The Sunday Best (12/9/2018)

The Sunday Best
The Sunday Best is a collection of articles I’ve curated for your reading pleasure.

Expect most of the writing to be from recent weeks and consistent with the themes presented on this website: investing & taxes, financial independence, early retirement, and physician issues.

 

 

Presenting, this week’s Sunday Best:

 

I wrote about burnout for the first time in a couple years this week. Physician Sense is talking about a different kind of burn. Why You Should Set Your Money on FIRE: How Financial Independence and Retiring Early (FIRE) Can Work for Physicians

 

FIRE can work for physicians, but not if you’re taking on debt to support your lifestyle. Our friend Steve from Think Save Retire has thoughts on this phenomenon. High-Income Debt: Why High-Income Earners Still Struggle to Build Wealth.

 

A typical high-income lifestyle demands a high-workload life. Side Hustle Scrubs explores what life can be like with All Work and No Play. Spoiler Alert! It makes Jack a dull boy.

 

A number of docs who don’t want to be dull have made the conscious choice to work less. Crispy Doc and I are among them, and he’s featured several more in his interview series.

 

Fritz Gilbert from Retirement Manifesto didn’t just cut back; he retired completely in his early 50s. He recently shared 6 Lessons from the 6 First 6 Months of Retirement.

 

Continuing on a theme, the mohawk-rocking J. Money from Budgets are Sexy, whose blog is on sabbatical through the end of the year, shared a guest post from Marc at Vital Dollar. 40 Money Lessons Learned in 40 Years on This Earth.

 

Most lawyers I know have learned how to spend money. But have they learned how to be happy? Matt has. From his blog, Optimize Your Life, How to Buy Happiness.

 

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Michael Robinson and family are finding happiness living in far-flung, low-cost places. In a guest post on Get Rich Slowly, Michael shares their Uncommon Dream in How We Used Geographic Arbitrage to Pursue Our Dreams (and Enrich Our Lives).

 

I may have been the first doctor to tout the benefits of geographic arbitrage for physicians, but I’m not the latest. That would be Smart Money MD who has been Weighing the Geographical Arbitrage Scale for Physicians.

 

If you want to be a millionaire, geographic arbitrage can help you punch your ticket. Learn how these five millionaires made their money in their interviews with ESI Money.

 

How much interest are you earning in your checking and savings accounts? Explore accounts offering 20x what many banks are offering. High Interest Savings Accounts

The Market is Down. This is Not Abnormal.

 

When the market gains 5% or 6% in a good week, you don’t hear a lot of “what should I do now” chatter. But when it loses that much, the noise can become deafening.

Part of it is due to a lack of experience. For some, it may be insufficient memory. The market dropped as much or more early in 2018, and in most years prior, even during this nearly ten-year bull market.

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We also tend to have a more primal reaction to losses than we do to wins. Loss aversion is strong and the pain of losing some money is more powerful than seeing your portfolio grow by a similar amount.

Where do things go from here? I don’t know. Those who portend that this is the beginning of the next big bear may prove to be right. Or not. And if so, this is probably not the first time in the last ten years they’ve made such a statement. Some have been sounding alarm bells since 2011, and we’ve had a fantastic run since then.

What am I going to do? Nothing different. Stay the course. Perhaps I’ll be investing in funds at reduced prices. Or not. A quick rebound would not be a surprise, either.

I won’t be altering my asset allocation or looking for “safe havens.” Successful market timing requires multiple correct calls. When to get out, when to get in, and to what extent. Times like these are a good time to have an IPS to refer to if you’re having any doubts.

A few people on Twitter have been quick to point fingers at index fund investors, saying “I told you so” as the market is slightly down for the calendar year, as if such an event is completely unexpected.

The stock market loses money for us nearly 1/3 of all years. The gains in the good years more than make up for it. A down year is not surprising or unexpected. Whether we end the year up or down, we expect volatility.

It hasn’t been as placid a year as 2017, but the ups and downs we’ve been seeing could be called “normal accidents” in a complex system, as Ben Carlson recently described them.

While it may not feel normal, this is not abnormal.

 


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Have a Masterful week!

-Physician on FIRE

11 comments

  • Side Hustle Scrubs

    Heeeeeere’s Johnny!

    Although all this hustling doesn’t have me grunting “red rum” (yet), I am buried by more work than The Overlook Hotel had snow.

    Here’s hoping 2019 brings a warm thaw.

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  • PoF,

    Grateful to you for promoting the interviews, and the playbooks, that folks have been generous enough to share. Working less, more humanely, is the way to fall back in love with medicine.

    Fondly,

    CD

  • Appreciate your reiterating the idea that there is no reason to be panicking when it comes to the stock market. Fluctuation is normal; without it, we wouldn’t be getting a return on our investments (i.e. “traditional” savings).

    • It’s comical how certain people — most of whom profit off of moving people’s money around — are fake-laughing at the index fund investors. Because the S&P 500 is down 2% or something.

      They’re just hoping people are freaking out and looking for guidance that they will gladly provide if you part with 1% to 2% of your money to them every single year for eternity.

      Thanks. But no thanks.

      Cheers!
      -PoF

  • Thanks for the links to the Docs who cut back series. I will have to read those. I always find it so fascinating that the script in America is always to work more, buy more stuff, trade up, buy nicer, and this continues until it all comes crashing down. It is so refreshing to see high-income earners who choose to take the path less traveled and say I have enough. As a nurse, I see the high-income doctor stigma. Everyone expects them to play the part of a high-income earner. By that, I mean, drive nice cars, wear fancy clothes, buy treats for the nurses. In our department, the doctors are required to contribute money to a fund to throw an annual party for the nurses. Why? Because they earn a high income and others expect them to spend it. So to sum it up. I applaud those high-income earners who are able to purchase their time and freedom back. Thanks, Doc.

    • Thanks for weighing in, Shawn.

      I do buy treats for the nurses, but I don’t see that as a barrier between me and building wealth. Even spending $100 a week is a pittance compared to the ability to set aside a six-figure sum per year, as many physicians could pull off.

      Cheers!
      -PoF

    • Shawn,

      Thanks for the kind feedback on the series. The biggest down side to reducing clinical shifts is not seeing my friends (nurses, techs, unit secretaries, registration) as regularly as I once did, although this makes our shifts together feel that much more like a special reunion (albeit one with crashing septic patients in the background).

      I’d agree with PoF that treating our nurses well when we have the opportunity is something we do out of gratitude to our friends who save us, so it doesn’t fall into the expected high spender category in my mind.

      Fondly,

      CD

  • Gasem

    You may stay the course, but big ERN has a plan with triggers based on economic data he follows in case of impending disaster. When you cut a finger off in a saw pull the hand out of the saw don’t wait till 2 3 and 4 are on the floor.

    If you plot on the efficient frontier risk reward plane, the boggelhead 3 is not on the EF and has an expected return of 7.54% @ 12.31% risk. A 50/50 VTSMX:VBMFX has a 7.15% return and only a 7.8% risk. Both portfolios have 50% VTSMX so just convert VGTSX to VBMFX and you cut your risk by 40% at nearly the same return. It’s not a matter of selling out it’s a matter of re-balancing to a lower risk. Once the storm clouds pass you can easily re-balance back into VGSTX from the bond fund if you absolutely can’t live without foreign exposure. VTSMX and VGSTX are 85% correlated and VGSTX has a higher risk so when the robots take down the US they are going to take down foreign just as hard (because of the excess risk) and only the bonds will save you. You have to consider cap gain issues of course but if you’re investing in a Roth or TIRA or HSA, lightening your risk at least partially is quite doable with little consequence if you pull the trigger a bit early on the risk management and the market is freaking you out. If you want to plan for exactly the same expected return as a BH3 re-balance to a 2 fund AA of 58/42. Re-balancing is NOT equivalent to getting out of the market. It merely moves you to a different point on the risk reward plane.

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