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Webinar: An hour with the White Coat Investor

Locumstory.com partnered with Dr. Jim Dahle, the White Coat Investor, to host a webinar focused on managing finances during a pandemic. You can view the webinar below.

Unfortunately, Dr. Dahle couldn’t get to all of the questions during the webinar but he was kind enough to respond to all of them.

Do you think that quantitative easing is the main reason for such a quick bear?  If bears are this wimpy in the future, how badly does this affect future returns for a young investor when they retire in 30 years or 40 years?

The truth is I don’t know. Nobody else really does either. It is fun to speculate though. I think the Fed is probably doing the right thing with quantitative easing as far as keeping the economy humming as much as possible under the circumstances. But it is painful as a debt-free saver to have interest rates be so low. Lower interest rates do suggest lower future returns, particularly on bonds and CDs, at least in the near to medium term. But sometimes markets do things you do not expect them to do. As far as 30-40 years from now, my crystal ball is not just cloudy but complete opaque. If you are worried about lower future returns, save more money.

Has this bear market combined with super low interest rates changed the answer to the question of pay off debt vs invest for many of your readers?  Is there a breaking point, whether mathematical or psychological, that you have found in your experience for docs and other high-income professionals?  Is the fed setting rates to 0% now an anchor where docs have changed their financial plan to switch from paying off debt to now refinance the debt and invest?

When your choices for a “safe” return are a 0.5% high yield savings rate or paying off a 3% mortgage, that mortgage starts looking more and more attractive all the time. So yes, low rates do change that calculus a bit. Obviously one should refinance debt when lower interest rates are available. Remember that when interest rates fall, not only are future bond returns expected to be lower, but future equity and real estate returns are also expected to be lower as those assets are “bid up” by those frustrated with low bond yields.

Have you found that non-fiduciary financial advisors have stepped up their selling of predatory financial products of whole life insurance and annuities, pointing to the bear as a reason to avoid traditional investing?  Is there any evidence that having been sold these terrible products has contributed significantly to the recession?

No. Those guys sell these products as much as they can in times that are good and in times that are bad. They might be easier to sell after a stock market downturn though. I certainly do not think the recession had much to do with that. I think the COVID-19 pandemic and all of us staying home is pretty clearly the most significant factor in the recession.

Hi, I have extra money to invest in my taxable accounts (~50k). Given that there is much more much uncertainty and risk in the market over the next 6mos (pandemic, election, etc) would it make more sense to contribute a portion monthly vs depositing it all at once now to limit risk? If there wasn’t a pandemic, I would probably invest it all at once.  I am planning on contributing all or most of this money to VTSAX. Thank you.

As a general rule, you will be better off lump sum investing rather than dollar cost averaging because the market usually goes up. But obviously there are times that dollar cost can come out ahead. If I had $50K to invest, I would invest it today, knowing there is about a 1/3 chance that the market falls after I invest it but that the odds are with me. Any more of a recommendation would require a functioning crystal ball, which I do not have. At least if the market falls you can tax loss harvest the investment and share the loss with Uncle Sam since you are investing in a taxable account.

What’s a good swap for tax loss harvesting at Vanguard for the Vanguard High Yield Index Fund?  Only have access to Vanguard funds.

I don’t understand why you would only have access to Vanguard funds in a taxable account. There is no taxable account out there that exists with that restriction. I assume you are referring to the Vanguard High Dividend Yield ETF. If I wanted to tax loss harvest that ETF using a Vanguard product I would probably use the Vanguard Value ETF (VTV). If you are referring to the Vanguard high yield corporate bond fund, I do not know of another similar Vanguard fund. You might try the iShares High Yield Bond ETF (HYG).

A clinic offered me 50% of the fees for services at an hourly rate as a locum.  Thoughts?

I have no idea if that is a fair rate or not. I do know that a typical employee of an emergency medicine contract management group gets paid about 70% of the money she generates. I would not accept that contract without a lot more information about overhead, typical fees (is it fees charged or revenue collected), volume, payer mix etc.

Then what about infinite banking concept?

If you are really a fan of Infinite Banking or Banking on Yourself and buy a policy designed to do that, I think it is fine. You are essentially trading poor returns on your money for the first few years for a higher rate on your cash over decades. But the marketing associated with this concept is ridiculous and is primarily a way for agents to make big commissions for selling whole life insurance. To make matters worse, many people who buy policies for this reason are not even sold policies designed to do this well. You want to make sure the policy has wash loans, non-recognition dividends, and maximum paid up additions. More information here: https://www.whitecoatinvestor.com/a-twist-on-whole-life-insurance/

Thoughts on what the housing market will do in the next year?

My crystal ball is cloudy. I really have no idea. All real estate is local anyway. I know on my street a couple of months ago homes were selling very fast for asking price. The one that was listed 3 months ago hasn’t had anyone look at it in person and only 6 people online. So maybe it is slowing down. At any rate, I would buy a home when you are ready to do so, rather than based on what the market is doing. When you are in a stable professional and personal situation, buy a home.

Any program you recommend, like Quicken or Personal Capital, to safely update and manage your portfolio and gauge for retirement?

I use a simple spreadsheet to manage my portfolio. There are a lot of Personal Capital fans out there though, at least among bloggers who are paid affiliate commissions to get you to sign up for it. The software is cheap. If it helps you, I would use it. Why not try it out? I think the companies have addressed the security concerns about as well as they can. It’s very good, but probably not perfect.

Check out The White Coat Investor for more of Dr. Dahle’s tips.

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