In this occasional series, titled The Other 5% of Your Money, we explore these alternative strategies. Our next piece in this series will run in a few months, and it’s about angel investing. If you take part in alternative investments (anything from investing in futures, high-end art, short selling, sports gambling, gold, etc.) and you’re interested in writing a guest post for WCI, either submit an article through our Guest Post Policy page or email [email protected]. Show us how you can make 5% of your money work for you, even if it’s something that goes against the boring investor’s strategy.]
By Dr. A.P., Guest Writer
As 2024 came to a close and the election was decided, my wife and I had the annual year-end meeting with our accountant, projected our tax burden, and withheld additional income from our respective fourth-quarter compensation adjustments to meet that obligation. The remainder of the money was deposited into our brokerage account since our 401(k) allocations, Roth IRA transfers, and HSA accounts were all fully subscribed.
My wife and I are in our fourth and fifth years of practice, respectively, and because we are relatively early in our careers and are saving many multiples of our maximum 401(k) allocation in a given year, our brokerage account has roughly 2.5X more funds than both of our 401(k) balances combined. Up until this point, I followed the recommendations of WCI religiously, and I like to think that this has been a major contributing factor to our financial progress and overall security. Currently, we don’t have children, and we save 75% of our take-home pay. Our only liability is a 15-year mortgage at a fixed 2.75% on a $610,000 loan that we choose not to pay off.
In light of our low fixed monthly expenses and ample emergency fund and taking into account the ever-changing policies of our current administration, I wanted to set aside capital in our brokerage account to trade outside of our normal asset allocations. This was my first attempt at gambling, trying to take advantage of market volatility with a hopeful strategy to score some quick cash.
Background
Our 401(k)s are invested in vanilla Vanguard ETFs, and the same holds true for the bulk of our brokerage account assets. That being said, I don’t make changes to these asset allocations beyond the quarterly rebalancing—automated in the 401(k) and manually done in the brokerage account by selectively adding funds to ETF positions to avoid taxable sales.
My motivation for active trading on the side was simple: I was bored, and I wanted to see if my interest in personal finance and knowledge gained through reading could translate into actual income. I’m also just fascinated by passive income at baseline. The concept of investing was foreign to me growing up since my parents had low-paying blue-collar jobs, and their entire life savings consisted of post-tax earnings after the bills were paid. They never invested in the stock market, and they couldn't build their net worth via real estate—we never owned a home. It was honest money, but it wasn’t smart money.
Physicians work extremely hard for their money. When reimbursements fall, we either increase volumes or decrease expenses to maintain our compensation, and most of us generate little to no revenue when we’re on vacation, ultimately resulting in some kind of pay cut down the line. To me, making a quick buck on the side without seeing patients or even doing a side gig that requires medical knowledge is the equivalent of using a cheat code in a video game.
The currency for all purchases in my life is not dollars but hours worked. How many hours do I have to work to buy a Porsche 911 or a Rolex, for example? It’s immensely empowering to think that with a few clicks of throwing my financial muscle around in the right place at the right time, I could harvest a lot of those hours worked.
Before I actually made my first active trade, I set some ground rules. I avoided options trading altogether because I simply don’t understand advanced options strategies well enough to use them effectively. I avoided any kind of leverage or leveraged ETFs due to the added decay risk and possibility for outsized losses. I also chose to only actively trade ETFs, not individual stocks, in hopes of riding more predictable momentum.
To make this worthwhile, I needed to position myself for gains that I would find sizable, while also not taking significant risk in a single trade. I decided on setting aside $400,000 to be put to work toward a myriad of ideas.
It should be noted that I genuinely enjoy reading financial articles. Between patients on procedure days or at lunch, I read a fair number of Wall Street Journal articles, as well as more in-depth analysis pieces on Seeking Alpha in the evenings. These are my two primary subscriptions, and I spend about 2-3 hours a day reading financial articles of some kind. What interests me more than trying to find the next NVIDIA or Bitcoin are macroeconomic trends (interest rate decisions at the Fed, Treasury yields, currency risk, specific sector outlooks, etc.) and ultimately how I can monetize these broader trends as they unfold.
For the past few months, I kept a logbook of sample trades and followed them over time. Once I gained enough confidence and saved up enough capital where potential losses wouldn’t sacrifice our daily lifestyle, I started placing real trades.
More information here:
A Die-Hard White Coat Investor Buys an Individual Stock — An M&M Conference
Returns
I placed my first trade in mid-December and closed out all the short-term positions by April 2. Over the 3.5-month course, I made $77,000 in taxable income on that $400,000 in capital. I subsequently withdrew the money from the brokerage account, set aside 45% for taxes, and spent the rest. Half of that return came from purchasing GLD (the largest bullion-backed gold fund—highly liquid with tight spreads) early in the year, aggressively building on that position at almost every dip, and then ultimately liquidating that entire position at about 1.5% from the fund’s all-time high at the time of sale. The underlying play here was obvious: a de-dollarization bet supported by chronic US deficit spending with no end in sight; prospects of high inflation; prospects of possible rate cuts if a recession pans out (thus making a non-interest/dividend-bearing asset like gold more acceptable); and, above all, the constant tariff policy abuse on equities.
This bet is also chronically supported by the BRIC nations’ central bank purchasing of gold (originally set in motion by US sanctions on Russia at the onset of the war in Ukraine), which is now likely compounded by some liquidation of US Treasuries by China, Japan, and other EU nations. I chose to take the gold risk on bullion itself rather than mining stocks that have performed even better this year, since I feel these stocks also get sold off in a panic with all other equities and they are more vulnerable to tariff policy and civil unrest in mining countries.
Another quarter of the returns came from buying IBIT (the iShares Bitcoin fund—also very liquid) when I expected NASDAQ/growth stocks to outperform on a given day. It was obvious that crypto and tech stocks have been highly correlated through this time course, almost to the point of making Bitcoin’s case as a reserve asset laughable, although this correlation may be unfolding. I always liquidated the IBIT trade at the end of the same day due to price swings after hours with Bitcoin, which can often be drastic. I chose an ETF instead of Bitcoin itself so I wouldn’t have to deal with wallet storage logistics, passwords, hacks, and fraud on cryptocurrency exchanges.
The price changes in even a large ETF like IBIT can easily be 3%-5% in a given day, and with $100,000 invested at once, I made approximately $4,000 in a few hours on five or six separate days. Most of my IBIT purchases were made when Bitcoin was trading in the high $70,000s/low $80,000s, which seemed to be the floor this year despite immense volatility in equities. Beyond the nightly reading, I probably spent 30 minutes during the work day watching prices and placing trades on the Chase app.
Finally, the last chunk of the returns was made from VUG (a tech-heavy, growth-focused Vanguard ETF). This fund served as my surrogate for the tech play, which I used to dip my feet in the AI pool without actually committing to individual companies or even the AI movement itself. I basically bought this fund when I felt it was oversold, when a jobs or inflation report hinted at a possible rate cut, or when Tesla and Palantir hit close to their 90-day lows. I bought and sold this about five times before the Liberation Day tariff announcements, which were an absolute bloodbath for this fund. When you’re basically trying to predict whether a security is going to increase or decrease in value, your job is to weigh every possible factor that could sway the price and triage them to arrive at your end prediction. Tech and growth valuations were already stretched and a macroscale tariff announcement would be more anti-growth than not, so thank goodness I wasn’t in this fund when the market tanked.
There were many times when I wanted to buy Tesla or Microstrategy (essentially a leveraged Bitcoin play at this point) after steep selloffs, but I didn’t have the stomach to lose 10%-25% of my $100,000 despite the potential of making that in a single day. For this reason, ETFs tend to be more predictable both in pricing and trends, especially when we have a market where a lot of stocks move in tandem regardless of their individual advantages and where many retail traders use considerable leverage to build their positions.
Emotions
I started on this path because after finding success in my practice, I felt that, with ample education and research, I could also make money in the stock market and be a savvy retail trader. I’m sure many professionals can relate to arriving at this checkpoint, where you interpret success in your day job as a Midas touch for all other ventures. In hindsight, some trades seem so obvious, and you beat yourself up over triggers not pulled. But trading on the side while working does have its benefits. With access to large amounts of capital, I can pursue higher returns without leverage. I can also afford to simply wait out trades that have soured if the underlying security is one I would keep long-term—or double down on that same trade if the fundamentals of my hypothesis are still intact. Most of the conclusions I outlined above when justifying my trades likely wouldn't be that difficult to make by other attentive WCI readers.
Another major reason why I wanted to try short-term trading is because I find stock market speculation exhilarating, simply because it‘s such a pure and unapologetic way of making money. Best of all, you don’t have to deal or rely on other people to accomplish the goal. I’m also really passionate about immediate gratification and using gains to immediately better your life in some way. I completely understand the value of getting rich on paper slowly over many years, avoiding taxable gains, and positioning yourself for the step up in basis when you kick the bucket—the vast majority of our portfolio is dedicated to this mission. However, unrealized gains are just that—unrealized—and this is evident when you don’t realize how exposed your gains are to losses until the next downturn.
Tobey Maguire—the only Spider-Man in my opinion, a prodigious poker player, and the assumed player X in Molly Bloom’s book (and the movie Molly’s Game)—famously said, “Money won is better than money earned.” I couldn’t agree more. There’s nothing groundbreaking about your administrator telling you that you can make 10% more money by seeing 2-3 more patients in a day. I made $77,000 in three months in an otherwise down market without seeing a single patient, taking on any procedural liability, or answering a single task message. I’m a pragmatic person, so I attribute the gains to what I think is mostly skill (a correct spot interpretation of the current market landscape) and some luck.
This isn’t a post that’s meant to promote day trading, but we all have intellectual curiosities. Embarking on them with strategy and guardrails is better than an off-the-cuff approach.
I have a lot of friends my age who have invested $50,000-$100,000 in multiple real estate syndication deals and/or rental properties, or older friends near retirement who largely invest for dividends and/or bond interest. I acknowledge that those strategies may very well be superior in the long run. But these people never seem excited about their investments, and most of them already make enough money to sustain their lifestyles without having to wait for these strategies to bear fruit. In short, you never feel like you’ve won anything, and I felt the exact same way until these past few months.
WCI is undoubtedly right: smart investing should be boring. But over time, for the investors who want to be more engaged, it can also become sterile.
More information here:
When Is It OK to Carry Debt (and How to Feel Fulfilled by It)?
Takeaway
I know my recent gains are not a life-changing amount of money for most people who read this blog, and so I leave you with this. At some point, you may be tempted to engage in short-term trading if courage gets the best of you. If and when that happens, approach short-term trading as an academic experiment instead of as an aggressive strategy to supplement your income. If you find yourself losing too much of your principal, take a long break or stop altogether, because the moment you feel desperate, in need, and pressured to recoup your principal, that's the moment you accelerate losses.
If you are going to short term and/or day trade, set ground rules you are comfortable with, do your research, observe the markets daily for a long while before making a single trade, be systematic in your strategy so you can attempt to replicate profitable trades but understand that correlations can abruptly become undone, don’t be distracted mentally by trading while taking care of patients, and never trade securities you don’t understand. Most importantly, don’t play with money you’ll actually need for a serious life expense. If you can find something more useful, noble, and/or fulfilling to do with your cash, do that other thing because trading will always be waiting when you get back.
I personally find that taking my profits instead of reinvesting gains, setting aside the taxes, and spending the money almost immediately allowed me to appreciate something tangible with my returns. It also made digesting short-term losses on other trades much more palatable. I plan on continuing to short-term trade with a minority allocation of cash purely as a hobby, and I’ll probably stop when I’ve either lost a palpable amount of money or made enough where I can quit practicing altogether.
As for my recent winnings, we bought a tasteful leather couch and travertine coffee table for our living room, my wife booked a trip to Tuscany with her girlfriend, I added a Jaeger-LeCoultre Reverso to my collection, and we replaced our 22-year-old HVAC. Dr Jim Dahle always says that he can’t predict market trends because his crystal ball is cloudier than yours. I’ve found that if I wipe mine down with warm, soapy water and a clean microfiber cloth, I can occasionally make something out in the clouds.
It’s either that or a hallucination; time will tell.
What do you think about short-term selling or day trading? Is that something you've tried? How did it work out?
Awesome story telling. Thank you. One of my buddy was a professional financial manager and China expert for the military. He’s strategy was even simpler, ” I buy China’s telecom stock on the dip whenever there is bad news on TV about China.”. That makes sense intuitively. China has a hundred-year plan for global dominance; we have a broken legislative and fiscal cycle that takes holiday breaks (lol). Half of the market is purchased by fools and gamblers with non financial main and side gigs; the other half by diehard buy-and-hoarders (boring investors). In the middle there are MIT tech weenies with AI driven algorithms that can day trade much faster than a human. Hopefully most of us can look into the mirror, in the absence of a crystal ball, know where we belong. Now we need a companion piece titled “how I lost my marriage and $400k in eight mouse clicks because I was bored”. Let’s channel our boredom creatively, appropriately and deliberately.
If it was that easy, surely there’s a successful mutual or hedge fund doing it, right? If no, you’re planning to start one, right? No reason to only manage your money when you have a free money generator.
I’m impressed with his success and hope it continues. Only time will tell. But I fear this is like Icarus flying too close to the sun and he will get burnt.
Well it is his 5 percent play money.
Dr. A.P., Thanks for this article. Can you describe your headspace before/during/after your workday during this time period, and how it compares to passive index investing? Thanks!
I do a lot of reading the day before, so I generally have a plan of the trades I want a place in the morning. On most of my procedure days, I do 1 procedure every 20 minutes, and I typically have to do 25 to 29 procedures in a given day, but the injections do not actually take me 20 minutes given my practice’s efficiency, so I usually have a free 5 or 10 minutes 30-45 min to handle task messages, call patients, and check stock prices when I want to – I usually do this with more depth and check the financial news at lunch. It is really not all that overwhelming, and again I do a fair amount of homework when I get home. At the end of the day, once you get home and the market closes, I just feel like I normally would after a workday. I don’t have children, and my wife is just as busy as I am in her oncology practice, so there is really very little expectation for me in the evening with what I do with my free time. At the end of the day, this does not feel like work, and I feel like I am getting paid for not doing real work. The passive index investing is probably like everybody else, its money that I just do not really think about, our combined 401(k)s probably make up a minority chunk of our net worth, and its just invested in 100% stocks with monthly / quarterly deposits, and I check it maybe once a month, but never make any changes. Its certainly easier to passive index everything, but volatility is a gift and physicians are smart enough to excel at many things if the effort / interest is there. That’s what I tell myself at least.
Just for fun I bought $100,000 in the SCHD ETF the day before ex-dividend date to pick up nearly $1000 in extra dividends (I have a bigger chunk in it that collects dividends). The last time it declared dividends the price actually went up, so I thought it would be fun to see if that could happen again. I set a rule that I would sell as soon as the price returned to purchase price. One week later the ETF had a great day and it is was extremely exciting to watch it climb. I decided to let it ride a bit but sold as soon as it looked like it would drop lower. I ended up making an additional $1200 on the sale.
Small stakes for this group, but it was really fun to make $2200 in a week. I would have been fine holding SCHD for months or years, so there wasn’t much of a downside.
I’m not sure you understand how dividends work with stocks and mutual funds. Basically, the share price drops by the amount of the dividend on the ex-div date. The dividends aren’t “extra”. Of course there is still normal volatility every day and you seem to be trying to connect two things that aren’t actually connected. It could just as easily (and probably more likely) drop on fund ex-div date.
Bloomberg news ran this story today, “While dividends have long been a defining feature of stock investing — a sign of corporate discipline and investor reward — Roundhill Investments plans to launch the S&P 500 No Dividend Target exchange-traded fund on July 10 with the ticker XDIV. Its ambition is simple but strategic: track the performance of the famous benchmark while dodging its payouts. The fund will sell holdings just before their dividend dates — steering income away from ETF shareholders and, in the process, away from their tax bills.”
Cool trick if they can really still track the S&P 500 with non dividend paying stocks. Not sure it helps much if it generates a ton of capital gain distributions though from frequent selling.
Good point, but the way Roundhill’s doing it they’re not dumping dividend names at all—they just hop between SPY/VOO/IVV right before each one goes ex-div, so the price drop cancels the missing cash and tracking error should stay tiny (a few bps). And because those swaps are done “in kind,” the fund hands the old ETF shares to an auth-participant instead of selling for cash—so almost no realized gains to kick out at year-end. The real wild cards are the fee waiver expiring in ’26 and whether the IRS ever clamps down on these heartbeat trades; until then it’s basically a tax-deferral gadget, not a cap-gains fire hose.
Interesting. Cool idea and something to keep an eye on the next few years. No rush to invest in something like this that is so unproven. It’ll either turn out to be brilliant or no one will be doing it five years from now.
Thanks for replying. I actually do understand how they work and why dividend capture is sort of a silly idea (since the ETF price drops by the dividend). I understand your point and realize it was just market timing an increase in ETF price. But, it felt sort of exciting, even as I realized it was not a great strategy or part of my written investing strategy. I will happily go back to sitting on the sidelines with mostly passive index funds.
Perfect. I just want to make sure you have the knowledge. Do whatever you want with it.
My vice was option trading. Not the riskier type, buying options; I only sold them. I would buy a few hundred shares of otherwise good, solid companies (Home Depot, IBM, Master Card etc) and sold “out of the money” options on them with a 1-3 months expiration (which means I sold the right to someone to buy the stocks from me at a higher price in a few months time – apologies if you all know what selling options mean). I kept the fee for the options, and if the price of the stock went up during that time and was bought away from me at a higher price I also kept the capital gains. If the price of the stock didn’t go up as high as my option price, I kept the fee and the stocks and repeated the process all over again. It was so much fun to watch the stock price going up and down every day!! Eventually though I realized that 1. At the end of the year you have to pay taxes on all that profit, and 2. more importantly, the stock price of those good, solid companies kept going up and I missed out on the rise. If I just bought them and sat on them all that time, I would have made much more money and paid zero taxes. So yes, I arrived at the “boring” type of investing after a few years of fun and my bank account thanked me. But I can absolutely relate to the thrill of it all!!!
400k/5%=8M
Nice job! Though it’s much easier to have a play account when you’re already financially independent. Interesting how this forum has morphed to a rich person’s blog. I guess that’s a testament to its teachings?
Well, we certainly want the wealthy to feel comfortable asking their “first world problem” questions here without ridicule, but there are plenty of people with a negative net worth we’re trying to serve too.
This is how Michael Burry got his start.
“He studied economics and pre-med at the University of California, Los Angeles, and earned an MD degree from the Vanderbilt University School of Medicine in 1997.[6] He started but did not finish his residency[8] in neurology at Stanford University Medical Center.[9] While off duty at night, he worked on his hobby: financial investing.[9]
After medical school, Burry worked as a Stanford Hospital neurology resident, and then a Stanford Hospital pathology resident.
He then left to start his own hedge fund.”
Enjoyed this post. Sounds like you have done a great job setting yourself up to have some hobby/gambling money. I hope your secret sauce continues to bear fruit. Doesn’t sound like if the next round you come back to earth you’ll be eating rice and beans. I’d be curious what you are going to do next in terms of scale.
Hey AP great article and congrats on your success. Would be interesting to see long term if you actually beat the index, and also if you can keep to that 5% of your portfolio as your play money and your emotions in check. Definitely try and keep accurate track of your returns and maybe write a guest post on an update in a few years!
Just be careful with that dopamine hit on your recent success. Like opiate addicts as we said at Bellevue hopital in NYC, “you’ve got the taste” and your DA is secreting like crazy every trade you make, and DA receptors are getting super sensitive with your losses as your brain chases that first hit of success your’ve had like financial cocaine!
Sorry, i am a neurologist afterall 🙂
Really impresses by your stamina doing day trading. I used to set up a robinhood to trade bitcoin. I only tried 2 days and then I lost steam and let dca do the job afterwards.