Speaker 1 (00:02.254)
Welcome to the Physician Family Financial Advisors Podcast, where physician moms and dads turn today's worries about taxes and investing into all the money they'll need for college and retirement. This is Ben Utley.
And this is Nate Rennecke. Today's topic is should physicians stop investing now? So Ben, is if you're looking at the your investments or it is getting pretty ugly out there and the news is kind of looking pretty bad if you watch it. Investors are starting to get scared.
There's like three or four things to keep your eyes on right now that are a little spooky.
Yeah, and it all touches your investments at the end of the day. So we are starting to get some questions from physicians out there and we got one particular that we thought we'd bring to the table today. So a cardiologist out in the Midwest had asked us a question about their investments and we thought we would bring her question here today. So here it is. I'm gonna read the email to you.
says, with the way the economy is, is it worthwhile slowing down on how much I put into investments every month until it is over the hump?
Speaker 1 (01:22.017)
Over the hump.
And over the hump...
The economy is today. Well, I know that we just got this email, but I think there are probably like a dozen different times in history when we could have received a similar email. And I say that, I mean, a dozen different times, just over the last 20 some odd years. you know, when I started in the industry, the first thing that I heard was Asian currency crisis, which was the collapse of the Thai bot and
Somebody could have made that argument back then and you know, back in 2008, we get over this hump in the real estate market. You know, I think they could have made that, that then the short answer is no, you should not stop investing provided that you are invested in.
an appropriate portfolio. So by appropriate, I mean that the asset allocation is right for your risk tolerance, which means you wouldn't freak out if we had a correction or a drop. That it's diversified, which means it's not all loaded up in a single stock, like a pet stock you hear about these days. That it's spread out among a number of holdings, perhaps through index mutual funds, which we really know and love. And that there's a balance of stocks and bonds in there that's appropriate for your age.
Speaker 1 (02:42.218)
and of course that all this stuff is invested in a low-cost tax-efficient manner. So if that is you, then the answer to this question is no, you should not stop investing.
Okay, so that's all we have for you today. Answers are up.
Right? Nate, you're funny.
No, but seriously, mean, so well diversified, know, invested appropriately. This is our client. So I mean, they are. So what's the real question here? Because obviously, I mean, this is a client you've had for a while. And I mean, I think what they're really asking is, is what they're doing the right thing to be doing. Investing in it. Right. It's still a good thing.
It's all a thing.
Speaker 1 (03:30.732)
Yeah, because this is a client who's been investing on a monthly basis for a long time, years and years and years. And occasionally we have one of these faith-shaking events that comes along and you kind of just flex a little bit. like, is this really what I should still be doing? you know, given the proviso that I've stated here recently, it's yes. The answer is yes. And the reason to stop investing is when you've hit your target. And that might mean that you're saving for college and your kids are about to go.
or that you're saving for retirement and you've got all the money you need, even if you're not actually ready to retire. So you keep investing until you get there. You keep running until you hit the finish line. So I think that the, the best way to counteract the fear is to put a more hopeful thought in mind. And, um, I'd like to introduce a concept that I call the investor smile. Investor smile. We've talked about investor smile before together. we, Yeah.
Sm-
So investors smile. at times like this, at long-term investors who have not reached their goals yet should be smiling, which is a little counterintuitive because things have gone down and they may be going down and you think, well, that's the opposite direction of the way I want things to go. But here's what to keep in mind. I'm going to, I'm going to give you a historic example. So I think most of our listeners can remember the dot com bubble.
when stocks went way, way, way up with tech stocks all the way up to 2000. And then that bubble burst and we saw the market run down and I'm talking about all the markets, not even just the U.S. stocks ran down around 50 % and there's blood in the streets. So start at the top, time marches on, it goes down. And then long about 2010, the market recovered all of its losses.
Speaker 1 (05:26.592)
So I want you to imagine kind of crossing a chasm where you start on the left hand side and maybe you're crossing the Grand Canyon. So start on the left hand side, you can see all the way across to the right. You march down the trail, you get to the bottom and then you march back up. Okay, so that's what we're envisioning when I talk about the smile. So many people talk about a U-shaped recovery or a V-shaped recovery.
I like to see it as a smile because you imagine you start on the left side on a graph where things are nice and rosy, they're high, and then as time marches on, the market goes down until it kind of reaches the bottom. That's where the middle teeth and the gap in your teeth would be and it marches back up to the right-hand side where everything comes out and it's okay. All right? So the reason you should smile is this. If you buy, if you make your monthly purchase at the top of the market, at the left-hand corner of the smile,
And then next month it goes down, you buy a little bit more. Next month it goes down, you buy a little bit more. You get to the bottom, you buy there, and then you buy every month all the way back up to the right-hand corner of the smile. When you get back to the top right-hand corner of the smile, what you will find is that all of the purchases that you made during that downdraft or that correction are profitable. Because by definition, they would all be at lower prices than the finished price.
And so the reason you should smile about this is because all you're going to basically be buying lower with the ability to hold or sell higher. Now this sounds like pra like theory, but I've actually experienced this with several million dollars under management in the firm. went all the way through 2000 and back to 2010. Now this among investment professionals is known as the lost decade because during that time period,
The S &P 500 really made no money. It just kind of crossed the chasm, came out the other side. But investors who invested on a monthly basis and kept investing during that time period actually came out of that decade-long period with some healthy profits.
Speaker 2 (07:28.62)
Which is a counter to getting out of the market. You know, if you take your money out of the market even while it's going down, it may feel like you've done something but you're missing out on making profit at all.
Yeah, now I wanna cop to something here, okay? So I'm not poly-perfect up here with my microphone, my pom-poms with, know, clairvoyant reverse vision. I lived through all that stuff. I managed money through all that stuff. And I managed my own money through all that stuff. And there was a time when I did different stuff with my money than I did with clients' money.
Specifically, I would leave the client's money invested and I would tell them to keep investing and I would stop investing my own money and I pull my money out of the market. All right. So that's, that's a full disclosure and this is in the past, in the distant past. Okay. Now I have had clients contact me and say, Hey, should I stop investing? Should I take my money out of the market? And now I have a story where I can say, you know, I've done that in the past myself. And every time I did it, I live to regret the decision.
And you think about it like if you'd invested in 1998 at the top before everything went down when the tie block collapsed, if you'd invested in the year 2000, you'd still be doing great right now. If you invested at the peak, if you invested at the peak before the 2008 crash for real estate, you'd be better off today. If you had invested at the onset of COVID, you'd still be better off today.
The point is that the reason we invest is because we believe these securities that we own, these companies, will be more valuable in the future than they are today. That's an edict. You have to believe that to be an investor. And if you don't believe that, you need to stop investing because the whole thing is volatile. It goes up and down. And when it goes down, that's when you smile. You think, hey, everything I'm buying today is cheaper.
Speaker 1 (09:26.754)
than it was in the past, just like there's a sail on. And then you think about, when this recovers, I'll be sitting pretty. So don't make the mistake that I made. That's what makes me an expert is I've made the mistakes that other people should not be making. I've learned it myself. I've been through that. Expert is one who was there and spurt is drip. So very fast drip that was there.
Right. Yeah. And it's
It's easier to smile during these times. I mean, it really actually is pretty difficult to smile because even if you're happy about your investments, everybody around you seems to be sort of frantic, but it is easier to take a positive approach to the situation when you know the history of the markets and you know that we experience a bear market every three to four years.
Right.
And it's always funny because every time someone asks me this question, I say, you know, 30 years ago, no matter which year it's in, I pretty much just say 30 years ago because there's a bear market all the time that you can point to that's 30 years ago or 20 years ago. And if you look back, if you have a long enough time horizon, just like you've described, there's, it's always been a good deal to invest in matter of it's the top, the bottom or whenever.
Speaker 2 (10:55.436)
if you can wait it out long enough and waiting it out during these times. A wise man once told me, which is Ben Utley, that this is the price of getting a return. Right. Right. Going through these bear markets and going through this pain, that's the cost.
Yeah, that's the cost of the tuition. The returns that you get are not free. They're paid for by the sweat of your brow and lost sleep if that's how you choose to roll. So I can see a scenario where we have listeners today, I'm talking to you, who is maybe a couple years out from retirement and they're not smiling. In fact, they're kind of frustrated. Maybe they're a little pissed off. They're scared. They're worried they're going to have to work a long time.
because their portfolio has gone way, way, way down in this. And they're afraid that's going to keep going on. So as I said at the top, you need to be appropriately invested, which means having an asset allocation that is right for you. Now, I think it's inappropriate for someone who's on the cusp of retirement to have a portfolio that is heavily invested in stocks, 80 % plus stocks. And it's not uncommon for us to get clients who've come from brokers, and it's 100 % stocks.
It scares the crap out of me because they're really on the edge of retirement. So if that's you, do something about it today. This could get worse before it gets better. And if you really need to retire in the middle of it, you'll have a bad outcome. So, you know, but everyone else, if you're invested appropriately, then you have the right mix of stocks and bonds. You have that buffer for the downside and you have time to be able to wait for it to come back.
Well, it always seems like there's more to it, but there really isn't. So I don't think we should give it anymore.
Speaker 1 (12:40.898)
Well, it's like a lot of things in life, you know, the key to health is diet and exercise, right? You go to your doctor, say, hey, you need to eat better and get more exercise. and drink water and like end a story. Now, I'm sure that doesn't cure everything, but it's a really great start. And with investing, it really is not more complicated than holding the right stuff and hanging on to it when the bad times come.
I mean, it's just, that's like the beginning of the end of the story. It's like, if you, you know, if you want to be financially secure, spend less than you make. If you want to be successful with your investments, get the right stuff and hang on. Right. And nobody wants to hear that. It's too simple. You can't write a white paper about it. doesn't make the headlines. It's not interesting. It's not sexy. If they said that on CNBC, they'd have a one minute show instead of a 24 hour show. If all financial advisors said that,
then they wouldn't have anything to wave their hands over, you know? and we wouldn't be fooled into believing that they know something that we don't know. But it's really just that simple. you have to hang on and you have to remember...
why you're investing, that you hope that things are going to go up because they have over decades and decades and decades in our country and in other countries. And you also have to remember what's at the end of the rainbow. The reason that we're investing is not to make money. The reason we're investing is to fuel a comfortable retirement and to be able to send our kids to a great college or educational experience.
Mm-hmm.
Speaker 1 (14:11.948)
And while you're doing that, it's good to save taxes and investments. So, want to let our listeners know that we have a, new thing that you can get ahold of. is called the overtax doctors guide to retirement 2022 edition. sometimes people call and they're like, Hey, I'm, I'm Warren. I'm wondering if I'm missing out on something. I'm afraid that I'm missing a tax break. Nate and I put our heads together and we thought through FOMO and we have put together everything that we could think of that physicians should be doing to save taxes.
while they're saving for retirement. Again, it's the Overtaxed Doctor's Guide to Retirement 2022, and we will have a 2023 update. So if you'd like a copy of that, you can write in to us. It's podcast at physicianfamily.com.
You can also drop a question on our answer line, 503-308-8733. And even better, subscribe to our newsletter. Occasionally we have freebies in there. We might give you an offer code where this is free. So you can go to PhysicianFamily.com, scroll all the way down to the bottom, and sign up for our newsletter.
Thank you for listening to the Physician Family Financial Advisors Podcast. Is there a question you would like answered on our next show? Go to PhysicianFamily.com to record your question. While you're there, sign up for our newsletter and gain access to tools you can use to turn worries about taxes, investing, and extra money into a lifelong feeling of financial security. That's PhysicianFamily.com.
