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[emergentmd]

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It's time for me to make my quarterly PSA about how we should all take emergentmd's how-to-get-rich story with a massive block of salt

Yes he's successful, yes he's exited with double-digit millions and lives a 0.1% life, yes his overall lessons are important and should be listened to.

But to think that an ER doc in today's environment could do it the same way he did, or that he wasn't the beneficiary of an incredibly permissive environment (free standings are legal in his state, his cost of capital was extremely low, almost no competitors, the golden age of EM and knowing how to milk facility and professional fees) is just putting your head in the sand.

Scott Galloway's thoughts on guys like emergentmd ring so true in these discussions: they rarely realize how their environment and context were so important for their success, and erroneously attribute a majority of their success to perspiration, rather than opportunistic positioning.

What I am NOT saying: OMG Emergentmd is wrong, Don't ever listen to anything he says!!!! Never work, don't try, it's impossible, just accept that you've lost!!!

What I am saying: All you can take away from emergentmd's advice is that it takes a combination of the right market, the right timing, the right opportunity, the right people, the right amount of risk tolerance, and a TON of work. AND that a majority of people aren't successful, and that emergentmd's story is RARE. You have VERY LITTLE control of so many of these variables that result in success.

I appreciate this take and there is much truth to this. I will completely agree that I have been "lucky" to be in some beneficial circumstances but that is not to say that I live in some unicorn situation. Yes, been lucky to be able to take risk in a FSER state. Yes, been lucky to have low interest rate and high RE appreciation. But there are other unicorn environments that I could not benefit in.

Every generation before me and after me will have "lucky" situations too. I remember during residency when everyone was a tech millionaire when my friends/family wondered how lucky they were because we were too poor to jump into the market. I remember when I finished residency when all docs who graduated with me in many specialties wondered how lucky the previous generation was to be able to open medical facilities printing money. I remember Friends in the O&G industry making loads of money in the Shale Boom.

I was not "Lucky" to be in their situation.

Interesting that many EM docs were in my same position 10 years ago. But most are still working in the Pit. If a "lucky" situation is mostly all it takes, I should be looking around at my contemporary EM docs esp in Texas and we all should be at FIRE. Interesting that most are not and still working in the PIT.

I am sure it had little to do with me willing to risk a large amount of $$ and go into RE. Little to do with me educating myself on RE who probably knows more about RE buy/sell than many RE agents. Little to do with me Risking ALOT leaving a 4-500K/yr job to open a medical business where a paycheck was not guaranteed with a SAH wife and 3 kids under 8. Little to do with me getting an "MBA" on the job. Little to do with me starting a completely new business venture last year getting my FINRA licenses even though I didn't financially need to. Little to do with moving into another business venture later this year. Little to do with me wanting to start another completely new company next year when things slow down. Hopefully in a few years I will be sitting on a successful RE business, Medical business, Finance business, and construction business.

I will bet that in 10 years, those who think they need to be mostly "lucky" will look around and wonder why one of their fellow EM PIT doc is flourishing while they just were not as "lucky". I remember 10 years ago when a group of us PIT docs had a meeting on starting a FSER business when most said, "too much risk, can't compete with hospitals, too much competition, look at FCER/Neighbors with all their resources/VC money".

Sometimes it takes work and willingness to take risks.

 

[AD04]

A small part of my net worth is dependent on Sp500 so my returns are surprisingly not as dependent on SPY. I guess I kind of know why my net worth went up quite a bit between 7/2022 and 3/2024. My taxable brokerage account (aka my options account) gained 111% between 7/22 and 3/24. Most of those gains were from options on EWZ (brazilian stock market). From 3/24 to today, it's only gained 3%. I'm lagging the SPY YTD actually.

So only 20% of my networth is in retirement accounts which are all in 2055 vanguard target date funds - which are basically 50% ish VTI (50% VTI, 40% VXUS, 10% BND), so in reality, barely 10% of my actual networth sits in the total US stock market - which is unfortunate since US markets have had quite a decade.

I'm surprised only a small part of net worth is exposed to S&P 500. Weren't you indexing and then using the margin loan to sell puts? If not, how are you getting enough buying power?

I've been thinking about your put-selling strategy and it is fundamentally flawed and isn't optimal to build net worth. Let me know if you want constructive feedback about how to make it better.

Contrast that to foreign stock markets like Brazil trading at P/E ratios of around 9-10 and giving 7-8 percent dividends.

There may be a good reason why foreign stock markets are cheaper and underperform US stock market.

It's time for me to make my quarterly PSA about how we should all take emergentmd's how-to-get-rich story with a massive block of salt

Yes he's successful, yes he's exited with double-digit millions and lives a 0.1% life, yes his overall lessons are important and should be listened to.

But to think that an ER doc in today's environment could do it the same way he did, or that he wasn't the beneficiary of an incredibly permissive environment (free standings are legal in his state, his cost of capital was extremely low, almost no competitors, the golden age of EM and knowing how to milk facility and professional fees) is just putting your head in the sand.

Scott Galloway's thoughts on guys like emergentmd ring so true in these discussions: they rarely realize how their environment and context were so important for their success, and erroneously attribute a majority of their success to perspiration, rather than opportunistic positioning.

What I am NOT saying: OMG Emergentmd is wrong, Don't ever listen to anything he says!!!! Never work, don't try, it's impossible, just accept that you've lost!!!

What I am saying: All you can take away from emergentmd's advice is that it takes a combination of the right market, the right timing, the right opportunity, the right people, the right amount of risk tolerance, and a TON of work. AND that a majority of people aren't successful, and that emergentmd's story is RARE. You have VERY LITTLE control of so many of these variables that result in success.

I'm surprised at how many likes your post got. My impression is there are a lot of people who believe they will never measure up financially to @emergentmd .

It's true that boomer generation had it easier. Mainly, the dollar was stronger back then. In the same way, we have it easier than the generation that comes after us. That is how the financial system is set up. Yet, during his generation, he didn't have some of the advantages we have today. Back then, information wasn't so plentiful. He had to connect with the right people for information or experiment to find his own information. When he found something that worked, he had to take on risk to invest time and money into it. And he's probably among the more successful ones among his cohort. The advantage of our generation is that results are magnified because of technology and leverage. Those who are successful are extremely successful and vice versa. The middle ground is shrinking.

You should give him more credit regarding his transparency regarding 1) his finances and 2) how he got there. More information available is better than less information available. And when someone reveals how he became successful, it is very rare his process can be replicated to achieve the same level of success. By then, the environment already changed. The better thing to do is to see what he did right during his era and apply the principles (not the tactics) to yourself in the current era.

He should get credit for opportunistic positioning. He chose the right state and the right business model for his time. Today, why should someone in metropolitan southern CA make more (or the same) compared to someone living in rural SD? (This doesn't apply to a certain member whom have a sweet setup to make southern CA work.) Someone choosing metropolitan southern CA is placing a premium on culture and good weather and no-penalty shoplifting over opportunistic positioning.

You have more control than you think. You can choose your market. You can find the right opportunity. You can surround yourself with the right people. You can increase your risk tolerance. You can choose how much to work. But most physicians want to be comfortable rather than outlier successful.

No, you can't choose when you're born. But you can find the right opportunity. Each generation has an opportunity unique to that generation. A few will find the opportunity for the Millennial generation but most will disregard it. That's all I'll say about it.

"Everyone was waiting for the next Michael Jordan and they were always looking on the basketball court. He was walking down the fairway."
- Phil Knight, 2000

 

[cyanide12345678]

I'm surprised only a small part of net worth is exposed to S&P 500. Weren't you indexing and then using the margin loan to sell puts? If not, how are you getting enough buying power?

I've been thinking about your put-selling strategy and it is fundamentally flawed and isn't optimal to build net worth. Let me know if you want constructive feedback about how to make it better.



There may be a good reason why foreign stock markets are cheaper and underperform US stock market.



I'm surprised at how many likes your post got. My impression is there are a lot of people who believe they will never measure up financially to @emergentmd .

It's true that boomer generation had it easier. Mainly, the dollar was stronger back then. In the same way, we have it easier than the generation that comes after us. That is how the financial system is set up. Yet, during his generation, he didn't have some of the advantages we have today. Back then, information wasn't so plentiful. He had to connect with the right people for information or experiment to find his own information. When he found something that worked, he had to take on risk to invest time and money into it. And he's probably among the more successful ones among his cohort. The advantage of our generation is that results are magnified because of technology and leverage. Those who are successful are extremely successful and vice versa. The middle ground is shrinking.

You should give him more credit regarding his transparency regarding 1) his finances and 2) how he got there. More information available is better than less information available. And when someone reveals how he became successful, it is very rare his process can be replicated to achieve the same level of success. By then, the environment already changed. The better thing to do is to see what he did right during his era and apply the principles (not the tactics) to yourself in the current era.

He should get credit for opportunistic positioning. He chose the right state and the right business model for his time. Today, why should someone in metropolitan southern CA make more (or the same) compared to someone living in rural SD? (This doesn't apply to a certain member whom have a sweet setup to make southern CA work.) Someone choosing metropolitan southern CA is placing a premium on culture and good weather and no-penalty shoplifting over opportunistic positioning.

You have more control than you think. You can choose your market. You can find the right opportunity. You can surround yourself with the right people. You can increase your risk tolerance. You can choose how much to work. But most physicians want to be comfortable rather than outlier successful.

No, you can't choose when you're born. But you can find the right opportunity. Each generation has an opportunity unique to that generation. A few will find the opportunity for the Millennial generation but most will disregard it. That's all I'll say about it.

"Everyone was waiting for the next Michael Jordan and they were always looking on the basketball court. He was walking down the fairway."
- Phil Knight, 2000

I was indexing 4 ish years ago when i started and used my remaining buying power to sell puts. Old news. That was 4 years ago.

Right now my taxable brokerage account has ~700k in it, has roughly doubled the gain of spy over the last 4 years since I’ve started. The only strategy which I’ve done over the last 3-4 years is i exclusively sell naked puts, usually 45-90 days to expiration. I like targeting a 2 percent return in premium per month. Was targeting higher returns last year, but have become risk adverse since i have a decent nest egg now. I usually close anywhere from 30-50 percent profit usually. I occasionally do strangles as well, but thats rare, i know technically that’s the best use of capital, but the naked calls are scary when a stock rips up. There’s no margin or interest that i pay. I just maintain a healthy margin maintenance excess and don’t pay any interest. I keep most of my margin maintenance excess in vusxx as well to keep getting 5.3% interest.

Open to suggestions since you’ve been doing this for far longer than me.

 

[HemorrhagicShock]

I'm surprised at how many likes your post got. My impression is there are a lot of people who believe they will never measure up financially to @emergentmd .

It's true that boomer generation had it easier. Mainly, the dollar was stronger back then. In the same way, we have it easier than the generation that comes after us. That is how the financial system is set up. Yet, during his generation, he didn't have some of the advantages we have today. Back then, information wasn't so plentiful. He had to connect with the right people for information or experiment to find his own information. When he found something that worked, he had to take on risk to invest time and money into it. And he's probably among the more successful ones among his cohort. The advantage of our generation is that results are magnified because of technology and leverage. Those who are successful are extremely successful and vice versa. The middle ground is shrinking.

You should give him more credit regarding his transparency regarding 1) his finances and 2) how he got there. More information available is better than less information available. And when someone reveals how he became successful, it is very rare his process can be replicated to achieve the same level of success. By then, the environment already changed. The better thing to do is to see what he did right during his era and apply the principles (not the tactics) to yourself in the current era.

He should get credit for opportunistic positioning. He chose the right state and the right business model for his time. Today, why should someone in metropolitan southern CA make more (or the same) compared to someone living in rural SD? (This doesn't apply to a certain member whom have a sweet setup to make southern CA work.) Someone choosing metropolitan southern CA is placing a premium on culture and good weather and no-penalty shoplifting over opportunistic positioning.

You have more control than you think. You can choose your market. You can find the right opportunity. You can surround yourself with the right people. You can increase your risk tolerance. You can choose how much to work. But most physicians want to be comfortable rather than outlier successful.

No, you can't choose when you're born. But you can find the right opportunity. Each generation has an opportunity unique to that generation. A few will find the opportunity for the Millennial generation but most will disregard it. That's all I'll say about it.

"Everyone was waiting for the next Michael Jordan and they were always looking on the basketball court. He was walking down the fairway."
- Phil Knight, 2000

The reason why my post got so many likes (and why yours should too) is you and I are saying the exact same thing

Yes, you have agency in regards to positioning, nobody is questioning that. You can choose your location, opportunity, and specialty etc. But here's where you are missing the mark. It's the adjective I used to describe all of those things.. "Right"

The RIGHT opportunity is only determined after the fact, via the retrospectoscope.

And ultimately the advice that both you, me, and emergentmd are dropping is effectively the same. Its persistence, grit, getting up when one thing fails and trying it again, taking on a little additional calculated risk, and doing this repeatedly until the squirrel finds the nut.

The problem is we don't talk about how many squirrels don't find their nut, and die without anybody ever hearing their story.

I'd argue it's the vast majority of people who actually get up and try, try, try.

Also living in Southern California... sounds terrible unless you can pull a few million a year.

You have to find some niche volume-based hustle that borderlines on fraud to do well in those kind of VHCOL areas.

A great example is the PM&R SNF game with Medrina in SoCal. I see docs now who work for them that talk about stupid levels of reimbursement, but what this tells me is that they are a few months to a year or so out from getting lit up for Medicare fraud.

By that point you now have a 2M house in Irvine, a Ferrari, an expensive wife... that's the last situation you want to be in when hit with a fraud audit LOL

 

[AD04]

I was indexing 4 ish years ago when i started and used my remaining buying power to sell puts. Old news. That was 4 years ago.

Right now my taxable brokerage account has ~700k in it, has roughly doubled the gain of spy over the last 4 years since I’ve started. The only strategy which I’ve done over the last 3-4 years is i exclusively sell naked puts, usually 45-90 days to expiration. I like targeting a 2 percent return in premium per month. Was targeting higher returns last year, but have become risk adverse since i have a decent nest egg now. I usually close anywhere from 30-50 percent profit usually. I occasionally do strangles as well, but thats rare, i know technically that’s the best use of capital, but the naked calls are scary when a stock rips up. There’s no margin or interest that i pay. I just maintain a healthy margin maintenance excess and don’t pay any interest. I keep most of my margin maintenance excess in vusxx as well to keep getting 5.3% interest.

Open to suggestions since you’ve been doing this for far longer than me.

You are the put-selling king on SDN. I don't have as much put-selling experience compared to you and I learned a lot from your posts. These days, I don't give much feedback here but I want to give back some value to you instead of just taking.

I'm not married to a particular investing strategy. I just want something that works the best. I believe we graduated residency around the same time and I have grown my taxable account from 0 to a high amount that I can retire now if I wanted to. Maybe my insight may provide a new perspective.

I'm surprised you're no longer indexing to the stock market. I guess you're deploying the bulk of available capital into options. I thought about your strategy and although you outperformed S&P 500, there are several headwinds imbedded in put-selling that impair growth of net worth:

Taxes: This is the biggest headwind. Assuming you're in the max tax bracket making physician salary with a max state income tax of 5%, taxes would be 37% (federal rate) + 3.8% (NIIT) + 5% (state rate) = 45.8%. Let's around it down to 45%. Your after-tax return is 2% * 12 months * (1 - 45%) = 13.2%. It isn't much better than buying S&P 500 as the indexer is letting compounding work without paying taxes (excluding taxes from dividends).

Commissions: These small expenses add up the more you trade. Wasn't there an option trader on this forum that accumulated 6-figures in fees? What a drag to net worth.

Time: It seems you gravitate towards companies and emerging markets. Researching about companies and countries take time. Even though you can roll down losing options, you still want the underlying asset to be good. If you keep rolling down Enron, you'll lose a lot of money due to leverage. After taking positions in various companies and countries, you will spend time rolling over contracts. You will also have to figure how to position size to reduce risk of ruin. You will have to check on your various positions to make sure they're not going to blow up. You will have to figure how to enter and exit positions especially if liquidity is subpar. Preparing taxes would also eat up a lot of time due to the trading. Maybe this is your pastime and you enjoy it but it is still substantial cost.

Liquidity: Options on some companies are less liquid and thus less scalable compared to buy and hold.

At the end of the day, you're employing leverage to juice returns. There are multiple ways to apply leverage. Your method is inefficient through the headwinds I listed above.

If you are married to the put-selling strategy, get into futures. Section 1256 tax treatment is much better than paying 45% taxes per year. It also makes filing taxes much easier, saving time. You don't have to do as much research as you don't have to research individual companies. Liquidity is also better. Here is a very good site about put-selling regarding futures:

Options Trading - Early Retirement Now

The strategy in a nutshell I’ve written about this strategy in previous posts, most recently in Part 10 and Part 11. But briefly, here is what I’m doing: Why does this work? Implied Volatility (normally) exceeds Realized Volatility. Of course, the central limit theorem is useful only if the...

earlyretirementnow.com

With the way the financial system is set up, the optimal solution is to buy and hold. Put selling and buy & hold are directionally similar anyways. The richest people in the US are not traders but holders of companies. Steve Ballmer is richer than Bill Gates because the former diamond handed a great company while the latter is more concerned about population reduction. You can easily beat index by employing leverage in buy and hold method as well.

From 07/01/06 - 07/18/24, $10k initial investment with $2.5k added each quarter in SPY would have resulted in $726k. The same amount in SSO would have resulted in $1,568k. Buy and hold. Minimal taxes. Minimal commission. Minimal time. Decent liquidity.

I personally am not invested in any of the investment strategies I talked about here. And I'm not saying you should change. But keep an open mind.

The reason why my post got so many likes (and why yours should too) is you and I are saying the exact same thing

Yes, you have agency in regards to positioning, nobody is questioning that. You can choose your location, opportunity, and specialty etc. But here's where you are missing the mark. It's the adjective I used to describe all of those things.. "Right"

The RIGHT opportunity is only determined after the fact, via the retrospectoscope.

And ultimately the advice that both you, me, and emergentmd are dropping is effectively the same. Its persistence, grit, getting up when one thing fails and trying it again, taking on a little additional calculated risk, and doing this repeatedly until the squirrel finds the nut.

The problem is we don't talk about how many squirrels don't find their nut, and die without anybody ever hearing their story.

I'd argue it's the vast majority of people who actually get up and try, try, try.

Also living in Southern California... sounds terrible unless you can pull a few million a year.

You have to find some niche volume-based hustle that borderlines on fraud to do well in those kind of VHCOL areas.

A great example is the PM&R SNF game with Medrina in SoCal. I see docs now who work for them that talk about stupid levels of reimbursement, but what this tells me is that they are a few months to a year or so out from getting lit up for Medicare fraud.

By that point you now have a 2M house in Irvine, a Ferrari, an expensive wife... that's the last situation you want to be in when hit with a fraud audit LOL

You are wise beyond your years. The 3 things you listed in your last sentence are better rented than owned.

 

[emergentmd]

You should give him more credit regarding his transparency regarding 1) his finances and 2) how he got there. More information available is better than less information available. And when someone reveals how he became successful, it is very rare his process can be replicated to achieve the same level of success. By then, the environment already changed. The better thing to do is to see what he did right during his era and apply the principles (not the tactics) to yourself in the current era.

I am going to preface this by saying that if you saw me on the streets, you would think I am extremely average. When I go to the gym (one of the nice ones), I wear my amazon bought $10 shorts and shirt I typically get from running marathons while most are dressed in Lulu. Still shocked someone would pay $60 for a pair of shorts to go work out in, but I overspend on other stuff so do what makes you happy. I never bring up what I have or what I do unless asked.

There are two main reasons why people do not share their successes or how they got there. First, they don't want others to be as successful because they want to be seen as the big fish. Second, they get labeled as bragging or minimalized as being lucky.

I like helping others be successful. How others do have no bearing on my self worth. My wife even tells people to come to me if they want help because I am an open book. I don't mind walking people through the processes while also explaining to them the risks. I hope someone did this for me early on rather having to learn this by myself. I am not someone who shares a food recipe and "forget" to give the secret ingredient which I see all the time.

I know I have helped a few on here who reached out to me and I think they are happy for it. This is an anonymous medium, which allows me to be more open esp with my finances. I would never be so open in real life as I really do not like talking about my success/worth. My friends/family post all the time about their nice trips, kids successes but I never do this because I don't do SM and these posts just makes other feel less accomplished.

The labeling as coming across bragging and minimalizing does get tiring. This definitely will give me pause in the future to be so open so I will keep things more general.

 

[emergentmd]

The RIGHT opportunity is only determined after the fact, via the retrospectoscope.

And ultimately the advice that both you, me, and emergentmd are dropping is effectively the same. Its persistence, grit, getting up when one thing fails and trying it again, taking on a little additional calculated risk, and doing this repeatedly until the squirrel finds the nut.

The problem is we don't talk about how many squirrels don't find their nut, and die without anybody ever hearing their story.

I disagree that the that the right opportunity is determined being a Monday morning QB. Successful people can see what is more likely to work. Those who can't are just throwing darts. You only have control over how you see opportunities, working hard, and being moral in your dealings.

Failing is a always a part of any new venture. I have always said this from RE and businesses; the risks are real. It is the people that educate themselves to mitigate risks that separates those that are successful from the squirrel. If you are opening a FSER and have no idea what you are doing, then you are a squirrel. If you educate yourself, find the right site, know how to run one then you are not a squirrel. Same with RE, there are always buying opportunities but education is the key.

Yes, I have and will continue to make mistakes but it is like baseball. Batting .300 is all it takes and when you are an EM doc with money/time, one success sometimes is all you need. It is not for everyone and its completely fine to work a W2 job until you retire socking money in the stock market. I am just giving my input on other options to be successful.

I will tell you my squirrel missing nut story. Lost 6 figures in a renewable energy venture. I have done terribly in the stock market overall because I chase home runs rather than singles. I would be much more successful if I just threw it in the S&P, but my risk tolerance doesn't allow me to do this. Failure doesn't bother me. I expect failure going to any new project. Just put a large chunk of $$ into a crypto start up with essentially zero vetting; just invested because I know smarter people who did plus the CEO appears to be moral. Just put $$ into a RE flip with very little vetting; just went with it b/c the flipper is a hard worker. My lost "nuts" could continue to grow but I typically bet on the Man rather than the business.

 

[Pudortu]

I am going to preface this by saying that if you saw me on the streets, you would think I am extremely average. When I go to the gym (one of the nice ones), I wear my amazon bought $10 shorts and shirt I typically get from running marathons while most is dressed in Lulu. I never bring up what I have or what I do unless asked.

There are two main reasons why people do not share their successes or how they got there. First, they don't want others to be as successful because they want to be seen as the big fish. Second, they get labeled as bragging or minimalized as being lucky.

I like helping others be successful. How others do have no bearing on my self worth. My wife even tells people to come to me if they want help because I am an open book. I don't mind walking people through the processes while also explaining to them the risks. I hope someone did this for me early on rather having to learn this by myself. I am not someone who shares a food recipe and "forget" to give the secret ingredient which I see all the time.

I know I have helped a few on here who reached out to me and I think they are happy for it. This is an anonymous medium, which allows me to be more open esp with my finances. I would never be so open in real life as I really do not like talking about my success/worth. My friends/family post all the time about their nice trips, kids successes but I never do this because I don't do SM and these posts just makes other feel less accomplished.

The labeling as coming across bragging and minimalizing does get tiring. This definitely will give me pause in the future to be so open so I will keep things more general.

I just want to say that I am sorry you are being labeled. I am one of the docs you mentioned who you have helped. I reached out to you via DM and you offered me your cell phone. You went through a profit loss statement with me for a possible buy in to a FSED. And finally, you gave me your honest advice and (looking back now) helped me avoid a mistake. Thank you for helping me and others out.

 

[EctopicFetus]

We often get too wrapped up in hitting the home runs. My 2 cents.. if you enjoy investing, running a business do that.. Yes you will make more money than just investing. On the other hand if you have no interest in the work / setup of a business you wont be successful.

I bought a few rental properties. I bought most of them in 2019 or so. Rates were cheap but it wasnt super obvious to buy rentals at the time. (In hindsight it’s so obvious). Mine are up a lot. Each one. I was very disciplined with my piurchases and what i looked for. Each of the 3 has been a home run and I have returned well over 100% of what i put into them if i sold them today.

A colleague got into the game late, fudged him “numbers” to get the result he wanted and is getting crushed on his one deal. After years of losing a lot of money he is hoping to break even when he sells.

This same person has made a number of other financial mistakes. Much of it is from a lack of discipline and trying to do something they weren’t interested in but rather just following a line of people who did similar but did well.

A typical EM doc who doesnt mind the job would be well served playing the long game in my opinion. Max out retirement, live a fun life, spend time with kids, family, travel and retire with multi millions in the bank and own a nice home.

What we are seeing IMO is the soul crushing of our job is leading people to try to hit home runs financially to get out but very few have the acumen and luck needed. Some investments the returns are gonna be good and they turn out to be amazing. I think many of emergent’s things were like that. You hope it works out well and then boom it takes off and the returns far exceed your expectations.

I have had this happen. Others as well. IMO it’s a mix of discipline and luck in my case. Others are just much smarter when it comes to this stuff. I also have as Dave Ramsey would say a large shovel. All EM docs do. Some of us are using a hand shovel others an excavator.

 

[cyanide12345678]

You are the put-selling king on SDN. I don't have as much put-selling experience compared to you and I learned a lot from your posts. These days, I don't give much feedback here but I want to give back some value to you instead of just taking.

I'm not married to a particular investing strategy. I just want something that works the best. I believe we graduated residency around the same time and I have grown my taxable account from 0 to a high amount that I can retire now if I wanted to. Maybe my insight may provide a new perspective.

I'm surprised you're no longer indexing to the stock market. I guess you're deploying the bulk of available capital into options. I thought about your strategy and although you outperformed S&P 500, there are several headwinds imbedded in put-selling that impair growth of net worth:

Taxes: This is the biggest headwind. Assuming you're in the max tax bracket making physician salary with a max state income tax of 5%, taxes would be 37% (federal rate) + 3.8% (NIIT) + 5% (state rate) = 45.8%. Let's around it down to 45%. Your after-tax return is 2% * 12 months * (1 - 45%) = 13.2%. It isn't much better than buying S&P 500 as the indexer is letting compounding work without paying taxes (excluding taxes from dividends).

Commissions: These small expenses add up the more you trade. Wasn't there an option trader on this forum that accumulated 6-figures in fees? What a drag to net worth.

Time: It seems you gravitate towards companies and emerging markets. Researching about companies and countries take time. Even though you can roll down losing options, you still want the underlying asset to be good. If you keep rolling down Enron, you'll lose a lot of money due to leverage. After taking positions in various companies and countries, you will spend time rolling over contracts. You will also have to figure how to position size to reduce risk of ruin. You will have to check on your various positions to make sure they're not going to blow up. You will have to figure how to enter and exit positions especially if liquidity is subpar. Preparing taxes would also eat up a lot of time due to the trading. Maybe this is your pastime and you enjoy it but it is still substantial cost.

Liquidity: Options on some companies are less liquid and thus less scalable compared to buy and hold.

At the end of the day, you're employing leverage to juice returns. There are multiple ways to apply leverage. Your method is inefficient through the headwinds I listed above.

If you are married to the put-selling strategy, get into futures. Section 1256 tax treatment is much better than paying 45% taxes per year. It also makes filing taxes much easier, saving time. You don't have to do as much research as you don't have to research individual companies. Liquidity is also better. Here is a very good site about put-selling regarding futures:

Options Trading - Early Retirement Now

The strategy in a nutshell I’ve written about this strategy in previous posts, most recently in Part 10 and Part 11. But briefly, here is what I’m doing: Why does this work? Implied Volatility (normally) exceeds Realized Volatility. Of course, the central limit theorem is useful only if the...

earlyretirementnow.com

With the way the financial system is set up, the optimal solution is to buy and hold. Put selling and buy & hold are directionally similar anyways. The richest people in the US are not traders but holders of companies. Steve Ballmer is richer than Bill Gates because the former diamond handed a great company while the latter is more concerned about population reduction. You can easily beat index by employing leverage in buy and hold method as well.

From 07/01/06 - 07/18/24, $10k initial investment with $2.5k added each quarter in SPY would have resulted in $726k. The same amount in SSO would have resulted in $1,568k. Buy and hold. Minimal taxes. Minimal commission. Minimal time. Decent liquidity.

I personally am not invested in any of the investment strategies I talked about here. And I'm not saying you should change. But keep an open mind.

Thank you for your thoughts.

Believe it or not, these are the exact same things I've thought long and hard about. And every now and then I revisit these topics again and again.

I'm going to try to explain how I've come to the conclusion to do what I'm currently doing after contemplating over the topics you mentioned. I'm going to tackle each topic one by one.

TAXES:

Yes. I agree. Short term capital gains is painful. But you're actually not doing a apples to apples comparison. The long term buy and hold investor also EVENTUALLY pays taxes. A person like me whose worth 2 million at age 35, likely will have a considerably large net worth when I'm in my 60s. So my assumption is I'll likely remain a high income tax bracket person - hence likely a 20% capital gains tax rate. NIIT tax, state income tax you regardless pay on long term capital gains. But, I'd still pay 20% capital gains tax as a buy and hold investor (based on current laws and brackets - may change in the future who knows). So the difference between my short term capital gains tax and long term capital gains tax rate in fact is only 17%. Lets say increased risk and leverage lets me get ~ 20% annual return vs SPY 11% average annual return. The 20% return after accounting for an extra 17% tax (37% short term capital gains rate vs 20% long term capital gains rate) is essentially 16.6 vs 11. The remaining taxes paid are the same for each. So you can't compare a post tax return in one scenario vs a pre-tax return in the other scenario. While taxes definitely eat up a traders returns, but even long term capital gains taxes are substantial. In fact several congressmen are attempting to change the long term capital gains tax rate to the income tax rate for wealthy individuals as well - So I don't feel super confident about the future rate being 20% 35-40 years later.

If you actually do the math, if something is taxed every year vs something that is taxed 20 years later - as long as the tax rate is the same, both investments end up the same. So, $100 invested every month growing at 8% for 20 years (with 20% paid to the tax man) is the same as $100 invested every month growing at 10% for 20 years and then paying 20% on the eventual capital. Both are identical. So - the only difference is an extra 17% and as long as I have a 117% return of the total return of my benchmark (which is actually not SPY - my personal benchmark is a target date fund), then my return is superior despite added taxes. Unfortunately Etrade only shows the last 3 years which is now excluding my first year of options trading (which was actually a block buster year), but even then I'm far exceeding the 117% goal of beating my benchmark (2055 target date fund by vanguard). My benchmark is a target date fund because I'd be invested in a 3 fund portfolio if I wasn't doing options. I will not be 100% VTI/SPY. I believe anyone who is 100% VTI/SPY is ignoring current US valuations and has recency bias. My return has been 4x my personal benchmark in 3 years even after accounting for the extra 17%. So the extra 17% doesn't bother me.

Lets talk about Futures. Granted I only have a vague understanding of futures. But my understanding is that futures allows for 100x leverage. Selling naked puts whereas allows for 10x leverage on things like IWM, SPY, RUT, SPX, QQQ etc. I don't even come close to fully utilizing naked puts leverage let alone ever consider going 100x leverage. The other thing I really really don't like is the fact that futures markets are barely ever closed. I can't imagine the anxiety I'd feel if the market was open 18 hours a day. My sleep quality would worsen, I'd be watching the markets a lot more, especially when markets would be going down, I'd have a lot more time to react in a detrimental manner. So I just don't do it. Yes, you get 1256 tax treatment and get 60% of your profits treated as long term capital gains - BUT I dont need futures for that. I can trade RUT, SPX, XSP options and have the EXACT SAME 1256 tax treatment and have 60% of my short term capital gains treated as long term gains. In fact, my first entire year of trading options was ONLY trading RUT. That's it.

But after A LOT of thinking and several times re-visiting the topic, I moved away from RUT to higher volatility things like EWZ, ARKK, TAN, KBE, KRE, JETS, FXI, and some hand picked beaten down single stocks with fortress balance sheets, earnings, and/or assets (MPW, LYFT, PYPL, META, PINS, PAYC, SQ). And here's the math behind this decision - Like I said there's a 17% tax difference between short term capital gains vs long term capital gains. If I did Futures OR SPX/RUT/XSP options, that 17% difference is now 10.2% since 60% of capital gains will get taxed long term while the remaining is still taxed at short term. So, as long as I can get 110.2% or higher return than trading SPX/RUT then I'm still ahead of doing 1256 contracts.

So - I'll show you what I need to get a 2% monthly return for SPX vs something more volatile.

So - I'd have to sell 13 August 19th contracts for a strike of $5100 (7.6% below todays price) to get $14500 of premium in 31 days. The leverage on this position is RIDICULOUS. 10X. Highly highly highly leveraged. 13 contracts on SPX with strike of 5100 has a theoretic maximum loss of 510000 x 13 = 6.6M. The above trade will use 660k of buying power. SPY has had weeks where it has dropped 5+ percent in a week. It has in fact had a few 10% drop days as well - 1 10% down week will completely wipe me out. Margin maintenance call. 6 figure losses. Massive wipe out from the leverage.

Lets compare that to MPW. A stock backed by real estate values that has time and time again showed that the portfolio assets are valuable when sold.

To get a 2% return from MPW, I'd have to sell 1300 contracts for $3.5 strike (todays price $4.74 - so 26% below todays price) with a expiration 28 days from now. This trade gets me 14300 premium, uses very minimal leverage, uses a buying power of $310k (half the buying power of the above trade), and the maximum theoretical loss is 441k. So considerably lower leverage. Plus being 26% below todays price means that if it dropped 10-15% tomorrow, Its still a salvageable trade and I'm maybe losing 20K-30k on a negative 10% day rather than 20% of my networth if SPX lost 10% in a week.

Yes there is single stock risk, but do it with 5-10 companies and a bunch of ETFs and you mitigate that risk. With significantly better return per unit buying power used, i've come to the conclusion of just trading the things I trade and paying the extra tax because I believe I will get a better return, while using less leverage through trading more volatile things. To me less leverage is less risk even if its trading something more volatile.

And I say the above after literally doing 1 full year of RUT only and enjoying the 1256 tax law.

Commissions:

I only pay 15 cents a contract vs 99% of brokerages charging 65 cents a trade. My trading costs aren't actually bad. It's a negotiated rate with etrade.

Also, I signed up for an account with public.com as a backup brokerage. They don't have full naked puts yet, but they will roughly pay me 18 cents per contract instead of me paying them per contract. They will essentially share 50% of their order flow revenue. Right now they just have cash covered positions. But yeah...Not only do they have $0 comissions, but they share 50% of their order flow revenue which is 18 cents a contract on average.

Time:

Yeah it takes time. Not for everyone. I enjoy it though. I like dabbling in things. I've started 3-4 failed businesses, I've set up a couple of ecommerce stores, ive tried drop shipping, ive imported stuff from china in bulk and sold on ebay, i've attempted etsy stores - THIS AND SYNDICATION REAL ESTATE HAS BEEN MY ONLY SIDE GIG/HOBBY THAT HAS ACTUALLY MADE MEANINGFUL MONEY. I've spent so much time on other ventures and failed, this is the only thing that has reliably been successful. If I'm not doing this, I'll probably be looking through bizbuysell.com or flippa.com to buy a business or a website. I enjoy this kind of mental stimulation. Instead of me wasting time on a failing venture, at least my hobby makes money that I genuinely enjoy. But if I'm not doing this, I'll be dabbling in something else which is historically less likely to be successful based on how I've done in the past with business ventures.

Liquidity:

I don't trade things with low liquidity. The bid ask gap of low liquidity positions have been very painful in the past. If I do trade something with low liquidity, its almost always a very small meaningless position. The larger positions (>100+ contracts) are always going to be highly liquid things.

Buy and hold:

Yeah...I know. If I pick a NVDA or AAPL at the right stage and early enough then I would never ever come close to those returns. But I think I will beat the return of a buy and hold investor who is indexed in 60% US stocks and 40% International stocks over a long term. That's what I would be invested in if I wasn't doing options. So...that's the benchmark I compare myself with.

Hopefully that explains what I do and why I do it. The tax question comes up again and again in my head. It's a very valid question. I think once I have 3-4M in assets, a large part of my portfolio will start going back to indexing and some income funds like JEPI/JEPQ even. My appetite for risk is definitely decreasing as I'm worth more.

 

[JacobMcCandles]

TAXES:

Yes. I agree. Short term capital gains is painful. But you're actually not doing a apples to apples comparison. The long term buy and hold investor also EVENTUALLY pays taxes. A person like me whose worth 2 million at age 35, likely will have a considerably large net worth when I'm in my 60s. So my assumption is I'll likely remain a high income tax bracket person - hence likely a 20% capital gains tax rate. NIIT tax, state income tax you regardless pay on long term capital gains. But, I'd still pay 20% capital gains tax as a buy and hold investor (based on current laws and brackets - may change in the future who knows). So the difference between my short term capital gains tax and long term capital gains tax rate in fact is only 17%. Lets say increased risk and leverage lets me get ~ 20% annual return vs SPY 11% average annual return. The 20% return after accounting for an extra 17% tax (37% short term capital gains rate vs 20% long term capital gains rate) is essentially 16.6 vs 11. The remaining taxes paid are the same for each. So you can't compare a post tax return in one scenario vs a pre-tax return in the other scenario. While taxes definitely eat up a traders returns, but even long term capital gains taxes are substantial. In fact several congressmen are attempting to change the long term capital gains tax rate to the income tax rate for wealthy individuals as well - So I don't feel super confident about the future rate being 20% 35-40 years later.

If you actually do the math, if something is taxed every year vs something that is taxed 20 years later - as long as the tax rate is the same, both investments end up the same. So, $100 invested every month growing at 8% for 20 years (with 20% paid to the tax man) is the same as $100 invested every month growing at 10% for 20 years and then paying 20% on the eventual capital. Both are identical. So - the only difference is an extra 17% and as long as I have a 117% return of the total return of my benchmark (which is actually not SPY - my personal benchmark is a target date fund), then my return is superior despite added taxes. Unfortunately Etrade only shows the last 3 years which is now excluding my first year of options trading (which was actually a block buster year), but even then I'm far exceeding the 117% goal of beating my benchmark (2055 target date fund by vanguard). My benchmark is a target date fund because I'd be invested in a 3 fund portfolio if I wasn't doing options. I will not be 100% VTI/SPY. I believe anyone who is 100% VTI/SPY is ignoring current US valuations and has recency bias. My return has been 4x my personal benchmark in 3 years even after accounting for the extra 17%. So the extra 17% doesn't bother me.

I'm actually somewhat impressed by the logic of arguing that paying 85% (20% vs. 37%) more in taxes is actually preferable. And, that's with the caveat that you actually significantly outperform the S&P 500 over the long term.

I think we can agree that current taxes are a known and future taxes are an unknown but I suspect the tax rates may change several times (both short term and long term capital gains) over the course of our lives.

 

[cyanide12345678]

I'm actually somewhat impressed by the logic of arguing that paying 85% (20% vs. 37%) more in taxes is actually preferable. And, that's with the caveat that you actually significantly outperform the S&P 500 over the long term.

I think we can agree that current taxes are a known and future taxes are an unknown but I suspect the tax rates may change several times (both short term and long term capital gains) over the course of our lives.

I don’t let the tax tail wag the dog.

The out performance isn’t free. Bigger risk, higher reward.

 

[cyanide12345678]

I'm actually somewhat impressed by the logic of arguing that paying 85% (20% vs. 37%) more in taxes is actually preferable. And, that's with the caveat that you actually significantly outperform the S&P 500 over the long term.

I think we can agree that current taxes are a known and future taxes are an unknown but I suspect the tax rates may change several times (both short term and long term capital gains) over the course of our lives.

And i also agree. Current tax rates may be lower. The wealthy are probably going to start getting taxed a lot more in the future - depending on how many future democrat party governments we get.

There’s already discussions about wealthy people having long term capital gains taxed at income tax rate.

Heck there’s discussions about taxing unrealized capital gains -_-

So yeah… i mean i guess I’ll keep paying my short term gains for now

 

[JacobMcCandles]

And i also agree. Current tax rates may be lower. The wealthy are probably going to start getting taxed a lot more in the future - depending on how many future democrat party governments we get.

There’s already discussions about wealthy people having long term capital gains taxed at income tax rate.

Heck there’s discussions about taxing unrealized capital gains -_-

So yeah… i mean i guess I’ll keep paying my short term gains for now

It looks like Biden's proposal would tax long term capital gains over $1M at ordinary income tax rates. Again, a proposal is a long ways from legislation. Do you expect to have $1M in retirement income? I'm pacing pretty well and I don't. Until something changes, I'll defer the taxes as long as possible. And if something changes then I'll likely continue to defer because the odds are high it'll change again.

 

[cyanide12345678]

It looks like Biden's proposal would tax long term capital gains over $1M at ordinary income tax rates. Again, a proposal is a long ways from legislation. Do you expect to have $1M in retirement income? I'm pacing pretty well and I don't. Until something changes, I'll defer the taxes as long as possible. And if something changes then I'll likely continue to defer because the odds are high it'll change again.

I think I’ll have a lot of income. Its hard to envision a high 8 figure net worth today, but if future performance of the markets is similar to the past, then theoretically there’s a world possible where i have massive wealth.

For example:

I’m 35, my wife is 31. Today my exact net worth is at 2.09M. I’m exactly 5 years out of residency. 5 years ago my net worth was negative 110k. In 5 years we’ve had a 2.2M swing.

Assuming my wife and i work another 5 years at a similar pace and our combined income remains around 600-650k, and assuming some of our assets show some modest appreciation in 5 years. Then theoretically we should be at 4M of investments or more in 5 yrs at age 40 for me.

Now if we just go coast fire after and together we bring in just enough to cover expenses. So let’s say we drop our incomes to 200k combined and work 4-5 days a month each. Even in that situation, if past performance becomes future performance, then let’s say our investments double through compound growth every 8 years (9 percent annualized return).

so, to make math easy, from age 40 to 72 this is what things would look like assuming that not a penny is added through income and not a penny of assets is used for expenses:

Age 40: 4M
Age 48: 8M
Age 56: 16M
Age 64: 32M
Age 72: 64M

Even dividend income at that point of 2% from index funds would be over 1M, and this doesn’t even account for mandatory withdrawals from 401k accounts.

So on paper, i see that possibility of having a large income in my 70s and beyond.

It is hard to picture having 50M plus in 35-40 years. But compound growth says it’s a likely scenario.

 

[JacobMcCandles]

I think I’ll have a lot of income. Its hard to envision a high 8 figure net worth today, but if future performance of the markets is similar to the past, then theoretically there’s a world possible where i have massive wealth.

For example:

I’m 35, my wife is 31. Today my exact net worth is at 2.09M. I’m exactly 5 years out of residency. 5 years ago my net worth was negative 110k. In 5 years we’ve had a 2.2M swing.

Assuming my wife and i work another 5 years at a similar pace and our combined income remains around 600-650k, and assuming some of our assets show some modest appreciation in 5 years. Then theoretically we should be at 4M of investments or more in 5 yrs at age 40 for me.

Now if we just go coast fire after and together we bring in just enough to cover expenses. So let’s say we drop our incomes to 200k combined and work 4-5 days a month each. Even in that situation, if past performance becomes future performance, then let’s say our investments double through compound growth every 8 years (9 percent annualized return).

so, to make math easy, from age 40 to 72 this is what things would look like assuming that not a penny is added through income and not a penny of assets is used for expenses:

Age 40: 4M
Age 48: 8M
Age 56: 16M
Age 64: 32M
Age 72: 64M

Even dividend income at that point of 2% from index funds would be over 1M, and this doesn’t even account for mandatory withdrawals from 401k accounts.

So on paper, i see that possibility of having a large income in my 70s and beyond.

It is hard to picture having 50M plus in 35-40 years. But compound growth says it’s a likely scenario.

What’s $1M today worth in 40 years? And you expect to work (even just to cover expenses) until 72? Now we’re getting off track. Regardless, your reasoning for wanting to pay 85% more taxes today is very flawed.

 

[EctopicFetus]

I think I’ll have a lot of income. Its hard to envision a high 8 figure net worth today, but if future performance of the markets is similar to the past, then theoretically there’s a world possible where i have massive wealth.

For example:

I’m 35, my wife is 31. Today my exact net worth is at 2.09M. I’m exactly 5 years out of residency. 5 years ago my net worth was negative 110k. In 5 years we’ve had a 2.2M swing.

Assuming my wife and i work another 5 years at a similar pace and our combined income remains around 600-650k, and assuming some of our assets show some modest appreciation in 5 years. Then theoretically we should be at 4M of investments or more in 5 yrs at age 40 for me.

Now if we just go coast fire after and together we bring in just enough to cover expenses. So let’s say we drop our incomes to 200k combined and work 4-5 days a month each. Even in that situation, if past performance becomes future performance, then let’s say our investments double through compound growth every 8 years (9 percent annualized return).

so, to make math easy, from age 40 to 72 this is what things would look like assuming that not a penny is added through income and not a penny of assets is used for expenses:

Age 40: 4M
Age 48: 8M
Age 56: 16M
Age 64: 32M
Age 72: 64M

Even dividend income at that point of 2% from index funds would be over 1M, and this doesn’t even account for mandatory withdrawals from 401k accounts.

So on paper, i see that possibility of having a large income in my 70s and beyond.

It is hard to picture having 50M plus in 35-40 years. But compound growth says it’s a likely scenario.

Also I don’t know what’s included in your net worth but while the stock market works that way housing which is a huge chunk of many people’s net worth only grows 2-3% per year. If you bought a house today for 1M and put 20% down. You have 200k of your nw in the house. It grows at 3%. That’s another 30k. Plus whatever u pay off the interest. Eventually that growth in 10 years isn’t the 15% u got in year 1. As others mentioned it’s a race vs inflation and as we all know the market isn’t gonna deliver a flat 9% a year.

I do agree with what you did otherwise. My nw has skyrocketed so it’s doable. I think an em doc can get to $10m in real money at retirement assuming discipline. It’s all a balance though. Enjoy life. Die with zero is a solid book.

 

[cyanide12345678]

What’s $1M today worth in 40 years? And you expect to work (even just to cover expenses) until 72? Now we’re getting off track. Regardless, your reasoning for wanting to pay 85% more taxes today is very flawed.

It’s back of the napkin math. Estimations for making math easy.

I also don’t expect to not invest a single penny after age 40 either especially since we will have $0 in day care expenses then.

also if someone is worth 15-20m and they withdraw 200k a year (mortgage paid off and kids independent), then that withdrawal rate is almost nothing in the grand scheme where net worth still grows rapidly.

The reality is simple, if someone hits 4-5M by 40 age. They are going to have a massive portfolio. What that number is, who knows.

You can say that my argument about taxes is flawed. But in the last 4 years, my tax adjusted return is 4X that of a 3 fund boglehead portfolio. So it’s so far been the right choice.

 

[cyanide12345678]

Also I don’t know what’s included in your net worth but while the stock market works that way housing which is a huge chunk of many people’s net worth only grows 2-3% per year. If you bought a house today for 1M and put 20% down. You have 200k of your nw in the house. It grows at 3%. That’s another 30k. Plus whatever u pay off the interest. Eventually that growth in 10 years isn’t the 15% u got in year 1. As others mentioned it’s a race vs inflation and as we all know the market isn’t gonna deliver a flat 9% a year.

I do agree with what you did otherwise. My nw has skyrocketed so it’s doable. I think an em doc can get to $10m in real money at retirement assuming discipline. It’s all a balance though. Enjoy life. Die with zero is a solid book.

Out of the 2.09M - 1.9m is investments.

We don’t have that much equity in our home, did 0% down physician loan.

The 1.9M also consists of 700k of syndications. All in all, that’s my basis in them, while some are under performing (4 under performing out of 24), a large majority are performing well, there’s no way for me to value them in their current state after 3 or so years of investment, so who knows what the value of that real estate portfolio currently is. It might be 800-900k and i just don’t know it. I just keep assuming it’s the same as my cost basis.

 

[JacobMcCandles]

You can say that my argument about taxes is flawed. But in the last 4 years, my tax adjusted return is 4X that of a 3 fund boglehead portfolio. So it’s so far been the right choice.

I would have to go back but didn’t you say you’re trailing the S&P 500 on the year? And that’s likely not tax adjusted. And a 3 fund portfolio probably isn’t the best benchmark for a day trader, but again, off topic. I hope it continues to work out well for you but history suggests it will not.

 

[cyanide12345678]

I would have to go back but didn’t you say you’re trailing the S&P 500 on the year? And that’s likely not tax adjusted. And a 3 fund portfolio probably isn’t the best benchmark for a day trader, but again, off topic. I hope it continues to work out well for you but history suggests it will not.

Im a put seller. My upside is actually capped. My downside is mitigated. Very very hard to beat SP500 when it goes on a tear as a put seller with capped upside. I try for fixed 2% return a month, and i have that, 14% in 7 months. Spy just happens to have 18 percent return ytd.

So yes, I’m trailing these last 7 months. But if i zoom back, last year i killed spy. 45-50 percent return last year vs whatever the spy had. The year before that i had 8 percent return vs negative 20 percent of spy. And the year before that i had a very high percent return vs whatever the spy had. Don’t even remember the exact numbers.

It’s sad etrade doesn’t show performance beyond 3 years, in the current 3 years i have 67% return vs 27 percent spy and 15 percent 3 fund portfolio of a 2055 vanguard target fund. A year ago it was something like 110% vs 38 percent spy for the 3 years trailing.

Edit: i put in the current trailing 3 years and the trailing 3 years exactly 1 year ago from july 23 2023. Even with the increased taxes - I’m far far far ahead. As long as i have 1.17 x the return, im ahead. I’m roughly 2x for 4 straight years since being a trader.

 

[DocWinter]

Your generation of docs vs docs who finished residency in the last 5ish years are in different universes.

I look at house prices 10y ago in my area and drool. Salaries have only gone up minimally. It's really wild how expensive everything has gotten.

Fortunately, I grew up dirt poor, so while I'll never reach the 1%er lifestyle you achieved, I feel good.

Congrats on your success.

I feel this.
I'm late thirties. Late start to medical school, finished residency 2 years ago.

My colleagues who have been practicing for some years are all doing excellent. Mortgage 3%. Students loans, if not already paid off of 3%. Big windfalls in real estate. I'm at twice that for mortgage and federal loans.

I bring home about 17K/month, not counting bonuses as W-2, after 401k, taxes, insurance, etc. Wife is SAHM , three young kids. We live comfortably now, not luxuriously and it seems like there's only about 5K/month extra after, and I usually end up putting it towards the debt.

Relatively LCOL however with the kids and paying back the loans, it just seems like a rut. I grew up with very little so it still is great, but there's a part of me that just wishes I could flourish financially, but have no idea how to get there at this pace.

No regrets, but not having kids or an earlier start would make a world of difference

 

[emergentmd]

Your generation of docs vs docs who finished residency in the last 5ish years are in different universes.

I look at house prices 10y ago in my area and drool. Salaries have only gone up minimally. It's really wild how expensive everything has gotten.

Fortunately, I grew up dirt poor, so while I'll never reach the 1%er lifestyle you achieved, I feel good.

Congrats on your success.

Every generation has different disadvantages and advantages. If you have already thrown in the towel, then you have little chance at being one of the more successful ones which is not a bad deal b/c docs making 3-400K/yr is plenty rich/successful.

Wait 10 yrs, some of your contemporaries will have "made" it living in the same era you did. I look back 10 yrs ago working in the pit, and some did alot better than others.

If you continue to compete/work hard, you can/will be highly successful in 10 years.

 

[emergentmd]

I bring home about 17K/month, not counting bonuses as W-2, after 401k, taxes, insurance, etc. Wife is SAHM , three young kids. We live comfortably now, not luxuriously and it seems like there's only about 5K/month extra after, and I usually end up putting it towards the debt.

Relatively LCOL however with the kids and paying back the loans, it just seems like a rut. I grew up with very little so it still is great, but there's a part of me that just wishes I could flourish financially, but have no idea how to get there at this pace.

No regrets, but not having kids or an earlier start would make a world of difference

Right after 2008 RE crash, I was working in the Pit along with my fellow docs. I had 3 young kids and SAHM. I had colleagues in the same boat. Everyone made 400K+, lots of expenses, home prices were not bad and interest rates were low.

The ones that took risks in RE and opening up businesses are sitting pretty. Those who didn't are still in the PIT working full time.

You may not see it now, but there always are opportunities It might not be obvious but prepare when it comes. Save some money, educate yourself, put in alittle work on your days off.

EM docs have a big shovel and time. If you keep telling yourself its too hard, then it will be too hard. If you tell yourself that you can do it, things come much easier. Have patients and educate yourself outside of medicine. People make much less than EM docs and having less free time end up being successful. If they can do it, EM docs can too.

 

[DocWinter]

Right after 2008 RE crash, I was working in the Pit along with my fellow docs. I had 3 young kids and SAHM. I had colleagues in the same boat. Everyone made 400K+, lots of expenses, home prices were not bad and interest rates were low.

The ones that took risks in RE and opening up businesses are sitting pretty. Those who didn't are still in the PIT working full time.

You may not see it now, but there always are opportunities It might not be obvious but prepare when it comes. Save some money, educate yourself, put in alittle work on your days off.

EM docs have a big shovel and time. If you keep telling yourself its too hard, then it will be too hard. If you tell yourself that you can do it, things come much easier. Have patients and educate yourself outside of medicine. People make much less than EM docs and having less free time end up being successful. If they can do it, EM docs can too.

Appreciate that. I'm OBGYN for what it's worth so I have less free days/time to tinker with ideas but it's good to know it can be done. I wouldn't be sad to put in 20 years and have a good career, but I know there's more and I'm looking for more. Thanks for the advice.

 

[anonperson]

I feel this.
I'm late thirties. Late start to medical school, finished residency 2 years ago.

My colleagues who have been practicing for some years are all doing excellent. Mortgage 3%. Students loans, if not already paid off of 3%. Big windfalls in real estate. I'm at twice that for mortgage and federal loans.

I bring home about 17K/month, not counting bonuses as W-2, after 401k, taxes, insurance, etc. Wife is SAHM , three young kids. We live comfortably now, not luxuriously and it seems like there's only about 5K/month extra after, and I usually end up putting it towards the debt.

Relatively LCOL however with the kids and paying back the loans, it just seems like a rut. I grew up with very little so it still is great, but there's a part of me that just wishes I could flourish financially, but have no idea how to get there at this pace.

No regrets, but not having kids or an earlier start would make a world of difference

It seems like a rut because it is. Work, pay down debt, invest, repeat.

With a stay at home wife and 3 kids, you are the sole provider and unless you hit some home run investments, you will be working a decent while especially if you want to help out your kids when they are older.

I'm not knocking it. I'm in the same position ( Urogynecologist who still does some general OBGYN) with a stay at home wife and 2 kids. I will be working another 20 to 30 years if I physically can. If you can find a job without call ( they are out there) then everything becomes much more pleasant.

Enjoy your family, take some vacation. Real estate is not a bad investment opportunity. If you buy actual units then be prepared to deal with the landlord headaches otherwise keep investing into VTI/VTSAX and chill.

 

[AD04]

Short term capital gains is painful. But you're actually not doing a apples to apples comparison. The long term buy and hold investor also EVENTUALLY pays taxes. A person like me whose worth 2 million at age 35, likely will have a considerably large net worth when I'm in my 60s. So my assumption is I'll likely remain a high income tax bracket person - hence likely a 20% capital gains tax rate. NIIT tax, state income tax you regardless pay on long term capital gains. But, I'd still pay 20% capital gains tax as a buy and hold investor (based on current laws and brackets - may change in the future who knows). So the difference between my short term capital gains tax and long term capital gains tax rate in fact is only 17%.

You're overestimating the taxes you pay for long-term buy and hold. You're paying taxes on 100% of your returns with your strategy -- every year. The buy and hold person only pays taxes on realized gains -- such as gains on 4% of assets if he adheres to the the 4% rule. He can sell specific lots to reduce taxable gains. Gains from 96% of unsold assets keep on growing tax free. If the person is particularly savvy, he can borrow against assets instead of selling which would be tax free. He can then choose to sell assets at more favorable times (e.g. after move to FL and retired) to avoid NIIT and state income tax. Or never sell and have assets step up in basis after he dies.

My benchmark is a target date fund because I'd be invested in a 3 fund portfolio if I wasn't doing options. I will not be 100% VTI/SPY. I believe anyone who is 100% VTI/SPY is ignoring current US valuations and has recency bias. My return has been 4x my personal benchmark in 3 years even after accounting for the extra 17%. So the extra 17% doesn't bother me.

How does your return compare if you bought and hold the various stocks and ETFs that you sold puts on? Your method isn't just selling puts, it also involves stock picking.

But after A LOT of thinking and several times re-visiting the topic, I moved away from RUT to higher volatility things like EWZ, ARKK, TAN, KBE, KRE, JETS, FXI, and some hand picked beaten down single stocks with fortress balance sheets, earnings, and/or assets (MPW, LYFT, PYPL, META, PINS, PAYC, SQ). And here's the math behind this decision - Like I said there's a 17% tax difference between short term capital gains vs long term capital gains. If I did Futures OR SPX/RUT/XSP options, that 17% difference is now 10.2% since 60% of capital gains will get taxed long term while the remaining is still taxed at short term. So, as long as I can get 110.2% or higher return than trading SPX/RUT then I'm still ahead of doing 1256 contracts.

I give you props for trying futures. I understand why you moved away from futures if you can get higher after-tax return per $1 of buying power with your strategy.

Yeah it takes time. Not for everyone. I enjoy it though. I like dabbling in things. I've started 3-4 failed businesses, I've set up a couple of ecommerce stores, ive tried drop shipping, ive imported stuff from china in bulk and sold on ebay, i've attempted etsy stores - THIS AND SYNDICATION REAL ESTATE HAS BEEN MY ONLY SIDE GIG/HOBBY THAT HAS ACTUALLY MADE MEANINGFUL MONEY. I've spent so much time on other ventures and failed, this is the only thing that has reliably been successful. If I'm not doing this, I'll probably be looking through bizbuysell.com or flippa.com to buy a business or a website. I enjoy this kind of mental stimulation. Instead of me wasting time on a failing venture, at least my hobby makes money that I genuinely enjoy. But if I'm not doing this, I'll be dabbling in something else which is historically less likely to be successful based on how I've done in the past with business ventures.

Overall, I'm starting to understand more of your psychology. You like to be busy and you like inflows to cash. Surprisingly, you're into JEPI although you correctly talked about the pitfalls of YieldMax ETFs. JEPI has been underperforming SPY.

 

[TooMuchResearch]

I disagree that the that the right opportunity is determined being a Monday morning QB. Successful people can see what is more likely to work. Those who can't are just throwing darts. You only have control over how you see opportunities, working hard, and being moral in your dealings.

Failing is a always a part of any new venture. I have always said this from RE and businesses; the risks are real. It is the people that educate themselves to mitigate risks that separates those that are successful from the squirrel. If you are opening a FSER and have no idea what you are doing, then you are a squirrel. If you educate yourself, find the right site, know how to run one then you are not a squirrel. Same with RE, there are always buying opportunities but education is the key.

Yes, I have and will continue to make mistakes but it is like baseball. Batting .300 is all it takes and when you are an EM doc with money/time, one success sometimes is all you need. It is not for everyone and its completely fine to work a W2 job until you retire socking money in the stock market. I am just giving my input on other options to be successful.

I will tell you my squirrel missing nut story. Lost 6 figures in a renewable energy venture. I have done terribly in the stock market overall because I chase home runs rather than singles. I would be much more successful if I just threw it in the S&P, but my risk tolerance doesn't allow me to do this. Failure doesn't bother me. I expect failure going to any new project. Just put a large chunk of $$ into a crypto start up with essentially zero vetting; just invested because I know smarter people who did plus the CEO appears to be moral. Just put $$ into a RE flip with very little vetting; just went with it b/c the flipper is a hard worker. My lost "nuts" could continue to grow but I typically bet on the Man rather than the business.

I have an idea for a cash pay clinic that doesn't really exist in my area. I haven't found an exact replica of what I want to do. I just have trouble taking that leap to trying something out of the box, but after reading your posts I think I have to do it. I think I can start slow enough that I have appointments in my off days and see how it goes. I wouldn't transition out of my full time SDG position unless things really took off. I just need to figure out how to run it lean so I don't go broke if it falls flat.

 

[Splenda88]

My monthly expense is probably ~12k now (including 2.5k student loan payment). I probably will never reach FIRE.

My spouse is a big spender. I am in Hawaii right now spending ~17k on 1 week vacation for only 4 of us.

If I remember from previous threads, @emergentmd has been a physician for ~20 yrs and his net worth 12-13 mil. His net worth is great but it's not extraordinary.

If you have been investing 10k per month in the S&P500 in the past 20 yrs, that will translate to 7.7 mil. Add your primary residence and another investment property to that, you have a net worth of 9+ mil.

If @emergentmd net worth is >15 mil, I will consider that remarkable.

 

[Splenda88]

Is there a huge difference in lifestyle between a family of 4 whose net worth of 5 mil vs. one with net worth of 10 mil anyway?

 

[sloh]

Is there a huge difference in lifestyle between a family of 4 whose net worth of 5 mil vs. one with net worth of 10 mil anyway?

Absolutely in HCOL city/suburb

 

[Splenda88]

Absolutely in HCOL city/suburb

Yeah, I actually can see that for places like NYC, LA, SanDiego, San Francisco, Boston, DC etc... But for LCOL/MCOL areas I am not sure the lifestyle would be significantly different

 

[cyanide12345678]

Yeah, I actually can see that for places like NYC, LA, SanDiego, San Francisco, Boston, DC etc... But for LCOL/MCOL areas I am not sure the lifestyle would be significantly different

In a way it also limits how people live as well.

I mean if i had 10m plus, id be a lot more willing to live in California.

The only reason i don’t want to live there is cost of living.

Though i think there’s going to be a difference between 5 and 10M even in the mid west, but most likely not much of a difference between 10 and 20m.

5M if you’re extravagant enough is easier to blow off. Buy a boat, a couple luxury cars, a luxury household, a Florida vacation home, and you’re done 😂

 

[Splenda88]

In a way it also limits how people live as well.

I mean if i had 10m plus, id be a lot more willing to live in California.

The only reason i don’t want to live there is cost of living.

Though i think there’s going to be a difference between 5 and 10M even in the mid west, but most likely not much of a difference between 10 and 20m.

5M if you’re extravagant enough is easier to blow off. Buy a boat, a couple luxury cars, a luxury household, a Florida vacation home, and you’re done 😂

I am operating under the assumption that a regular home (2000-2400 sqft home) in good school district should be good enough for most people to live in.

 

[gutonc]

I am operating under the assumption that a regular home (2000-2400 sqft home) in good school district should be good enough for most people to live in.

That is a reasonable assumption. Just not one shared by a lot of people.

 

[EctopicFetus]

I mean the next threshold of wealth is always the better one. For many a NW of 5 is a ton, for those with $5M 10M is “what they need”, for those with 10 they want 20. Hedonistic treadmill. There is always more, bigger, better nicer.

Personal finance is personal. I felt a NW of $4M was what i needed to be FIRE. As I approached that it became $4M in liquid/cash excluding home, then $5M, then $10M liquid.

What I havent figured out for myself is how much do i really need. Thats a million dollar question for all of us. That number will vary based on what we want our retirement to look like, how old we are when we retire, number of kids, what we expect to do for them. Perhaps also helping our parents or siblings financially as well.

There is no shortage of money we can find a way to spend. My wife recently showed me some National Geographic vacation which was like 100K per person. I think it was 3 weeks long. Hard to imagine people spend that kind of money on a 21 day trip.. for a couple it is 10k a day…. I didnt bother to look at what was included.

I’m a simple person. I literally could go to a beach and bring a cooler with food and drinks and be about as content as you could imagine. Ideally have my kids or friends there too so i can enjoy some water sports/ activities and throw balls around. Legit pretty cheap. I dont need more.

That being said i like some luxury.. frankly i like a lot of it. But im too cheap to spend..

 

[cyanide12345678]

I am operating under the assumption that a regular home (2000-2400 sqft home) in good school district should be good enough for most people to live in.

Man….2000-2400 sqft is small.

I’m fairly frugal, by no means we live extravagantly, but when we started house hunting, even 3000-4000 sqft seemed cramped. If we had to, we could live in 2000 sqft, but we wouldn’t want to.

If you had 5M dollars, you should atleast be able to afford more square footage.

 

[Splenda88]

Man….2000-2400 sqft is small.

I’m fairly frugal, by no means we live extravagantly, but when we started house hunting, even 3000-4000 sqft seemed cramped. If we had to, we could live in 2000 sqft, but we wouldn’t want to.

If you had 5M dollars, you should atleast be able to afford more square footage.

People who live in VHCOL areas might disagree.

 

[cyanide12345678]

People who live in VHCOL areas might disagree.

They can disagree all they want, but it’s still small.

It’s a compromise they make because they don’t have unlimited money. And unlimited is truly what they need to afford a large home in a vhcol area.

Most people with unlimited money, other than Warren buffet, do not live in 2000 sqft.

Edit: if someone had the choice to have a 2000 sqft 3 bed 2 bath home vs a 5 bed 5 bath home with a home gym, home theater, large entertainment area, great back yard, maybe even a pool - most would pick the latter if money didn’t matter

 

[Splenda88]

They can disagree all they want, but it’s still small.

It’s a compromise they make because they don’t have unlimited money. And unlimited is truly what they need to afford a large home in a vhcol area.

Most people with unlimited money, other than Warren buffet, do not live in 2000 sqft.

Edit: if someone had the choice to have a 2000 sqft 3 bed 2 bath home vs a 5 bed 5 bath home with a home gym, home theater, large entertainment area, great back yard, maybe even a pool - most would pick the latter if money didn’t matter

Only in the US and probably Australia that 2400 sqft home is considered small.

2400 would be a decent side home in almost ALL industrialized countries

I agree with your last statement, but one is not at a level to say money does not matter with only 5 mil net worth.

 

[emergentmd]

5M NW is typically not that much spending $$. Its not like they have 5M in the bank getting 5% or 250K to spend a year. They have $$$ in their home, IRAs, etc. Not many people have 1M in liquidity. I typically carry only about 1-300K in cash.

If a doc has 5M net worth at age 45 and 3 teenage kids, they still have to work. even with 1M in cash, it burns fast with teenagers then college.

I know docs who prob have 5M NW but most are in RE and Retirement which is not easy to access. If they wanted to pay for a 50K car, many have to take a loan.

 

[wamcp]

Who knows, the world could end tomorrow, a nuclear apocalypse. All that being said, very smart people have failed to time the market.. The other counter is the move to index investing means money will continue to flow into the sp500 stocks. Maybe in a decade it is down. I wouldn't take the bet. What is missed is even if the sp500 is down 10% then you as an investor are tracking the majority of society so relatively you are in the same spot.

@cyanide12345678 has a point here.

I have never been able to accept this consensus thought about the US stock market.

Especially the idea that “well if the market drops a lot then we’re all screwed anyway, it would be the least of your worries, like it’s probably an asteroid that kills civilization or a nuclear war etc”

No. Just no. There are infinitely more possibilities of geopolitical events that destroy the stock market returns over a prolonged period but don’t end civilization.

The most likely and “well known” black swan that may take place within the next few years is the China-Taiwan flashpoint.

In any scenario where either China invades/attacks, blockades or peacefully forces Taiwan to give up and join the CCP, the American stock market will lose.

The shock to the economy cannot be understated. Without the foundries and advanced chip production capabilities pretty much only found in Taiwan and impossible to replicate at scale elsewhere for decades, your favorite megacap stocks holding up SP500 returns for the past decades will collapse. AMZN dies. MSFT is done. AAPL, NVDA gets wiped. The most ridiculous valued stock on earth, TSLA, is gone.

Without easy supply of chips, you can’t manufacture affordable modern cars or smartphones. Datacenters cannot be replaced. Remember that everything runs on the cloud these days. Say good bye to the tech companies that have been the pillar of market returns for decades.

This is of course not to mention the extraordinary sanctions and cut in global trade from the fallout of all this. Cheap chinese goods are going to stop flowing.

Inflation will skyrocket at the same time that jobs are lost. This is NOT a covid event where you can just print some money by the Fed to rescue the stock market…because the Taiwan chip supply chain is gone, not simply paused.

What i’m trying to say here is that openly choosing to be complacent and trusting of the passive investing consensus is gross negligence of your own household’s well being and survival. Saying it’s ok to lose money for decades just because the average person would also lose with you is meaningless. You live a personal and individual life as does your family, you are not a statistical average. Saying that the market will always do well “long term” is nonsensical because our lifespans are incredibly short and finite. You can only miserably work for so many years in a career before you have to physically retire. “Long term” could easily mean 50 or 70 years in the future to see any real return in a market.

Take control and learn as much as you can about the market or other investing areas of interest. What i talk about with the china taiwan risk is a real probability event within the next few years. Xi jinping is getting old and he wants that Taiwan legacy. Research what is your strategy if this becomes a possibility. A china military staging force and build up to blockade or attack Taiwan is easily seen by satellites and other intel just like how Biden admin saw Russia about to invade Ukraine months in advance. So you WILL know when this becomes a likely geopolitical event to come. Prepare yourself, what will you do? Go all in cash? Treasuries? Buy put hedges? Buy defense stocks or INTC? Domestic companies that benefit from China trade cut?

The wrong answer is to do nothing but buy and hold the index funds…take control of your future.

 

[emergentmd]

This is one advantage of RE. People need a place to live. If everything hits the fan, people still will pay something in rent.

Diversify is the key. I think after this year, I will put very little into investing and build cash. If everything craters, I will still live a decent life.

There will be another Tech crash. Maybe not 2000 bad but a 20-30% pullback will happen.

 

[anonperson]

@cyanide12345678 has a point here.

I have never been able to accept this consensus thought about the US stock market.

Especially the idea that “well if the market drops a lot then we’re all screwed anyway, it would be the least of your worries, like it’s probably an asteroid that kills civilization or a nuclear war etc”

No. Just no. There are infinitely more possibilities of geopolitical events that destroy the stock market returns over a prolonged period but don’t end civilization.

The most likely and “well known” black swan that may take place within the next few years is the China-Taiwan flashpoint.

In any scenario where either China invades/attacks, blockades or peacefully forces Taiwan to give up and join the CCP, the American stock market will lose.

The shock to the economy cannot be understated. Without the foundries and advanced chip production capabilities pretty much only found in Taiwan and impossible to replicate at scale elsewhere for decades, your favorite megacap stocks holding up SP500 returns for the past decades will collapse. AMZN dies. MSFT is done. AAPL, NVDA gets wiped. The most ridiculous valued stock on earth, TSLA, is gone.

Without easy supply of chips, you can’t manufacture affordable modern cars or smartphones. Datacenters cannot be replaced. Remember that everything runs on the cloud these days. Say good bye to the tech companies that have been the pillar of market returns for decades.

This is of course not to mention the extraordinary sanctions and cut in global trade from the fallout of all this. Cheap chinese goods are going to stop flowing.

Inflation will skyrocket at the same time that jobs are lost. This is NOT a covid event where you can just print some money by the Fed to rescue the stock market…because the Taiwan chip supply chain is gone, not simply paused.

What i’m trying to say here is that openly choosing to be complacent and trusting of the passive investing consensus is gross negligence of your own household’s well being and survival. Saying it’s ok to lose money for decades just because the average person would also lose with you is meaningless. You live a personal and individual life as does your family, you are not a statistical average. Saying that the market will always do well “long term” is nonsensical because our lifespans are incredibly short and finite. You can only miserably work for so many years in a career before you have to physically retire. “Long term” could easily mean 50 or 70 years in the future to see any real return in a market.

Take control and learn as much as you can about the market or other investing areas of interest. What i talk about with the china taiwan risk is a real probability event within the next few years. Xi jinping is getting old and he wants that Taiwan legacy. Research what is your strategy if this becomes a possibility. A china military staging force and build up to blockade or attack Taiwan is easily seen by satellites and other intel just like how Biden admin saw Russia about to invade Ukraine months in advance. So you WILL know when this becomes a likely geopolitical event to come. Prepare yourself, what will you do? Go all in cash? Treasuries? Buy put hedges? Buy defense stocks or INTC? Domestic companies that benefit from China trade cut?

The wrong answer is to do nothing but buy and hold the index funds…take control of your future.

All reasonable points but if China invades Taiwan, the ramifications will be worldwide and not just the United States. I'm pretty sure the Brazilian stock market will eat it as well also but knows how things will respond.

If actively managed funds with an army of quantitative analysts, AI, war chests of millions, insider knowledge , likely political connections can't consistently beat a broad market fund, what makes any of us think we can?

No one can predict the future. A few years ago, people were pulling out of the market due to Covid or who was president etc and lost out on thousands/millions of dollars.

I posted a graphic previously of the top and bottom performing sectors year to year. It was basically a random plot. No one can predict year to year which sector will be a winner and which a loser

Now if I could follow Paul and Nancy Pelosis trades in real time, then I would probably just do that.

 

[Splenda88]

5M NW is typically not that much spending $$. Its not like they have 5M in the bank getting 5% or 250K to spend a year. They have $$$ in their home, IRAs, etc. Not many people have 1M in liquidity. I typically carry only about 1-300K in cash.

If a doc has 5M net worth at age 45 and 3 teenage kids, they still have to work. even with 1M in cash, it burns fast with teenagers then college.

I know docs who prob have 5M NW but most are in RE and Retirement which is not easy to access. If they wanted to pay for a 50K car, many have to take a loan.

Only a physician with 15 mil net worth would say something like that.

It's plenty even if 2 mil is JEPI (7-8% dividend)... that is 140-160k/yr spending $$

 

[GassYous]

5M NW is typically not that much spending $$. Its not like they have 5M in the bank getting 5% or 250K to spend a year. They have $$$ in their home, IRAs, etc. Not many people have 1M in liquidity. I typically carry only about 1-300K in cash.

If a doc has 5M net worth at age 45 and 3 teenage kids, they still have to work. even with 1M in cash, it burns fast with teenagers then college.

I know docs who prob have 5M NW but most are in RE and Retirement which is not easy to access. If they wanted to pay for a 50K car, many have to take a loan.

You can't do anything with five, Greg. Five's a nightmare. Can't retire, not worth it to work.

 

[wamcp]

All reasonable points but if China invades Taiwan, the ramifications will be worldwide and not just the United States. I'm pretty sure the Brazilian stock market will eat it as well also but knows how things will respond.

If actively managed funds with an army of quantitative analysts, AI, war chests of millions, insider knowledge , likely political connections can't consistently beat a broad market fund, what makes any of us think we can?

No one can predict the future. A few years ago, people were pulling out of the market due to Covid or who was president etc and lost out on thousands/millions of dollars.

I posted a graphic previously of the top and bottom performing sectors year to year. It was basically a random plot. No one can predict year to year which sector will be a winner and which a loser

Now if I could follow Paul and Nancy Pelosis trades in real time, then I would probably just do that.

Nobody can predict the future but you can estimate probabilities of an event and its assumed impacts/significance, and react or strategize accordingly.

 

[AD04]

@cyanide12345678 has a point here.

I have never been able to accept this consensus thought about the US stock market.

Especially the idea that “well if the market drops a lot then we’re all screwed anyway, it would be the least of your worries, like it’s probably an asteroid that kills civilization or a nuclear war etc”

No. Just no. There are infinitely more possibilities of geopolitical events that destroy the stock market returns over a prolonged period but don’t end civilization.

The most likely and “well known” black swan that may take place within the next few years is the China-Taiwan flashpoint.

In any scenario where either China invades/attacks, blockades or peacefully forces Taiwan to give up and join the CCP, the American stock market will lose.

The shock to the economy cannot be understated. Without the foundries and advanced chip production capabilities pretty much only found in Taiwan and impossible to replicate at scale elsewhere for decades, your favorite megacap stocks holding up SP500 returns for the past decades will collapse. AMZN dies. MSFT is done. AAPL, NVDA gets wiped. The most ridiculous valued stock on earth, TSLA, is gone.

Without easy supply of chips, you can’t manufacture affordable modern cars or smartphones. Datacenters cannot be replaced. Remember that everything runs on the cloud these days. Say good bye to the tech companies that have been the pillar of market returns for decades.

This is of course not to mention the extraordinary sanctions and cut in global trade from the fallout of all this. Cheap chinese goods are going to stop flowing.

Inflation will skyrocket at the same time that jobs are lost. This is NOT a covid event where you can just print some money by the Fed to rescue the stock market…because the Taiwan chip supply chain is gone, not simply paused.

What i’m trying to say here is that openly choosing to be complacent and trusting of the passive investing consensus is gross negligence of your own household’s well being and survival. Saying it’s ok to lose money for decades just because the average person would also lose with you is meaningless. You live a personal and individual life as does your family, you are not a statistical average. Saying that the market will always do well “long term” is nonsensical because our lifespans are incredibly short and finite. You can only miserably work for so many years in a career before you have to physically retire. “Long term” could easily mean 50 or 70 years in the future to see any real return in a market.

Take control and learn as much as you can about the market or other investing areas of interest. What i talk about with the china taiwan risk is a real probability event within the next few years. Xi jinping is getting old and he wants that Taiwan legacy. Research what is your strategy if this becomes a possibility. A china military staging force and build up to blockade or attack Taiwan is easily seen by satellites and other intel just like how Biden admin saw Russia about to invade Ukraine months in advance. So you WILL know when this becomes a likely geopolitical event to come. Prepare yourself, what will you do? Go all in cash? Treasuries? Buy put hedges? Buy defense stocks or INTC? Domestic companies that benefit from China trade cut?

The wrong answer is to do nothing but buy and hold the index funds…take control of your future.

Are you hedged now? If so, how are you hedged? All the hedges you listed have a very good chance of underperforming SPY.

S&P 500 is too entrenched in the US society. It's as entrenched as Medicare and Social Security. It is pretty much welfare for the middle and upper class. And thus it cannot fail. Soro's reflexivity comes into play. People up top will make sure S&P 500 doesn't crash to prevent the system from crumbling. Don't underestimate the ingenuity of bankers.

If China takes over Taiwan and cripples US mega corporations as much as you theorize, what makes you think US won't let China have Taiwan and negotiate a deal to make both sides look good? After all, didn't Newsom roll out the red carpet for Xi when the latter visited CA? Newsom actually hid the homeless away during Xi's visit.

 

[wamcp]

Are you hedged now? If so, how are you hedged? All the hedges you listed have a very good chance of underperforming SPY.

S&P 500 is too entrenched in the US society. It's as entrenched as Medicare and Social Security. It is pretty much welfare for the middle and upper class. And thus it cannot fail. Soro's reflexivity comes into play. People up top will make sure S&P 500 doesn't crash to prevent the system from crumbling. Don't underestimate the ingenuity of bankers.

If China takes over Taiwan and cripples US mega corporations as much as you theorize, what makes you think US won't let China have Taiwan and negotiate a deal to make both sides look good? After all, didn't Newsom roll out the red carpet for Xi when the latter visited CA? Newsom actually hid the homeless away during Xi's visit.

No hedges, still full bull and dip buying. I wouldn’t react to china taiwan geopolitics until it’s increasingly likely- military buildup/staging like russia did months before ukraine.

I also wouldn’t be so optimistic about “they” will always save the market. The higher ups will always try but it won’t always work. You don’t see how massive the exposure is that the megacaps have to china? NVDA and all of them with datacenters (AMZN GOOGL MSFT) rely on TSMC. AAPL and TSLA needs china sales. All these are trillions of dollars in market cap that easily slice by half or more in a single week on a taiwan attack.

I have done incredibly well in the markets since starting active investing in 2019. First went short with SPY puts at covid crash, then closed out and bought software stocks (to take advantage of the work from home and stay at home theme) the day after Fed announced ZIRP again (which was sunday march 15). The market bottomed march 20 so didn’t time it perfect but was close.

With the short SPY gains and software bubble gains i took 70k to $1M in 2020 (but half of that profit went to taxes).

I also bought a house (totally lucky timing, as we were in process of closing early march 2020) and scored 3% rates on zero down physician loan- but paid it all off with my remaining posttax stock gains that year anyway. financially a mistake but it felt good to get rid of the mortgage/interest payments every month.

2021 and into 2022 i continued software active investing with money put in from moonlighting, initially did well but once the bubble popped from fed hikes i made the mistake of staying in too late, however i repositioned myself in late 2022 with FAANG stocks and in 2023 missed the early parts of NVDA /chatgpt mania but managed to get in with SMCI which powered the vast majority of +303% gains in 2023. The rest of profit was from leveraged put selling. In 2024 i was long 100% AMZN at $145, sold it all at $175, selling puts on FAANG and NVDA, and am currently up another +54% YTD.

After taxes, i am at liquid $3M and a paid off home, up from 70K in 2019. It’s a life changing amount for our family that we would not have attained in <4.5 years without active management of our portfolio. Buy and hold SP500 would just keep us as highly paid wage slaves forever (3 kids are expensive)

So yes made some mistakes but i’m constantly adapting to the market- if there is a bubble inflating, get in and don’t sit out. If there is turmoil, get out or short it. Monitor what truly moves markets which is liquidity. Move with the Fed, not against it. We haven’t had a real black swan event that the Fed could not combat but china-taiwan is likely to be one future likely incident that the Fed cannot save the markets.

 

[cyanide12345678]

Only a physician with 15 mil net worth would say something like that.

It's plenty even if 2 mil is JEPI (7-8% dividend)... that is 140-160k/yr spending $$

If you use all of the dividend of jepi, your principle will decline over time.

The thing about jepi is that you have to know how to use it. If there’s a large correction 20-30 percent, you want to rotate out of jepi into the general market, otherwise, assuming you see a recovery in the next 1 or so years, jepi will significantly under perform. But if you rotate out of jepi, you’ll come out significantly ahead of the market.

A V shape recovery like that in covid could mean terrible news for someone holding jepi. You’ll get MOST of the downside (though not all), but then the covered calls will exclude you from MOST of the upside. So you don’t want to be in a situation where you get a big drop, but don’t get the gains after. So know how to use jepi.

Also, jepi returns are more stable in the 7-9 percent range with full dividend reinvestment, if you use up all the dividend, you’re looking at a slow decline in your equity over time most likely.