White Coat Investor

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The White Coat Investor
A Doctor’s Guide to Personal Finance and Investing by James M. Dahle, MD

This is an excellent, informative and very readable book.  I read it cover to cover on a plane ride.  

I can’t think of any other book that better captures my own ideas regarding personal finance and investing.  I wish I wrote this book!  I was entertained and informed and you will be too.

Part of what makes it so good is his willingness to share his personal information.  We can see how and when he increased his net worth.  

He gives other concrete examples that were posted on his blog.  He covers a lot of basic information like how and why to save and how to manage school loans.  

These topics can never be emphasized too much.  Some ignore them because they don’t want to face reality.  

Others are so interested in the excitement of risk analysis, options trading, etc. that they forget how important it is to simply save 20% of their income.  He lays out encouraging arguments showing that we don’t need as much as we think we need to retire.  

He argues forcibly for not buying too much house or buying a house too soon when you can’t afford it.  These messages need to be shouted from the rooftops of medical training centers.  

The residents I know all buy big houses during their residency training.  They do so with loans they neither understand or can afford.  

Even though the book covers mostly the basics, we can all learn something from it.  

I learned to reevaluate my income tax situation and the structure of my business expenses and retirement plans.  

You will learn from this book too!  Enjoy.

Interview of White Coat Investor, James M. Dahle, MD
The following is paraphrased since I was hurrying between patients in my office and he was hiking in the Utah mountains (yes, I do have a lot to learn from this guy!)

WD (Wealthy Doc):  

NNT (N.N. Taleb) recommends we use Monte Carlo simulators for running numbers.  Thoughts on that?

WCI (White Coat Investor):

Yes, that is true and advisable, especially when doing research or complex financial analysis.  

My goal for the average doctor is pretty basic and easy.  I want to encourage them to save 20% of their income, invest it in some reasonable way and if they use an advisor, to pay a reasonable price for good advice.

I preach the basics over and over again on my website.

You don’t necessarily need to buy an expensive Monte Carlo program in order to do that or run a few simple examples.

WD:

You wrote about the notion of “stopping savings” when you have “enough.”  Although I agree that enough is enough but some like Bill Bernstein implores us to never ever stop saving until you die.

WCI:

Life is a balance between under-saving and over-saving.

While no one wants to eat Alpo in retirement, there isn’t any point to end up with $10 Million in the bank.

Or worse, keeling over at age 50 after having lived a life of scrimping and saving. In my view, money is for spending (or giving.)

I invest money so I can spend more money later, not to accumulate some massive sum.

On the other hand, I acknowledge that my “number” has drifted up over time and may still continue to do so.  My wife and I are considering increasing the number we want at retirement since we want to have enough.

Not only for essentials but to cover things we enjoy such as a lot of travel.  

We might want the option of continuing our current schedule of about 10 vacations a year!

Lifestyle inflation affects us all I suppose.

WD:

What do you think about other investments available to us such as commercial real estate, surgery center ownership, etc.?

WCI:

Those markets are less efficient than other financial investments such as stocks and bonds.  

Because of that, a knowledgeable and dedicated investor can exploit that inefficiency.  The opposite, of course, is also true.

An ignorant and careless investor can lose his shirt in real estate and private investments.

I do invest in real estate (commercial and residential) and appreciate the tax, cash flow, and diversification benefits.  

But I have the majority of my money invested in the same boring old index funds that should make up the majority of the average doctor’s portfolio.

WD:

How did you come up with your formula to estimate physician expected net worth?

WCI:

I made it up.

I realized that the Millionaire Next Door formula needed to be modified because of two important aspects of physician finances- doctors come out of training with a dramatically negative net worth, and they don’t make any money in their 20s.

To adjust for that, I added a factor to the formula ($200K for the typical med student loan burden) and based the formula on time since leaving residency rather than age.  

No formula is perfect, of course. But for physicians, I think mine is better than Stanley and Danko’s!

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