Speaker 2 (00:15.222)
And I'm Nate Renneke. Tax-free investing for physicians just got more interesting. So then tax-free anything feels impossible for physicians. And so that feeling kind of breeds excitement when they hear it. Maybe even keeps them interested. But I think most physicians would be surprised about what we're actually talking about and that it actually
includes any excitement and that is bonds.
Speaker 2 (00:52.684)
Yes, please.
Speaker 2 (01:25.228)
which is the interesting part. But we should probably start with just what they are. They're so uninteresting that I've found most people don't even really get them. So what is a bond and like, how does it work?
Speaker 2 (03:07.726)
Right, right. And at a high level, I just want to understand, you know, not not when you get into the details, like we're going to get in a little bit today, but why would someone choose, let's say, like a municipal bond or a treasury bond versus a corporate bond, like a corporate bond? I'm assuming that means you're giving a loan to a corporation.
Speaker 2 (03:49.644)
yeah well most people are they're told they probably need some bonds they may not know why but why choose apple versus treasury
Speaker 2 (05:38.356)
That I think is where a lot of people kind of, you might lose them a little bit because these bonds have a value, but they also, you know, pay like a loan. Yeah. You know, like the person that you load money to is paying you. But then what rate you got determines its value on the market.
Speaker 2 (07:51.918)
Okay, let's pause for a second. So you said a couple really important things. So one, if you're gonna own it in an IRA, what do you mean by that? Own bonds in an IRA, what does that matter?
Speaker 2 (08:27.662)
Okay, so you're saying that corporate bonds paying interest into an IRA does not hurt a physician's tax bill.
Speaker 2 (08:43.455)
Okay, but if they were to do that in a taxable account, they're going to pay income tax on it in their highest earning years.
Speaker 2 (09:06.368)
Okay, okay. I think I'm getting it, I thought the let's bridge this gap for a second. Why? Why not just buy only these tax exempt bond bonds? Why buy corporate bonds at all?
Speaker 2 (10:21.902)
Well, lucky us, I have some numbers for us. Okay, so I'm gonna call it, there's many bond funds out there, but a well-followed bond index fund. So this is just, this has corporate bonds in it. Right now, the 30-day SEC yield is 3.8%.
3.8 versus a tax exempt bond fund is at 2.9.
Speaker 2 (11:01.408)
Right.
Yeah. That's how it feels to me.
Speaker 2 (11:46.222)
Actually, it's 2.4 when you put the actual...
Speaker 2 (12:02.072)
point nine.
Speaker 2 (12:23.702)
That is pretty interesting.
Speaker 2 (12:31.182)
Why's that?
Speaker 2 (12:53.666)
This brings me to sort of a tough topic. When traditional investors, know, we were all told, you know, buy some bonds or, you know, well diversified portfolio. Even though, you know, you can you can, you know, kind of pit one bond versus the other. you're looking at these rates, they still even though they're they're pretty high compared to last year, they still seem low. They just seem like loser investments.
Why buy bonds at all?
Speaker 2 (15:43.53)
Right. Yeah. I've always been fascinated too with sort of the history of returns of stocks versus bonds because in recent history, which is what any investor really thinks or cares about these days, it seems like they just don't do anything for you. But that is, you know, the classic recency bias and depends on how recent you want to look. But there is many times in our country's history where bonds
actually outperformed stocks. And that was a long time ago, but we just don't know what's going to happen. And it's tough for young investors to think that way. But for physicians specifically, do have a big portion of their investment career is preservation.
You build, you build for a long time, but you preserve for longer.
Speaker 2 (17:40.547)
Yeah agreed. Okay. So how do you do this? How do you buy a municipal bond?
Speaker 2 (19:43.011)
Okay What are the pitfalls of? buying into bonds I know that there's some rules you have to be careful of and we don't really get into them very often because we've sometimes it's boring to talk about bonds, but
Speaker 2 (21:09.111)
Yeah.
Speaker 2 (22:48.936)
Mm-hmm. The one note on that is this is a classic example of why physicians can't figure out their tax bill being so high They're just making this income where they don't even know what's coming from It's kind of snuck in there. So this
Speaker 2 (23:40.406)
Right. Okay. Anything else about bonds that we should know about?
Speaker 2 (24:39.37)
Okay, I want to tell a quick story about that. I just had a family Where I was explaining to them this that naturally their target date fund in their in their college in their 529 accounts was in mostly bonds and cash because their children are literally about to go to college and They weren't upset but they were sort of surprised they thought that they were taking more risk and trying to get a bigger return But when we checked in on the progress of their plan
They were also surprised to see that they weren't behind on college. Yet, you know, we've taken quite a big hit in the market, the stock market recently. And I said, that is why, you you weren't in the stock market in your college fund. And so they had all the money they needed to send their 18 year old off to college because the glide path naturally took them to a point where they weren't at taking as much risk.
So I saw it in real time just last week.
Speaker 2 (25:43.779)
Good stuff.
Speaker 2 (26:26.52)
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