In my first book, Money for the Rest of Us, it's 10 questions that investors should ask before they buy any asset. The second question is, “Is it investing, speculating, or gambling?”

An investment is something with a positive expected return, usually because it's generating some type of cash flow. It's a stock. Stocks are ownership in a company, there's profits being generated. It is a productive investment. A bond or real estate is generating cash flow. So, that's investing. Most of our portfolio should be investing.

Now, there are also speculations, and speculations are something where there's disagreement on what the price should be, usually because there isn't any cash flow. An example of speculation is gold. Gold has been held for thousands of years. It's truly a speculation because you can't value it. That doesn't mean it's worthless. It means it depends on trust.

Now, when it comes to something like gold and Bitcoin, one of the advantages is the supply is constrained. It's constrained because in the case of Bitcoin, it's the algorithm. There's only a certain amount of 21 million Bitcoin that will ever be created. In gold, it's linked to the real world because it has to be mined and the supply only grows 2% to 3% per year. You take that the US dollar has grown at 6% a year. The supply of that dollar is growing faster, which means that it will be the base relative to real things.

Now, is Bitcoin a real thing? No, it's a trust network. There's an algorithm, but it doesn't matter. If people find value in it, just like they find value in artwork or whatever, will that continue? We don't know.

The advantage of something like Bitcoin is people do find it valuable and you can keep it completely away from the financial system. You don't have to be locked in. You can put it in a USB wallet and you can carry it across the world and have access to money, which you can't necessarily do with other type of currency. You can't take more than $10,000 outside of the country. No, most people don't need to, but it's trust. These are speculations.

Then the third one is gambling, which is something with a negative return. I've been going back and forth, I did an episode months ago on sports betting is not investing. I got into this dialogue with this guy, super nice guy, who is basically taking the investing framework for gambling. He calls it low stress betting, low stress bets. I have talked to him. It's fascinating because in this case, his bets, there's a 72% chance of winning, which seems really high, but that includes the spread for the betting company.

Even if you are betting in something with a 72% probability of winning, you have to do better than that in order to actually make money, which is why you see his performance, he hasn't lost much money, but he has. These are the type of things we talk about on our show and a lot of it is philosophical. The original question is gold, Bitcoin, these are speculations. They shouldn't be a large part of your portfolio, but they are protection against monetary disorder.

Dr. Jim Dahle:
At what point does it start making you nervous when somebody tells you they have this much of their portfolio in these speculative investments in gold and Bitcoin? If they told you they had 5% in gold and 5% in Bitcoin, I presume you'd be okay. What if they told you they had 20% in gold and 20% in Bitcoin, does that start making you think maybe the person is being foolish?

David Stein:
Yeah, in my case, once gold and crypto gets above 20%, then I sell. I sold Bitcoin this past summer and gold. I actually went to a gold dealer in New York City, which was an experience to sell a few gold coins that I happen to carry with me. There are financial advisors that I know that got into their clients early, or they got into Bitcoin early and they have clients with 40%, 50% Bitcoin.

To me, that makes me incredibly nervous because it's not tied to the real economy. The innovation that we see in the economy, that's where we want most of our assets because of how dynamic it is. These hoarding assets, it's okay to hoard. It's okay, people have had gold jewelry for years as a protection in case they need it in an economy less developed, in poorer countries. That is a primary way they save, and you wear it.

Dr. Jim Dahle:
It's the classic Indian investment.

David Stein:
Yeah. That's a good thing. It can't be the only thing, but you can say the same thing about vintage Rolex watches. It's a store of value, no guarantee it'll go up, but if something is scarce in a world where fiat money is growing much faster, these are things, these hoarding assets can hold some value over the long term.

Dr. Jim Dahle:
Let's talk a little bit about fiat money. You've alluded to this today. You did a series on the podcast all about how the economy works, and some of that talked about how money is created by the Fed and by banks. Do you view creating money out of thin air as a bug or a feature? Is this just an accounting sham like Enron that's bound to crash, or is it just the benefit of being the world's reserve currency as long as the US economy doesn't collapse?

David Stein:
It's both a bug and a feature. Historically, most money was created when banks make a loan. My first loan I ever got was for a used Ford Granada, 1982 Ford Granada. I borrowed $5,000 at 18% interest rate. The bank that lent me that money, on their balance sheet, they put David Oza's $5,000 as a loan receivable, that was their asset. On the liability side, they created the money out of thin air. They just changed the digits in the account, in this case, the car dealership that I bought the car from.

That is money that was created out of thin air, and this is important. I had to work really hard to pay back that loan. Money is energy in the sense that it didn't take any energy to create that money, but because it still was tied to the real economy, it was tied to my life energy that I expended to pay back that loan.

That's how most money has been created over time. People only borrow money because they're willing to expend their life energy to pay it back. There is still a link to the physical world. Just like with gold, there is a link to the physical world because they're mining the asset or with cryptocurrency, there is energy being expended to secure the network and create the new Bitcoin.

Where it is broken down is because the US dollar, read it, it's a Federal Reserve note, it's a non-interest bearing perpetual note from the central bank, and they can create it out of thin air, and they have. That's what's known as quantitative easing. When that is being done, at the same time, the government's running a budget deficit, the federal government, that's creating new money. That's the danger of fiat currency because a government can create it out of thin air and you get the supply in Venezuela and some of these nations, and again, it comes back to a trust network. If people don't trust fiat anymore, they think the supply is growing too fast or the government's just printing it, then its value falls relative to real things.

Dr. Jim Dahle:
It can do so very rapidly.

David Stein:
All right. What do we call it? We call that inflation. Inflation is when the fiat currency isn't worth as much compared to real things and that's why we own some alternative assets, and that could be other current fiat currencies when we buy non-US stocks, but it could be gold and crypto, but it's part of our garden, part of our diversification pool, our capital reservoir, but it can't be the only thing. You can't just play the same piano key. You need a variety and not get emotionally tied and overly bearish or overly bullish in any one asset type.

Dr. Jim Dahle:
Let's talk about investing beliefs. What belief about investing have you changed your mind on in the last decade?

David Stein:
Gold would be one. When I was an institutional advisor, I remember I was doing a presentation at the Rhode Island School of Design. We were pitching to be their investment advisor and somebody asked me about gold and he must have been pro-gold and I just said, it's just unlike we talked about, it has no productive use. It's just a shiny rock.

In fact, I wrote about it in one of our investment pieces and one of our analysts pushed back because he'd invested in gold for a long time. I've gotten much more comfortable owning gold because I understand where it fits as a monetary like asset. I've changed and that's why I think I bought gold for the first time probably in 2012.

This isn't something I have bought for decades because I always took the institutional view that “No, you need something tied to the real economy.” Well, not always, because of some of the flaws with fiat currency and that's why I was an early participant in Bitcoin because of the same way. And in occasion, I've always taken profits. What do I do with the profits? I go buy real things. The first time I sold Bitcoin, I went and bought windows for the house we're in. They're made out of steel because it's real and we don't want to lose track of what's real in the world and it's not Bitcoin and it's not fiat currency.

Dr. Jim Dahle:
Let's talk a little bit about some of the limited things we have in life. There's time versus health versus money. There's been a fair amount of discussion in the last few years, some of it centered around the book Die With Zero and some of the ideas put out by its author.

Do you view that people ought to see their net worth peak at some time during their life? And if so, when? Is there a time they should begin to be more active in deploying their money, spending it, giving it away rather than focusing on more returns and investing? How do you balance time and health and money?

David Stein:
It's hard. The way that I look at it is these financial assets, they're a type of capital and what capital is, Henry David Thoreau, in his essay on walking, he talked about how he walked all the time, spent hours walking and he said, independence and freedom is the capital of the walking profession.

We don't usually think of independence and freedom as capital, but capital is something that expands its choices and I've been writing about this in my second book that I'm working on.

We have this capital reservoir. It includes time, it includes mobility, it includes our life energy, it includes our human capital, our skills and our education, and it includes some financial assets. There's always trade-offs. We've spent much of our life trading our life energy for more financial capital and at some point, yeah, we have enough. Everyone has to decide when that is.

John Maynard Keynes, back in the 30s, he said, eventually, given how fast the economy's growing, we're going to say we have enough, like everybody's going to have enough and then he said, there will still be purposeful moneymakers. People just love to make money because money is status. And you see this with billionaires, they're always trying to see who's got the most status, who's got the nicest yacht and plane. Most of us shouldn't do that.

What Keynes says, at some point, we need to focus on what the real purpose of life is and the same for our capital reservoir. At some point, we need to stop trading life energy for more money. Maybe we need to draw down some of that financial capital to go take a trip. There isn't a right time, but it is part of the overall discussion.

You said something on your podcast about something you've changed with, because you used to try to optimize everything. Optimization is a flattening of the world. It's mathematically trying to get the right amount, given certain constraints. We cannot do that with this reservoir capital, because it includes so many intangibles that it's hard to put a value on.

We're really just trying to calibrate our lives and figure out what the mix is. One of the things I've taught for years is we should live a life that we don't want to retire from. Instead of spending all this time waiting to retire and saving all this money, is why don't you structure life now that you're happy with? It sounds like you've done that in your life, Jim. You still like being a doctor, you still do it, but it isn't the only thing you do. You've structured a life that you don't want to retire from. Maybe you'll never retire, who knows?

With something like Die With Zero, which is a good book, but there isn't a right answer. When I quit my job as an advisor, I was 45. I told my clients we were retired. That's what we said to clients.

Then you think about 50 years, how am I going to invest thinking of a 50-year time horizon? Well, you can't. You can just do it one year at a time, and I still do that, one year at a time. Where do we want to take a trip this year? What do we want to do this year? Because we don't process 10-year increments of time very well, but we can focus on how we feel now. What do we want to do now? I plan out maybe six months ahead. I have no idea what we're going to do this fall. Maybe we'll travel somewhere, maybe we won't.

Now, not everybody can do that. Some people, like I said, they're list makers, they want it planned out. We have to figure out what works for us. The best analogy I have is metaphor is this capital reservoir with all of our assets in it, and then figuring out how to calibrate that.

Dr. Jim Dahle:
The wild thing is how challenging it is for us to predict what will make us happy 10 years from now. As I go back over the decades in my life, I thought, “Ooh, if this is where I'm at in 10 years, that's really what I'm going to want, and that's what's going to make me happy.” I've been amazed how different I am at 50 than I thought I was going to be at 50 when I was 40.

David Stein:
Oh, absolutely. That's where this whole idea of letting… See, that's narrative driven. We're thinking in 10 years, I will be this. We don't know. Now, we can prepare and do things now that we think that we're enjoying, that maybe it's also very helpful to have proxies go ask 50-year-olds.

I remember we were living in Idaho Falls, and our neighbor was 92. I'd spent a lot of time with this neighbor, Jay, and a lot of it was talking about what's it like to be 92? Asking people that are there, and it can be very helpful in terms of guiding our decisions, but no, we can't. What we can do is not spend so much time thinking about the future, making sure our life now is something that brings us joy.

Dr. Jim Dahle:
Absolutely. All right. Well, our time is getting short, David. What else do you think high income professionals, and there's going to be 25,000 or 30,000 or 35,000 high income professionals listening to this podcast, what have we not talked about today that you think they ought to know?

David Stein:
I think we've covered a lot of ground here. We've covered investing, we've covered speculation, we've covered allocating all of our capital, not just our financial capital, and that you can't optimize it. We've talked about not leaning so much into the future, but to focus on the present.

I think that anyone right now, I think it's just helpful to step back and think, “Am I happy and what can I change now that will help me be more happy?” Perhaps much of that is just allocating more time to physical things, what's happening, just being in nature or things like that, and spend less time worrying about money.

Dr. Jim Dahle:
Yeah, absolutely. All right. I've been speaking with David Stein. The book is Money for the Rest of Us. The podcast is Money for the Rest of Us. I encourage you to check it out and take as much value as you can from it. Thank you so much for your time with us today, David.

David Stein:
Great. Thanks, Jim.

Dr. Jim Dahle:
Okay. I hope you enjoyed that. The fun part about investing is you talk to people that know about investing. There are certain things that everybody agrees on. Keeping your costs low matters because those costs have to come from your return. Broad diversification matters. Sticking with your plan matters.

But you know what? Everybody's plan's a little bit different and that's okay. You don't have to have the same plan as everybody else. I always worry when I get an email and people ask me what I invest in, as though their goal should be to find a guru you like and copy what they're doing. It's fine, I guess. What I'm doing is reasonable, so it's okay if you copy it.

My point is there's 100 other reasonable ways to invest as well. You just have to pick one of them, fund it adequately, and stick with it long-term. David obviously invests in a few ways that are a little bit different from the way I invest. He puts some money into speculative assets like gold, Bitcoin, that sort of thing. I've chosen not to do that. I prefer to have all my serious money invested into productive assets and that's okay.

David's been successful. He's met his financial goals. I've been successful. I've met my financial goals. You too can be successful and meet your financial goals. Whether you have 5% in Bitcoin or don't have 5% in Bitcoin, you can be just as successful.

Now, we give cautions. If you've got 80% in Bitcoin, neither one of us thinks that's a good idea. And that would be the case for the vast majority of informed investors would give you that same advice that that's too much. But we're all going to draw the line differently where we think too much is. I hope that's helpful to you as you formulate your own investing plan and work on following. Perfect is the enemy of good. Get good and stick with it.

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INTRODUCTION

This is the White Coat Investor podcast Milestones to Millionaire – Celebrating stories of success along the journey to financial freedom.

Dr. Jim Dahle:
This is Milestones to Millionaire podcast number 265.

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We have a great interview today. Let's bring them on the line. Every now and then we meet a White Coat Investor that's just been very, very successful. And the people on the White Coat Investor Forum love to hear these stories. They think every White Coat Investor should be a decamillionaire eventually. But I don't know if that's necessarily the case.

But there are a fair number of docs out there who have been very successful, despite not necessarily having a super high physician income. There's a lot of different routes they take. Sometimes it's an entrepreneurial route. And you'll see that this interviewee did a little bit of that.

Sometimes it is a real estate empire that they built. This particular person did a lot of that. Sometimes it's just working hard as a doc, maybe marrying another high income professional like a doc, saving a big chunk of their income, stuffing it into boring old index funds and retirement accounts. This doc did quite a bit of that as well. So let's listen to the story and hear what success looks like.

INTERVIEW

Dr. Jim Dahle:
Our guest today on the Milestones to Millionaire podcast is Ashwani. Welcome to the podcast.

Ashwani:
Oh, thanks for having me.

Dr. Jim Dahle:
Well, let's introduce you a little bit to our audience. Tell us what you do for a living and what part of the country you live in and how far you are out of training.

Ashwani:
I am a hospitalist in internal medicine and we live in Hershey, Pennsylvania. And I've been out of training since 2009. Almost 17 years this year in July.

Dr. Jim Dahle:
Certainly mid-career by now.

Ashwani:
It is mid-career and I'm turning 50 this year.

Dr. Jim Dahle:
Congratulations. It's a big milestone. I hit it last year and it's not all happy news, but it is impressive to have lived for half a century.

Ashwani:
It is, you know.

Dr. Jim Dahle:
Let's talk about the milestone we're going to be celebrating with you today. It's really kind of a net worth milestone. Tell us what your net worth is now.

Ashwani:
Well, my net worth is, I would say a little short of $8 million. So it's not $8 million, but a little short. But I never realized that we can reach that level slowly and steadily doing the efforts and listening to your podcast, your Facebook group and others, wherever I got the knowledge and just slowly growing to that level.

Dr. Jim Dahle:
Yeah. $8 million is a ton of money. Lots of doctors retire on far less than 8 million. When we look at the net worth surveys out there, only something like, what is it? I think it's around a quarter of doctors in their 60s. Not before 50. Only a quarter of doctors in their 60s have a net worth of $5 million plus and about a quarter of marked even millionaires yet in their 60s. $8 million is smashing it out of the park. That's pretty awesome. So congratulations on that.

Ashwani:
Thank you, I didn't know these numbers actually.

Dr. Jim Dahle:
Tell us a little bit about what the net worth is made up of. How much assets, how much debt, how much is in traditional investments, how much in real estate investments, how much your home, et cetera.

Ashwani:
Yeah, I'll say, the retirement accounts, I have $2.7 million, it's both me and my wife. And I have a little bit more out of retirement accounts investments, so I still consider them as cash. And then a real estate investment, we have a worth of $7 million of property and that's just my issue. It's not with the partners.

You can say that is depending upon the cap rate and you understand the cap rate thing. I actually own a franchise too. I forgot to mention that. I don't know if you have heard about the Mathnasium, it's a math tutoring center. I have that. I consider that value somewhere around $400,000 to 4500,000, if I have to sell it right now, so that could be sold at that too.

And then the rest is cash. I still have cash. I consider whatever is the non-retirement accounts as cash because you can easily liquidate them and then do whatever you want to do, maybe buy another real estate.

Dr. Jim Dahle:
This is pretty fun to look at the end of the story. Now let's hear the story. Take us back 17 years, bring us back up to now. How did you build this net worth while working as a physician?

Ashwani:
Well, to be honest, I came from India here in USA in 2006. And I actually left India in 2003 with a minimum of only $2,000. And I stayed there for three years. I was lucky that I got a job and then still I was saving there. I would say those $2000 I got from India was spent within six months for stay and everything, finding a job, et cetera.

But then I got a job, so I saved $10,000. I came here and started residency in 2006. And 2006 to 2009, completed my entire residency. I was already attracted towards hospitals week on week off, pretty good thing. And that give me plenty of time to think about any other stuff I have to do in the life.

In 2009, we bought our first home. I got married as well in 2008. And my wife was doing residency. We moved from Pennsylvania to Delaware for a couple of years and we bought a home and she wanted to do a fellowship. We came back here in Pennsylvania.

And as you were mentioning or everyone says that it's not a good idea to sell a home if you're only living for two years, at least four or five years you have to live it. I didn't feel it like selling it and coming back to Pennsylvania. There was a residency there. I got a ER resident, she rented from me. And that was the thing started. Okay, things went really well.

And then I came over here, my wife was still doing fellowship. And again, we're in the process. We got our first kid, second kid. Then we stayed here forever after residency and our fellowship.

And then I bought another small home, $125,000, and that was not building an equity. That was somewhere around 2015 or 2014. And then I decided, I have to scale it up, but how? I researched a lot, I talked to people. I was still, I would say, looking for any side gig to see what else I could do.

And then I was at my friend's son's birthday party and then we were sitting outside in a boat and then there were six doctors. They said, hey, do you want to join hands together with me? And that's how the journey started and going into commercial real estate, I would say. And three of them chickened out. They said, “Oh, we can't do that. We don't have permission from wife” and this and that. And three, we stick together. One, we chickened out with our first deal. I wasn't chickened out. He never has done a deal before and he was a little afraid.

Another one, we two of them bought a first deal. And with all the courage and each other's support, okay, that's a lot of money to put that in a commercial, 20%, 25% down. And it was $1.3 million. We bought a dollar journal, single tenant, national levels. And we did a little bit of research and it was a long-term lease. And we said okay.

Okay, now's the next step. Then the third one kept on asking, “Hey, I think I'm ready now.” That was at 2016. We bought our first dollar journal. Then in 2018, we bought another deal, another dollar journal. Kind of grew from $1.3 million and then we bought this for $1.2 million, but a little bit more, less risk because it's divided in three.

All right, things were going really well. And then the end of 2019, I saw a medical office building and it was listed at $4.5 million. I said, this is a strong building, man. It's a healthcare tenants, everything, but we didn't have any money. Hey, this is out of league. We cannot put that much down payment. If you want to think about like a 20% down, so $4.5 million, at least a million dollars, if you think about it.

We didn't have any saved up money for that much, but then said, it's a solid bidding. We shouldn't just let it go. And then I said to my partners, let's talk to the banks, maybe something they can do. And at that time, the interest rate was super low. And then we bought that deal with the bank giving us 90%. What they did is 80% of building loan and 10% business loan for five years. And with the numbers, it made sense. That was our first bigger deal.

And then COVID hit, everything changed but we were still hungry to go more. And again, another birthday party, and I went to an almost an hour away with our friends' 40th birthday party. And then I saw a building is for sale. And I told my wife, let me just drive by. I drove by, it's a pretty strong strip mall. And with the national level tenants, Aspen Dental, Buffalo Wide Wings, Sports Clips, Moe's South.

But where would we get the money? And it was listed for $7.3 million. And that was another big deal like, “Oh, wow, that's it. Where would we get the money? We have already invested.”

But then again, we talked to multiple banks. We kept on talking, hey, give us some money, give us some money. And then we got a similar deal, 80% loan, and then they couldn't agree to 10%, but they agreed for 5% extra. So, we got it at 85%. That's how we grew.

And then we kept on getting this letter, hey, we'll do this cost segregation. What is this? As I said, I have no experience. And then I kind of Googled it, learned it. Well, this is a legal thing. We can do cost segregation. And that's how we found that, “Okay, cost segregation is the real key for real estate.”

And then next step, we found out 1031. We said, “Wow, what is this 1031 now?” We sold our first property, 2016, in 2021, and did the 1031, and doubled that debt. And then in 2022, with the medical building we bought, we sold that. Although we got a pretty bad hit by COVID because everyone went to work from home. That building was a medical office, a financial office, an attorney. They all started leaving, and the value was not that great.

We came out with a similar price, but we were able to exchange with the 1031, with the warehouse, with the national level tenant. That's how the journey started. And we're still in the process. Now we are doing 1031. Now the third property is on the list. That's the benefit of a tax harvesting.

I'll tell you another story. In 2008 and 2009, I was investing in a stock. And then I bought this right aid, it was only for a dollar. I bought for $30,000, and it became $4. I sold it. Then I found that, oh my God, that's a lot of tax money, because it's a short term tax gain. And then I realized that, hey, you need to find out where we can invest and get some tax harvesting, or maybe tax defer, or something like that. And that's where we kind of grew into this.

Dr. Jim Dahle:
Yeah, pretty cool. Okay, that explains the real estate journey for sure. We got to go back. You mentioned a Mathnasium. Mathnasium franchise. Tell us the story about the Mathnasium franchise.

Ashwani:
As I said that, I was looking for some side gigs. Whenever it's a week off, I was looking for opportunity. I used to go out, talk to people, talk to various agents, or maybe franchise, just kind of keep exploring. My goal was just to keep exploring, find out what's out there and what I can do.

And then we used to take my son, Mathnasium, he's a pretty sharp kid, to Mathnasium, which is almost half an hour, we used to sit there, go for half an hour, come back half an hour, one hour session, two hours were spent. And then I realized, why not explore that to bring it to my own county? That's how the journey started.

Then I went to the discovery thing and everything. I went to Los Angeles to their headquarters and found that it's a very low-key investment. I don't have to put a lot of money. And so, I started it, and math is the thing. Everyone needs that in their life. Whatever you're teaching, as financial literacy, it all involves math.

Dr. Jim Dahle:
I'm curious, what kind of returns have you seen off the Mathnasium franchise investment?

Ashwani:
Mathnasium does not give me that much of a return, but it has given me a lot of opportunity. How to market yourself in a small business, kid books, employee, how to manage everything. So it's kind of a mini-company, I would say, where I learned so much.

Being a doctor, you don't know anything. As myself, I was just going to the hospitals, that's it. See the patient, put the notes in, discharge somebody, and that's it. And then some compliance. I had no experience. Mathnasium, I still have it, and then it's given me plenty of opportunity to interact with how the social media marketing works. So, it gave me plenty of experience.

Dr. Jim Dahle:
Okay, are you still seeing patients?

Ashwani:
I am.

Dr. Jim Dahle:
How much do you work still?

Ashwani:
I am 0.75, but my job is 0.5. I'm a physician advisor. I don't know, have you heard about this term or not. I am for utilization management, so I call the insurance director for PGT-A. And then 0.25, I'm a hospitalist, so I'm still working, yes.

Dr. Jim Dahle:
This is the classic American dream story. An immigrant comes to the US, becomes a gazillionaire. It's pretty awesome. How proud are you of yourself? How proud of you is your family?

Ashwani:
Oh, absolutely. I am proud of that. I had to tell you a story where I came from in India. My father really worked hard. We are three brothers, and my father used to live in just one room, just one room, family of five, and then there was only a couple of beds. And although he worked hard, he became a lawyer eventually, but the situation was like that.

And then the older brother, he only had a goal, “Okay, I don't know what I will do. I'll maybe do a clinical job or something.” But he became a doctor. He's a radiologist in India, and he even cracked the highest exam in India called UPSC where you straight away go into the federal level of jobs. So he's pretty solid foundation. He went into that. We came from very like a low-key background.

Dr. Jim Dahle:
Yeah, it's pretty cool, pretty cool. Okay. Well, there's somebody out there that's like you. Maybe they're in residency right now some sort of international medical graduate. Their net worth is zero or certainly rounds there, and they want to do what you have done. What's the one piece of advice you would give them if you had two minutes to talk to them?

Ashwani:
Yeah, I would say don't stop dreaming. There's always an opportunity, and when you talk about finances and you should everything write it down. I have a zero dollar. I will still write it down on my Excel sheet. What do I have? How do I spend these things? And what's coming in, what's going on? I didn't live in a frugal way or anything. My cars were decent. One time I even bought a luxury car, and at that time I was not able to afford it, but still that's the advice. You keep dreaming, and there's always an opportunity to talk to people.

Dr. Jim Dahle:
Well, congratulations. It's pretty awesome what you've accomplished. You should be proud of yourself. We're proud of you, and thank you for being willing to come on the podcast and share your story with others.

Ashwani:
It was my pleasure. Thank you.

Dr. Jim Dahle:
Okay, I hope you enjoyed that. I didn't ask a lot of questions. I just wanted to hear the story, and I thought it was a very interesting story. It really is an American dream, and there are lots of docs from other countries, from India in particular. We've all worked alongside them shoulder to shoulder, and that immigrant mentality is something that I would love to be able to teach my kids, so much so that we're going to move to Canada. I'm just kidding.

But you wish you could. Just to instill that kind of immigrant work ethic and that immigrant dream in your kids so they also want to work hard and take some risks and just view the world as their oyster, but it's pretty awesome to really see somebody that's done that, that is basically my age. He could have been working alongside me admitting the patients I was calling him about all along the way, and meanwhile, he was doing this on the side. You can do it too.

If you're interested, you can learn this stuff. I mentioned at the beginning of the podcast, we're having a sale on our online courses. Use that code PODCAST20 this week. You can take our No Hype Real Estate Investing course, and you won't be on your 34th property before you learn what a 1031 exchange is or before you learn what a cost segregation study is. We'll teach you that stuff all up front and hopefully grease the skids on your pathway to building your own direct real estate investing empire.

FINANCIAL BOOT CAMP: HSAS

Tyler Scott:
Hello, my name is Tyler Scott with White Coat Planning, and Jim has asked me to come talk today about health savings accounts, or HSAs. HSAs are a beloved account by personal finance enthusiasts because of their incredible tax efficiency and tremendous flexibility.

Before we get into those details, let's zoom out and talk about the two major categories of health insurance plans offered by most employers and available in the marketplace. There are more than two types of health insurance plans. There's PPOs, HMOs, EPOs, point of service plans, high deductible health plans, and more.

For purposes of this conversation, we're going to talk about high deductible health plans and then non-high deductible health plans. For simplicity, I'll refer to the basket of non-high deductible health plans as PPO plans. Most of us are very familiar with how PPO plans work. Your kid gets strep throat, you go to the pediatrician, you pay the $30 copay, the insurance pays the rest. This is the cadence most Americans are accustomed to, and it's easy to understand. It's easy to plan for.

A high deductible health plan works really differently. These plans offer lower premiums in exchange for higher out-of-pocket costs. The insurance doesn't pay for anything until you've reached the high deductible, which is often several thousand dollars. Now when the kid gets strep throat, we do not pay a $30 copay at the pediatrician's office, we pay the entire $300 office visit.

This is not the cadence most Americans are familiar with, and it can feel confusing and be difficult to plan for. For this reason, high deductible health plans, or HDHPs for short, are unfortunately underutilized in our country.

I say unfortunately because HDHPs represent an opportunity for many of us to save overall on healthcare and build significant wealth over time. The primary way they help save on overall costs is because the monthly premiums are typically meaningfully lower than the premiums on the PPO plans. And they should be. If you're paying $300 for the strep throat visit instead of $30, you're saving the insurance company a lot of money, and thus it makes sense for the insurance company to charge you less for that coverage.

For an average family of four, I usually see that the annual high deductible premiums are $1,000 to $3,000 less than the PPO premiums. This annual savings on premiums is critical to keep in mind when you're paying the $300 pediatrician bill instead of the $30 copay. It can feel shocking at first to pay the full cost of the visit, but you have to remember that you're already saving several thousand dollars just by having lower premiums.

Now, having lower premiums is nice, but the real magic with a high deductible health plan happens because the HDHP is the key that unlocks the glorious door of the health savings account. You must be enrolled in a high deductible health plan and exclusively covered by one to save into an HSA.

Congress has set up a system that allows us to use pre-tax money to pay for our healthcare costs under both the PPO and HDHP plans. For the PPO plans, we can use a system or concept called a flexible spending account, or FSA.

With an FSA, your employer sets the money aside from each paycheck into this flexible spending account so that you can use it to pay for your $30 copays, prescriptions, any additional medical, dental, or vision costs during the year. You often get a special FSA debit card that you can use to directly pay for these expenses.

This is great because anytime you can pay for things with pre-tax money, you're getting a discount equal to your marginal tax rate, which can be 40 or 50% for many high earners.

The downside of an FSA is that it is “use it or lose it” money. If you set aside $2,500 for the year and only spend $1,500, you lose that $1,000 that you didn't end up using. That's why you see people sometimes at Costco in December with carts full of contact solution and Metamucil. They're trying to use their FSA money on qualified medical supplies before the money evaporates at the end of the year.

With a high deductible health plan, the way to use pre-tax money to cover qualified healthcare expenses is with an HSA. It's similar to the FSA we just discussed, but with some incredibly meaningful differences. The similarities are that this is also typically funded by payroll withholdings in a separate account. A debit card is also often issued to you so you can pay for the $300 pediatrician visit with pre-tax money. That's where the similarities end.

Now let's talk about the differences. A health savings account is a triple tax protected account. What do I mean by triple tax protected? The first layer of tax protection is that the amount you contribute to the HSA lowers your taxable income each year and thus lowers your tax bill accordingly.

In 2026, the maximum you can contribute, if more than one family member is covered by the high deductible health plan, is $8,750. The limit, if only one person is covered, is essentially half that. For someone who is in the 32% tax bracket at the federal level and 8% tax bracket at the state level, that means their combined marginal tax rate is 40%. If they contribute $8,750 to their HSA, they save $3,400 on their taxes every year.

This is also critical to remember when you're paying the $300 strep throat bill. Not only did you save a couple thousand dollars on your premiums, you saved another couple thousand dollars on taxes. For most high earning families, using an HSA in this way saves them between $2,000 and $5,000 a year due to lower premiums and reduced taxes. That's a pretty big headstart each year when it comes to reducing your overall healthcare costs.

Further, because the premiums are cheaper for your employer as well, in hopes of enticing you to use the HSA, many employers will make a contribution to your HSA on your behalf. It's not uncommon for employers to chip in $500, $1,000, or $2,000 to your HSA. That is free money. Just like your 401(k) match is free money, your HSA match is money you are leaving on the table if you do not opt to take it.

Keep in mind that the annual contribution limit to the HSA is the combination of both your and your employer's contributions. So, if your employer puts in $1,000 in 2026 and you put in the other $7,750 to hit the overall $8,750 limit, that's the combined total.

The second layer of tax protection is that this is not “use it or lose it” money. This money is yours forever, even if you don't spend it during the year, even if you leave the employer, even if you opt out of a high-deductible health plan in the future. No December Costco shopping sprees needed. The money is yours and you can invest it within the HSA in stock and bond index funds, just like you would any other investment account. The growth on those investments each year is tax-free. You do not owe any tax as the investments grow or as it kicks off dividends.

Tax protection number three is that when the money is withdrawn and used for qualified medical expenses, there is no tax due on it then either. This is the only money in America that routinely passes from ordinary income all the way around to expenses with no tax due.

Now, the way this money is meant to be used is that you go to the pediatrician, the cost is $300, you're meant to whip out your HSA debit card and pay the bill. And there is nothing inherently wrong with that idea, but I don't want you to use the HSA that way. I want you to cut up and get rid of the debit card. That's because the tax-free nature of this account is so mathematically profound that we don't want you pulling money out of the account when the healthcare expenses arise.

We want this HSA to benefit from as much compound growth as possible for as long as possible. If you can start maxing out an HSA every year in your 20s, invest the money wisely, do not take the money out of the account during your career, then you can have well over a million dollars in your HSA by the time you're 65.

Now you have a completely tax-free way to pay for what is often the highest expense for retirees, which is healthcare, including Medicare premiums. This can meaningfully change the time when you reach financial independence.

So, if that's not sounding awesome enough already, well, wait, there's more. I mentioned these accounts are the darling of personal finance enthusiasts, both because of their tax efficiency, but also because of their versatility and flexibility. To understand what I mean by that, you must first outline a few rules about HSAs. Most importantly, if you take money out of an HSA prior to age 65 for non-qualified expenses, you must pay ordinary income taxes on the withdrawal, and there's an additional 20% penalty.

The IRS wants to discourage you from buying a boat at age 55 with your HSA money. But one of the really cool things about an HSA is that after age 65, that 20% penalty goes away. If you're healthier than expected in retirement and don't need all that money for healthcare, you can take the money out and buy a boat if you want to, and there's no penalty for that.

The withdrawal is still subject to taxation, just like a 401(k) would be but the 20% penalty is gone. This is an incredible benefit and why Jim has been known to call the HSA – “Stealth IRA.” It's really just another retirement account with better tax treatment when used for healthcare.

Now, if you really want to optimize, you can make sure future withdrawals are tax free and penalty free at any age. We call this the save the receipts strategy. The way this works is when you pay for out of pocket medical expenses over the years, not using your HSA money, you save the receipts as you go. I personally take a photo with my phone or I often ask for an email receipt that I can take a screenshot of or save on my computer because paper receipts can degrade over time. So, it's nice to save these digitally.

Let's say that over 10 or 20 years, you have $30,000 in medical and dental expenses. I'm going to get halfway there from just putting my kids in braces over the next few years.

The reason to do this is that anytime in the future, you can reimburse yourself for past medical expenses using your HSA. That reimbursement is tax free and penalty free at any age.

If you're 55, you can buy a $30,000 boat using your HSA dollars because you are simply reimbursing yourself for $30,000 of past medical expenses as documented in the receipts you have saved. Prior to age 65, this saves you both the tax and the penalty. After age 65, it's saving you on the tax that would have been owed on the non-qualified withdrawal.

Further, if your adult child is no longer your dependent on your tax return, but is still on your high deductible health plan, they can make their own separate family contribution. And you can even give them the money to do it if they don't have the $8,700 to make the contribution.

If you do that for them from age 20 till age 26, when they get kicked off your insurance and they invest the money wisely and don't touch it, just those five or six years of contributions will lead to a million dollar HSA by the time they're in their mid-60s.

That's the story with HSAs. They are pretty cool. Give strong consideration to one if you have access to one. High deductible health plans are not scary. They are still real health insurance. You have out-of-pocket maximums similar to PPO plans, so it's not like you're going to have to pay $100,000 if you're in a car accident or get cancer. They have the same protections as all other plans under the Affordable Care Act.

You pay a little more upfront at the doctor's office in exchange for lower premiums, lower taxes, tax-free withdrawals that can be used for anything if you combine all these techniques we just discussed. And that's a really good deal for most high earners.

SPONSOR

Dr. Jim Dahle:
This podcast was sponsored by Bob Bhayani at Protuity. One listener sent us this review. “Bob has been absolutely terrific to work with. Bob has quickly and clearly communicated with me by both email and or telephone with responses to my inquiries usually coming the same day. I have somewhat of a unique situation and Bob has been able to help explain the implications underwriting process in a clear and professional manner.”

Contact Bob by calling (973) 771-9100, by emailing [email protected] or by going to www.whitecoatinvestor.com/protuity.

All right, we've come to the end of another great podcast. If you're interested in being on it, you can sign up whitecoatinvestor.com/milestones.

Until then, keep your head up, shoulders back. You've got this. We're all here to help you here in the White Coat Investor community. See you next time on the podcast.

DISCLAIMER

The White Coat Investor podcast is for your entertainment and information only. It should not be considered financial, legal, tax, or investment advice. Investing involves risk, including the possible loss of principal. You should consult the appropriate professional for specific advice relating to your situation.

Dr. Jim Dahle:
This is the White Coat Investor Podcast, Financial Boot Camp, your fast track to financial success. Let’s talk about revocable trusts.

First of all, what is a trust? A trust is an entity that is separate from you. It can own things, conduct transactions, and engage in business activities, but it is not you personally. It is something distinct, similar to forming a corporation or an LLC. Any trust has three key roles. There is a beneficiary, the person who ultimately benefits from the assets in the trust. There is a trustee, the person responsible for running the trust and managing the assets. And there is a grantor, the person who puts the assets into the trust in the first place.

There are two main types of trusts: revocable and irrevocable. With an irrevocable trust, once you place assets into the trust, the trust owns those assets and you generally cannot take them back. A revocable trust works differently. With a revocable trust, you can put assets into the trust, pull them out the next day, put them back the following day, or move them around however you want for the rest of your life. That flexibility is one of the key features of a revocable trust. It is not permanent and can be changed or revoked at any time.

So why would someone use a revocable trust? The main reason is to avoid probate. Probate is a state-specific legal process that reviews your will and determines how your assets are distributed after you die. The advantage of a trust is that it has its own rules that you create regarding how the assets are distributed. Because the assets are owned by the trust rather than by you personally, they do not have to go through the probate process.

This can be important because probate can be expensive and time-consuming in some states. If you want to avoid that process and the associated costs, placing assets in a revocable trust before you die can accomplish that. Technically, you could create the trust shortly before death if you knew exactly when you were going to die. Of course, most of us do not know that, and we may also face health or cognitive issues later in life. Because of that, it often makes sense to set up a revocable trust earlier rather than waiting until the last minute.

Another advantage of avoiding probate is privacy. Probate is a public process, which means that people can potentially see what assets you owned. A trust, on the other hand, is generally private. The distribution of assets through the trust does not become part of the public record.

Most people need a will, but not everyone needs a trust. However, many White Coat Investors prefer to avoid probate, so they often choose to establish a revocable trust at some point before they die. When should you set one up? There is no perfect rule of thumb. Some people suggest doing it once your net worth reaches seven figures. There is nothing magical about that number, but it is a reasonable guideline. It means you are not doing it at the very beginning of your career, and you are not waiting until well into retirement to put it in place.

What does it cost to set up a revocable trust? It can be relatively inexpensive, but it is generally not a good idea to simply use an online template without guidance. By the time you are considering a trust as part of your estate plan, you are usually financially comfortable enough to obtain professional advice. It is wise to work with a qualified estate planning attorney in your state. During that process, you can also review other important documents such as your will, a living will, powers of attorney, and other components of a comprehensive estate plan. This is also a good time to determine whether estate taxes may be a concern and whether more advanced planning strategies, such as irrevocable trusts, might be appropriate.

Once the trust is created, you must fund it. Simply setting up the trust is not enough. You need to move assets into the trust by retitling them. For example, if you want a brokerage account to be part of the trust, the account must be titled in the name of the trust rather than in your personal name. The same applies to bank accounts, vehicles, real estate, and other assets. Funding the trust can take some effort, but it would make little sense to pay for the trust and then leave it empty.

From a tax standpoint, revocable trusts are generally pass-through entities while you are alive. This means the income generated by the trust is reported on your personal tax return, and you do not need to file a separate trust tax return. After you die, however, the trust becomes a separate entity. At that point, it may need to file its own tax return and will be subject to trust tax rates, which can become quite high at relatively low levels of income.

Some people think trusts are useful for asset protection, but that is not the case with revocable trusts. Asset protection typically involves strategies that protect assets in situations such as bankruptcy. For example, retirement accounts often receive strong protection under bankruptcy laws. A revocable trust does not provide that type of protection. Because you can revoke the trust and access the assets at any time, creditors can generally reach those assets if there is a legal judgment against you. If you were to declare bankruptcy, the assets in your revocable trust would still be accessible to creditors.

If asset protection is the goal, that generally involves irrevocable trusts, which come with additional costs, restrictions, and downsides. Revocable trusts are primarily an estate planning tool used to simplify the transfer of assets and avoid probate, not to shield assets from creditors.

I hope this overview helps you better understand the purpose and benefits of a revocable trust.

The White Coat Investor Podcast is for entertainment and informational purposes only and should not be considered financial, legal, tax, or investment advice. Investing involves risk, including the possible loss of principal. You should consult the appropriate professional for advice specific to your situation.