Bill Bernstein- 1% of investors

[Kamban]

Every company should take out 10% of your salary, match some percentage and put it in the 401K that is only index stocks and bonds.

Is this what SS is all about ? The government takes a fixed percentage (12.4%) out of your paycheck and "invests" it for your retirement.

There are many reasons why SS failed -It promised too much, spread it all around, govt raided it when it had deficits and so on.

I want this to be just in one's name alone, like 401-K is now. Not in a general pool that is ripe for government raids and IOU. Which is allowed to grow untouched till age 65. Basically making 401-K compulsory for all. So that a set amount is invested and not allow one's behavior to make changes during the times of stress.

[artemis]

There are many reasons why SS failed -It promised too much, spread it all around, raided it when it had deficits and so on.

I want this to be just in one's name alone, like 401-K is now. Not in a general pool that is ripe for government raids and IOU. That is allowed to grow untouched till age 65. Basically making 401-K compulsory for all. So that a set amount is invested and not allow one's behavior to make changes during the times of stress.

That's basically how Australia's Superannunation Fund works. Employers pay in 9% and employees pay in 9%, and the fund is strictly for retirement, with exceptions made in cases of terminal illness or permanent disability (no raiding the cookie jar early to finance consumer spending). It works.

[Aquemini]

I would not slice and dice a low 5 figure portfolio. As long as you have equity risk and a low fund expense, you’ve done what you need to do.

The most important things you can do in the next 3-10 years are:
marry well
get disability insurance
avoid consumer debt
Learn about finance
get a good job

Think about it like this: you’ve got it made. You can screw up plenty as long as you get the big rocks right. 10% reits on 20k doesn’t matter when you’ll put 100k/y in as an attending.

Thanks for your input. I totally agree that these nuanced tweaks of AA are minimally important at my stage of career, and that's what I said in my original post. I could make the argument however that it would be good "practice" to set up my AA exactly how I want it now and get in the habit of rebalancing once per year or whatever. But again I agree with you that there are more important things in my life to "get right" in the next 3-10 years.

[Larry Ragman]

That's basically how Australia's Superannunation Fund works. Employers pay in 9% and employees pay in 9%, and the fund is strictly for retirement, with exceptions made in cases of terminal illness or permanent disability (no raiding the cookie jar early to finance consumer spending). It works.

Well, I think it is a very good system, and the government is heavily involved in ensuring fairness, but it isn't perfect. Among other things there is a lot of double charging of fees as Australians exercise their portability, and individual super annuity providers can have better or worse results. Anyway, it looks better than SS right now, but it does not when the market crashes...

[Tim]

Thanks for your input. I totally agree that these nuanced tweaks of AA are minimally important at my stage of career, and that's what I said in my original post. I could make the argument however that it would be good "practice" to set up my AA exactly how I want it now and get in the habit of rebalancing once per year or whatever. But again I agree with you that there are more important things in my life to "get right" in the next 3-10 years.

Set up the foundation. Forget the tilt and nuances. Three fund portfolio accomplishes that if you wish. Keep US /Intl for geographic equity and total bonds. When you want to peel the onion, trim within the category and fill with contributions later. No guarantee tilt will work, but so what?

[jfoxcpacfp]

The people who post here are not the norm even for physicians. There are a lot of great pearls in this thread. You are doing great BTW. I think it does not matter too much about REITS. BTW I own a small position in VNQ. At some point you will need to hold your nose and buy bonds. The only reason to do so now is to prevent panic when stocks take a 50% dive. How did you react in 2-3/2020?

100% agree re: the “people who post here”. My story, in case anyone cares - pls be patient - but I thought it might be interesting for a few of you:

When we are interviewing CPAs to join our team, we ask if they have experience with physician taxes. Usually “yes”. Then we ask if they have experience with backdoor Roth’s and solo-k’s. Blank stare. Some argue about the relevancy and benefit. The importance of that is that 95% (probably more) of our initial consults come from WCI - the rest are referrals from WCI readers, which is a challenge in itself. There is a huge gulf between you guys and the typical doctor who is looking for a CPA.

Most CPA firms that “specialize” in doctor taxes have done so based on starting with a single client who has referred his/her colleagues who have referred their colleagues and so on. One CPA told me that he hangs out in the hospital cafeteria and strikes up convo’s at breakfast and lunch. We would have never been successful with this technique b/c we are almost all introverts. You guys don’t seem to care so much about the schmoozing, you just want what you’ve learned you deserve. So, our practice (and other CPAs who advertise here, I think) specialize in a sub-niche of doctors, those who are financially astute and have a baseline expectation that most doctors are not aware of - those doctors are just happy that their buddy is happy and they can check that task off the list.

There is a huge gulf between the “typical” doctor niche and the sub-niche; the sub-niche expects a far higher level of knowledge and attention. This makes the hiring and training process especially intense - we learned we have to go national to find the “right” CPAs (thank you, Indeed and Wonderlic). We have fired more than we’ve kept on (which I hate, but we’ve also learned there are some traits that just can’t be taught). It also makes it difficult to explain to a few why we charge more than their buddys’ CPAs who whip out a return for $600 and offer no planning without additional charges which discourages calls and meetings and which leads to an April surprise and they learn to expect that level of service. There is so much more we have the liberty to do when the client feels free to contact us because they won’t be billed extra!

Honestly, you guys are not easy to work for - lots higher expectations because you’ve been taught what to expect - but I wouldn’t have it any other way. We now have the firm that I dreamed of having years ago and was not possible in our small, rural area. It has been extremely stressful but also humbling, gratifying, and a heck of a lot more fun along the way. I sometimes wish it could have happened before I was 60, but WCI didn’t start his forum until 01/2016 and that’s truly what made it possible. It has been a thing of challenge and joy and experience and I am so grateful to be here.

Enough of that - now about holding your nose and buying those bonds...it’s costing some of you a lot more than paying a financial planner who starts with Nick Murray and a plan .

Love you,Hatton (and the rest of you, but Hatton and I are birthday year buddies and there’s just a connection).

TLDR - can’t help you, sorry.

[Tim]

It’s not a huge intellectual undertaking. It’s a huge EMOTIONAL undertaking. When the market crashes, it’s extremely difficult to force yourself to sit on your hands and do nothing. The more money you have invested, the harder it is. In a bad bear market, far too many people panic sell and lock in losses (usually because they were taking too much risk in the bull market before the bear hit).

And you CAN’T ignore the financial news in a bad downturn, no matter how hard you try to. It will be coming at you from all directions. The only person unaware of the huge crash in 2008 was Rip Van Winkel. Anyone who was actually conscious knew the economy and the stock market was melting down. Until you’ve gone through a real bear market, it’s hard to understand how much fear they can generate even in normally level-headed investors.

Just a word of caution for those that 2020 was the first experience with a 20% drop. I would suggest that the time frame was so brief that one should not conclude that their behavioral finance response was under control. Not one month end statement (or balance) was at a new low. February was not at the bottom and neither was March. The reality is that the emotional fatigue factor simply was not there. Realize 1.5 years is much different than 30 days. From a market perspective, there was fear but very little pain.

[Larry Ragman]

Enough of that - now about holding your nose and buying those bonds...it’s costing some of you a lot more than paying a financial planner who starts with Nick Murray and a plan .

Johanna, pls say more about this. In this context and based on your previous statements on investment philosophy, I assume you mean that going to bonds is not necessary? Or perhaps that one needs only hold the amount in bonds necessary to sleep soundly in a crisis? Given this thread started out about one of Bernstein’s aphorisms, perhaps you could take on his oft quoted bromide about stopping the game once you have won, which is often interpreted as get out of stocks once a certain number is hit.

[zlandar]

I disagree with Bernstein if he thinks only 1% of docs can handle their investments. I would guess at least 20% are capable of investing on their own and accumulate enough assets to retire comfortably in retirement. Those 20% are not the flashy docs pulling up in an expensive car or boasting how much they have accumulated. How would Bernstein know I exist? If this was pre-2000 I would need a human broker to fill my orders but the Internet has changed that.

Bernstein likely interacts with the stereotypical doc who drives a German car, spends way too much on a house, has a huge whole life policy, and has a FA charging >1% AUM invested in a bunch of overpriced active funds.

[Tim]

Johanna, pls say more about this. In this context and based on your previous statements on investment philosophy, I assume you mean that going to bonds is not necessary? Or perhaps that one needs only hold the amount in bonds necessary to sleep soundly in a crisis? Given this thread started out about one of Bernstein’s aphorisms, perhaps you could take on his oft quoted bromide about stopping the game once you have won, which is often interpreted as get out of stocks once a certain number is hit.

https://forum.whitecoatinvestor.com/personal-finance-and-budgeting/212288-retirement-planning-in-a-low-interest-rate-environment

Liquidity, risk vs return, volatility, diversification: Your previous post was very well thought out. Although few in number, I believe the responses were excellent.
Do you (personally) need bonds in a crisis?
Do you (personally) need bonds for liquidity, return, volatility, diversification?

I personally think bonds have a very good purpose if properly used. Just not for investment returns, but for liquidity that accomplishes ones personal financial plan.

CM, Larry Ragman and Johanna would make a very interesting panel discussion at WCI2021 or a podcast. Likely a topic without a resolution because there isn't one!

[Hatton]

100% agree re: the “people who post here”. My story, in case anyone cares - pls be patient - but I thought it might be interesting for a few of you:

When we are interviewing CPAs to join our team, we ask if they have experience with physician taxes. Usually “yes”. Then we ask if they have experience with backdoor Roth’s and solo-k’s. Blank stare. Some argue about the relevancy and benefit. The importance of that is that 95% (probably more) of our initial consults come from WCI - the rest are referrals from WCI readers, which is a challenge in itself. There is a huge gulf between you guys and the typical doctor who is looking for a CPA.

Most CPA firms that “specialize” in doctor taxes have done so based on starting with a single client who has referred his/her colleagues who have referred their colleagues and so on. One CPA told me that he hangs out in the hospital cafeteria and strikes up convo’s at breakfast and lunch. We would have never been successful with this technique b/c we are almost all introverts. You guys don’t seem to care so much about the schmoozing, you just want what you’ve learned you deserve. So, our practice (and other CPAs who advertise here, I think) specialize in a sub-niche of doctors, those who are financially astute and have a baseline expectation that most doctors are not aware of - those doctors are just happy that their buddy is happy and they can check that task off the list.

There is a huge gulf between the “typical” doctor niche and the sub-niche; the sub-niche expects a far higher level of knowledge and attention. This makes the hiring and training process especially intense - we learned we have to go national to find the “right” CPAs (thank you, Indeed and Wonderlic). We have fired more than we’ve kept on (which I hate, but we’ve also learned there are some traits that just can’t be taught). It also makes it difficult to explain to a few why we charge more than their buddys’ CPAs who whip out a return for $600 and offer no planning without additional charges which discourages calls and meetings and which leads to an April surprise and they learn to expect that level of service. There is so much more we have the liberty to do when the client feels free to contact us because they won’t be billed extra!

Honestly, you guys are not easy to work for - lots higher expectations because you’ve been taught what to expect - but I wouldn’t have it any other way. We now have the firm that I dreamed of having years ago and was not possible in our small, rural area. It has been extremely stressful but also humbling, gratifying, and a heck of a lot more fun along the way. I sometimes wish it could have happened before I was 60, but WCI didn’t start his forum until 01/2016 and that’s truly what made it possible. It has been a thing of challenge and joy and experience and I am so grateful to be here.

Enough of that - now about holding your nose and buying those bonds...it’s costing some of you a lot more than paying a financial planner who starts with Nick Murray and a plan .

Love you,Hatton (and the rest of you, but Hatton and I are birthday year buddies and there’s just a connection).

TLDR - can’t help you, sorry.

Johanna thank you for your kind words. I respect that you were able to find a niche and start a new business really from this forum. Brilliant. I have picked up several pearls from your posts over the years. It never ceases to amaze me how some people can be really smart about producing income but not willing to learn enough personal finance to protect and grow it! Some jobs should not be delegated. Maybe one day we can get together in Nashville.

[Tangler]

We are the 1%! It seems so easy once you learn the basics that it sounds ridiculous that the average person cannot do it. But the average person doesn't care. That is the trouble. It is not complicated but that doesn't make it easy. Most people cannot get past the not spending all their income part.

Like me trying to out-run (out-exercise) the fork.

I know I need to eat less

Eat less, move more.

simple but difficult.

[fatlittlepig]

LOL, only 1% of people have the ability to manage their own retirement or investments. This is anathema to what the white coat investor community should be promulgating and this perpetuates the myth that investing and personal finance is too complex for the average individual or physician to handle. BS.

[Tangler]

100% agree re: the “people who post here”. My story, in case anyone cares - pls be patient - but I thought it might be interesting for a few of you:

When we are interviewing CPAs to join our team, we ask if they have experience with physician taxes. Usually “yes”. Then we ask if they have experience with backdoor Roth’s and solo-k’s. Blank stare. Some argue about the relevancy and benefit. The importance of that is that 95% (probably more) of our initial consults come from WCI - the rest are referrals from WCI readers, which is a challenge in itself. There is a huge gulf between you guys and the typical doctor who is looking for a CPA.

Most CPA firms that “specialize” in doctor taxes have done so based on starting with a single client who has referred his/her colleagues who have referred their colleagues and so on. One CPA told me that he hangs out in the hospital cafeteria and strikes up convo’s at breakfast and lunch. We would have never been successful with this technique b/c we are almost all introverts. You guys don’t seem to care so much about the schmoozing, you just want what you’ve learned you deserve. So, our practice (and other CPAs who advertise here, I think) specialize in a sub-niche of doctors, those who are financially astute and have a baseline expectation that most doctors are not aware of - those doctors are just happy that their buddy is happy and they can check that task off the list.

There is a huge gulf between the “typical” doctor niche and the sub-niche; the sub-niche expects a far higher level of knowledge and attention. This makes the hiring and training process especially intense - we learned we have to go national to find the “right” CPAs (thank you, Indeed and Wonderlic). We have fired more than we’ve kept on (which I hate, but we’ve also learned there are some traits that just can’t be taught). It also makes it difficult to explain to a few why we charge more than their buddys’ CPAs who whip out a return for $600 and offer no planning without additional charges which discourages calls and meetings and which leads to an April surprise and they learn to expect that level of service. There is so much more we have the liberty to do when the client feels free to contact us because they won’t be billed extra!

Honestly, you guys are not easy to work for - lots higher expectations because you’ve been taught what to expect - but I wouldn’t have it any other way. We now have the firm that I dreamed of having years ago and was not possible in our small, rural area. It has been extremely stressful but also humbling, gratifying, and a heck of a lot more fun along the way. I sometimes wish it could have happened before I was 60, but WCI didn’t start his forum until 01/2016 and that’s truly what made it possible. It has been a thing of challenge and joy and experience and I am so grateful to be here.

Enough of that - now about holding your nose and buying those bonds...it’s costing some of you a lot more than paying a financial planner who starts with Nick Murray and a plan .

Love you,Hatton (and the rest of you, but Hatton and I are birthday year buddies and there’s just a connection).

TLDR - can’t help you, sorry.

We are lucky to have people like you! I have a wonderful CPA (he has put up with me for over 10 years) and taxes are COMPLICATED! Tax planning is COMPLICATED!
The world needs folks like you! Thanks for doing what you do!

[Kamban]

LOL, only 1% of people have the ability to manage their own retirement or investments. This is anathema to what the white coat investor community should be promulgating and this perpetuates the myth that investing and personal finance is too complex for the average individual or physician to handle. BS.

Have you seen some of the posts here - buying land for timber, goats and cows, future developments, buying the hot stocks like Tesla and even the "why are you not holding bitcoin". These are supposed to be investment ideas that will bring about wealth!!!. Maybe one in a million but most will go bust. Many physicians have large shovels but many are also living paycheck to paycheck in Macmansions driving their leased Mercedes. If they make a mistake they might just be able to dig their way out.The average American cannot.

That is why no load, no commission things like total market for 500 index funds are the best for 99.9% of Americans as their base retirement money. They can play with the rest of the money investing in whatever catches their fancy - like asteroid mining - and still be able to retire without any worries.