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How to Tame the Fear of Stock Market Uncertainty – Podcast Episode 288


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On this episode of the Dentist Money™ Show, Ryan and Matt put their focus on risk. Our everyday activities involve many risks we accept as part of life. But when risk becomes a fear, that’s more about feelings of uncertainty. Whether a fear of sharks keeps you from swimming in the ocean, or fear of loss keeps you from investing, Ryan and Matt attempt to take the paralyzing effect out of uncertainty.

 


 

Podcast Transcript

Ryan Isaac:
Hey everybody, what’s going on? Welcome to another episode of the Dentist Money show, brought to you completely sponsored by Dentist Advisors. Who is Dentist Advisors? Dentist Advisors is a no commission, fiduciary comprehensive financial advisor, just for dentists all over the country. Check us out at dentistadvisors.com. Today on the show, Matt and I are talking about risk taking. We talk about risk-taking and investments in the career of dentistry. And we talk about one of the, probably not as talked about risks in the career of dentistry, but actually have a pretty broad impact on quality of life, quality practice and the quality of your financial future.

Ryan Isaac:
And we also talk about some of the risks that dentists perceive and maybe what the reality of those risks really are and what to do about it, how to mitigate those risks if you can. So risk is the topic today. Thanks for tuning in. If you have questions for us, go to the website, dentistadvisors.com. Click the book free consultation button and schedule a chat with one of our dental specific, very friendly advisors or go to the Facebook page. It’s the Dentist Advisors discussion group on Facebook. Post a question, we’ll post an answer. And thanks everyone for being here. We really appreciate the support. Thanks for listening and downloading us today. Enjoy the show.

Announcer:
Consultant advisor conduct your own due diligence when making financial decisions. General principles discussed during this program do not constitute personal advice. This program is furnished by Dentist Advisors, a registered investment advisor. This is Dentist Money. Now, here’s your host, Ryan Isaac.

Ryan Isaac:
Welcome to the Dentist Money show where we help dentists make smart financial decisions and avoid the bad ones along the way. I am a guy human named Ryan Isaac, and I’m here with another human who is a dad times two, recent father again, Mr. Hollywood, Matt Mulcock.

Matt Mulcock:
Yo Ryan.

Ryan Isaac:
What’s up Matt? How you doing?

Matt Mulcock:
You are not just a man, you are the man. You are the human.

Ryan Isaac:
I’m human.

Matt Mulcock:
You’re the human.

Ryan Isaac:
The human.

Matt Mulcock:
Yeah Thank you.

Ryan Isaac:
Congrats to you and your family and your wife on a new baby on the way?

Matt Mulcock:
He has arrived. He’s about 10 days old now.

Ryan Isaac:
Mini mountain?

Matt Mulcock:
Mini mountain. Little hill I guess.

Ryan Isaac:
He’s the little hill.

Matt Mulcock:
Yep.

Ryan Isaac:
The Hollywood hill. The Hollywood Hills dude.

Matt Mulcock:
The Hollywood hill.

Ryan Isaac:
Oh, you got the Hollywood hill. I’m so excited. That’s really great, man.

Matt Mulcock:
I’m a little sleep deprived, I’m a little wacky right now. Yeah. 2 under 2 is no joke for all the young parents out there that know what that’s like. It’s no joke.

Ryan Isaac:
It is not a feat to be reckoned with. [crosstalk 00:02:33].

Matt Mulcock:
We are in the big leagues now, I feel like. Before we were just messing around in the minors. Now we’re in the big leagues. Yep.

Ryan Isaac:
Yeah. You’re in the big leagues. It’s over now. You’re full on, you’re full committed to the max.

Matt Mulcock:
Honestly something feels different about two. I don’t know about you or anyone else out there, and maybe this is just because this is our new thing now, but it feels, and I probably said the same thing when we were married for almost a decade and then had a baby. I was like, man, it’s starting to get real. But something about going from one to two, it feels like now this is our family. We got a freaking family now.

Ryan Isaac:
Yes.

Matt Mulcock:
Yeah. Two kids.

Ryan Isaac:
Yeah. It’s cool, man. You got to change the car soon maybe. More car seat room.

Matt Mulcock:
Yeah. I mean, I got my Tacoma and it feels a little tight, but not too bad.

Ryan Isaac:
That’ll work for awhile.

Matt Mulcock:
It’ll work for a while and I just bought it. So I’m not doing anything with it. I’m like, I freaking love my truck.

Ryan Isaac:
Stoked.

Matt Mulcock:
Yeah, it’s fun. It’s been really fun.

Ryan Isaac:
I’m so excited for the mountain and the mini hill, the Hollywood hill. That’s exciting. So we’re going to talk about risk today and I guess first of all, if you’re new to the show, welcome. Thanks for being here. We are grateful that you’re listening and downloading us.

Matt Mulcock:
We love you. [crosstalk 00:03:40]. I’m a newish dad here, I’m a dad times two. I’m feeling the love. I’m feeling it.

Ryan Isaac:
You’re just feeling feelings.

Matt Mulcock:
All the feels.

Ryan Isaac:
You got all the fields right now. Feels on the sleeve. We do. We’re stoked that you’re here. Thanks for being with us. We’ve been doing this for about five years on the podcast and we hope that something is helpful to you. Not all of it will be.

Matt Mulcock:
We’re not expecting all of it. 5% of it. We hope you get something. 5%.

Ryan Isaac:
Some of this is for our own entertainment and sanity. I mean, it’s one of the most fun things I do in my job.

Matt Mulcock:
So deal with it.

Ryan Isaac:
And so some of this is for me, I’m sorry. But anyway, we’re going to talk about risk today. We just did a webinar on this. We actually had the Southern gentlemen, Cody, Cody Murray from Oklahoma, our advisor out there, he was with us on the webinar. We broadcast that from the Wondrous agency studios in San Diego. So that was pretty cool. If you want to check that out, that’s live on the website. It’s free. You can go download it and watch it. It was a good discussion on risk in a dentists life, dentistadvisors.com. You can just check it out on the webinars page.

Ryan Isaac:
So we’re going to talk about risk today, but I’m just now thinking about it, Matt, you just had a child born and for 10 months, and during that process, I don’t know if there’s anything more risky in maybe all of human history. The little Hollywood Hills here. I’m really glad man.

Matt Mulcock:
Hollywood hill.

Ryan Isaac:
It’s a risky process, but we run a lot of risks having the children with us though for the rest of our lives. I mean, there’s a lot of financial risk in that. You had another kid and you just extended your career by five years to pay for it.

Matt Mulcock:
Oh, hundred percent. Good thing I like what I do because I just extended it out for sure. Yeah.

Ryan Isaac:
It just extended man. Well, congrats, super cool. We started the webinar off talking about risk with a story. It’s not a new story, but there is a new twist with this risk thing kind of in mind. And anyway, I was just telling the story of how my midlife crisis was to buy a van and put a bed in it and drive to the coast in San Diego and surf every once in a while. And we were talking about this on the webinar. I started thinking of three main things, three main risks that I face every time I do this. And it’s becoming more and more common. That’s what I’ve seen about the doctors. The more you do something, the less you think about the risk, because the longer you go without an incident, I think you just kind of get used to it.

Matt Mulcock:
Oh, yeah.

Ryan Isaac:
Maybe a little numb, you start to feel like everything’s fine when the risks aren’t any less than they were the first time you experienced it. So I categorize my surf trips into three things. One is the drive, and then two other risks are sitting on a board in the ocean with sharks out there underneath my feet.

Matt Mulcock:
They’re there, they’re lurking.

Ryan Isaac:
They’re there. And the risk of drowning. So I looked up these statistics because I was trying to think, all right, if anyone answered this question, but I don’t think I’m any different. If you ask me, what’s the thing you’re most scared of when you head out on these trips? I would say I’m most scared of a shark for sure. That frightens me the most.

Matt Mulcock:
So why are you the most scared of the shark?

Ryan Isaac:
Because it has the most brutal connotation. It’s the scariest-

Matt Mulcock:
It’s the most [inaudible 00:06:54] thing.

Ryan Isaac:
It’s the movies. I can’t think of anything worse. Yes. But, okay. So the risk of shark attack, there’s the risk in driving and then I actually looked up the most common reason for surfer deaths. I shouldn’t be reading these statistics.

Matt Mulcock:
Yeah. This is not the best example for you to be thinking about right now.

Ryan Isaac:
It doesn’t help. It’s not good. I like to hold tight to my cognitive dissonance as much as I can in most areas of my life. And I also looked up the most common reason for surfers dying and it’s drowning which makes a lot of sense to me because there’s a lot of ways that can happen. So I looked at these statistics. The shark attack, one in 3.7 million. That’s my chances of a shark death.

Matt Mulcock:
You’re probably okay.

Ryan Isaac:
Yeah.

Matt Mulcock:
Yeah.

Ryan Isaac:
I’m probably fine. That one is happening. It happens. My risk of drowning as a surfer is one in 1100.

Matt Mulcock:
That’s kind of small number.

Ryan Isaac:
So that’s not low. It’s not low. My risk of dying in the car on the way over is one in 103.

Matt Mulcock:
Dude. And it’s the one you think about the least.

Ryan Isaac:
Yeah. The least. It’s the one I do almost on autopilot. I mean, I couldn’t tell you, when did you merge or do you remember that stoplight or these are things you do so often, you don’t think about them anymore because they feel like they’re routine until all of a sudden they’re not. But what’s funny about… I think you have a quote to share here to kick this off too about risk and uncertainty. And I want to kind of lead with that, but it’s funny to me how we categorize risks in our brain purely based on emotion.

Ryan Isaac:
What’s the quote you were going to share? Let’s kind of kick this off. And then what I thought we could do is this is kind of what we did on the webinar. Maybe we’ll take a few different paths with this, just to mix it up for people who hear this and the webinar, but let’s talk about some perceived risks that dentists feel like they take in their lives, things they are kind of up against. And then we can talk about whether or not that’s a good or what reality might be of that risk and then what they can do about it.

Matt Mulcock:
Yeah. So this kind of kicked off us even talking about this topic in the first place. I was reading in this book, I was telling Ryan, reading in a financial planning book in my free time because that’s what I do. Yeah, exactly.

Ryan Isaac:
Dad of two.

Matt Mulcock:
But the quote is from a guy named Frank Knight, back in the 1920s was a professor at the University of Chicago. And it was a quote about the difference between risk and uncertainty. So the quote is, “Risk is present when future events occur with measurable probability, uncertainty is present when the likelihood of future events is indefinite or incalculable.” So the whole topic of this was really about we’ll kind of go more into this, but talking about investing specifically and how there’s components of risk and there’s components of uncertainty. One, you can define and measure, the other one you can’t. And mitigate.

Ryan Isaac:
And mitigate.

Matt Mulcock:
And there’s things that you can do to measure, mitigate, and even manage or remove some risks in your life whereas uncertainty, you can’t.

Ryan Isaac:
Well, let’s just start with that. Let’s just start with, and of course there’s a lot of different types of investing. There’s a lot of things you can invest in. Let’s speak specifically about investing in public markets, stocks, bonds, mutual funds, let’s begin there because I think when people think of financial risks, that’s one of the things they think of on the first place. Here’s what I would say about this that’s always interesting to me, it’s always kind of eyeopening when I have this conversation. So when I talk about this with clients or in a presentation or something, we’re talking about markets, what I’ll do is I’ll grab a chart of a hundred years of data. Let’s just say the S&P 500, for example. And I mean, it looks like this giant, the chart I’m thinking of, is like giant triangle full of numbers basically. And you can cross reference periods of years. So you could find a starting year. Let’s say you go to the wonderful year of 1980, the year of my growth.

Matt Mulcock:
It’s a great year.

Ryan Isaac:
And you’re like, what was the return from 1980 to 1990. And you can cross these that kind of intersect on this chart, 1980, 1990. And you could see every return that happened, what was the one year return? What was the two year average? What was the three-year average? All the way down to 10 years to 1990 and see the ten-year arch. And you can do this for any period of time over the last a hundred years. It’s always interesting to me when people say, well, the risk of the stock market, and I’m not blaming them because there’s just not education around this stuff.

Ryan Isaac:
There’s just fear. There’s just fear and crazy stories about this stuff, but they’ll say, well I don’t know if I want to invest in stocks. The risk of stocks is that I’ll lose all my money. It’s a casino. My fill in the blank, dad, father-in-law, whatever uncle, was going to mom it was going to retire in 2008 and then the stock market crashed. And she couldn’t retire because her portfolio went down 90% and then she had to keep working for a decade, just happened. And that’s true, but it’s more nuanced than that usually. And so what’s crazy though, is that belief is held, that’s the risk, right? That’s the risk that and then you look at this chart and you go, and the negative years, by the way, on the chart that I’m referencing are red and they have a negative number in front of it.

Ryan Isaac:
So you can see okay, here’s a single year and that had a negative return or here’s a three-year period of time and it had a red number on it, it’s negative. But you’d be very hard pressed to find a five-year chunk of time that had a negative, almost impossible to find a 10 year chunk of time that had a negative average return over 10 years. I mean, there’s only been a few in a hundred years.

Matt Mulcock:
15 plus.

Ryan Isaac:
And yeah, and then you literally can’t find a 15 plus year stretch of time, which is a normal timeframe for investing in public markets where you have a negative return. And it’s always interesting to me to just show the data and show that the risk, I don’t know if I’m going to say this right compared to the quote you just said, but the risks that they think about, and then the uncertainty of things, they’re just two different things.

Ryan Isaac:
The risk is you buy stocks and you hold it for a year or three or five only, and then get out of it. The quantifiable measurable risk is that you could have a negative experience after that. A literal mathematical mathematical negative experience. To mitigate it, just hold it longer. But the uncertainty though is which one of those single digit years is going to be the negative one. That’s the uncertainty that is not measurable, it’s not predictable and you can’t mitigate it. I mean, we talk about this all the time. I’ve been doing this for almost 14 years and there has never been a month that has gone by in any market condition, economic cycle that someone has not said, I’m worried about the market because of dot, dot, dot.

Matt Mulcock:
Never.

Ryan Isaac:
I mean, there’s never been a month that’s gone by and same for you. So you can’t predict this stuff. You can’t mitigate the uncertainty of which year is going to be the negative year? You can’t just say well, as we know when the elections happen, this is going to happen with the market. Nope didn’t happen.

Matt Mulcock:
I love that. I always love it. As you know. When they say, as you know Matt. Oh, I do know this?

Ryan Isaac:
As you know.

Matt Mulcock:
Oh, okay. Tell me what I know.

Ryan Isaac:
You’re like no, I don’t. Don’t lump me in that group. I’m not in that group, man. So that’s a good quote, man. Risk and uncertainty. And that’s what I think about in my experience talking to people about markets and this kind of stuff with people. What about you? What comes to mind when you think of markets and that quote you said?

Matt Mulcock:
Yeah. I was thinking this exact same thing you said there near the end, when you were talking about investing. When I hear people, when they think about the risk of investing, you’re right. Usually what comes to their mind is I could lose all of this, right. Or if they’re a little bit more sophisticated, they’re thinking this will be negative when I need the money. Right? It’s a misalignment of time horizons. But if we focus for a second on the risk of losing all my money, there is a risk of that if you invest incorrectly, right? And that’s why you said, there’s a lot of nuance to this. If you go out and take all of your money and you go put it into one stock or one industry-

Ryan Isaac:
Or one industry.

Matt Mulcock:
You are risking, that’s what we call business risk. You are risking on that business going under. So if you take all of your money and put it into Amazon, as great as Amazon is, or has been from a returns perspective, guys, I know it’s a political hot topic here, but the company-

Ryan Isaac:
Is Amazon political now? Dang I missed something on Twitter. I haven’t logged in for a while.

Matt Mulcock:
I mean, just everything in America is political now. Yeah.

Ryan Isaac:
You don’t have to explain but [crosstalk 00:15:26].

Matt Mulcock:
But Amazon as a company has just destroyed over the last 20 years. Right? So if you put all your money into Amazon, yes, there’s a risk of Amazon as a company going completely under, going bankrupt, right? That’s what we call business risk. There’s a risk of you investing in a foreign country or having issues in America with political risks, there’s individual risks with individual industries or companies. So yes, you can absolutely lose money if investing in the wrong way. But to your point, you can mitigate that risk by one of the fundamental core values of investing is diversification. If you invest and you are well-diversified, the risk of you actually going and putting, let’s say a hundred thousand dollars into a diversified portfolio, global diversified portfolio across the world, the risk of that going to zero is basically zero. We’ve got so many more issues on our hands as a world if that portfolio goes to zero, it’s almost impossible.

Ryan Isaac:
If every company in the world, every publicly traded. I mean, every time I hear that, I just look around the room. And I think of all the publicly traded companies that have products in my room right now that I’m wearing, using, watching, listening to, interacting with, holding, depending on the car my wife is driving in right now and the gas she just picked up and the place we just bought food and the clothes, I mean, literally everything. So you’re right. If you have a diversified portfolio and it goes to zero and never comes back, the world’s over.

Matt Mulcock:
Got bigger problems on their hands. So that’s what they’re thinking of. They’re usually thinking, oh, this could go to zero. Right? We want to put that aside right now. If you’re well-diversified enough, it’s not going to go to zero. Right? But what they’re really saying and they don’t really articulate it this way is what you said is they’re just worried about the uncertainty. They know, because we show them the numbers, if you look back over a 20 year period of a well-diversified, a globally diversified portfolio, you know that over a 20 year period, you’re probably getting about 10%. Well, I’ll give you a range, eight to 12% per year over a 20 year period. That’s a pretty safe assumption. But what they’re really scared of is that every year it’s the uncertainty of, well, is this year going to be up 25 or is it going to be down 30? Is it going to be up 15? Always.

Ryan Isaac:
And there’s always a reason. I mean, what’s crazy about the stock market is there’s always a reason to be negative even when there’s good news.

Matt Mulcock:
Almost especially when there’s good news, right? Because they’re like, oh, this it’s got to turn around. Can’t last.

Ryan Isaac:
Can’t last. This can’t last forever. And it’s like, well, yeah, it can’t last forever. But over that period of time of forever, it kind of just always goes in that direction. It’s a staircase going up all the time. But yeah, no, it’s that uncertainty of not knowing when things are going to be bad, but there’s so much… I mean, we’ve covered this in other podcasts. When you build a low cost globally diversified portfolio with a high savings rate over years and years, there’s so much nuance that people don’t realize. They’ll say, you said it, the market’s going to be down when I need money. I’m scared about that. And that’s fair, fine. And maybe there’s just a string of bad luck. You start saving money for the first time ever, you got 50 grand in your portfolio to the first 50 you’ve ever saved. And the market does go down severely with your first 50 grand and then you happen to just need it for a house down payment or something.

Matt Mulcock:
Sorry to be cold-hearted here, but I’m going to say you didn’t plan very well then. Sorry. Why are we investing this money?

Ryan Isaac:
You needed a house? Well, why are we investing money in a way that can go down severely? Exactly. So, I mean, it’s not very likely. And there’s just so much nuance when you have a well built portfolio with a high savings rate for years and years, because, and this is cool for clients. They don’t realize that sometimes. They say, well, what happens if I need money? I’m not planning it. If I need money and the markets down when I do? I’ll say well, when your portfolio is pretty big, not gigantic, but you’ve been saving for five plus years, maybe 10 years. Yeah. I mean, we’ll have so many options because you got to realize most dentists are monthly savers. They’re buying shares of things on a very frequent basis compared to the average person out there.

Ryan Isaac:
And so what happens is let’s say you’ve been saving for 10 years and all of a sudden you need a chunk of money and the market is crashed at the same time. Let’s say it’s March, 2020 and you need a hundred grand out of your $600,000 portfolio, which is a chunk. That kind of sucks.

Matt Mulcock:
For sure.

Ryan Isaac:
But if you’ve been saving for a long period of time, you have options because we can go to your portfolio and say, all right, the shares you’ve purchased most recently, maybe the last year to year and a half, just got their gains wiped out, they might even be negative. So do you want to sell those and take a tax hit on purpose? Take a loss on purpose for your taxes, or we can sell the older stuff that you bought 10 years ago, the shares you’re buying 10 years ago or seven years ago.

Matt Mulcock:
That are still at a gain.

Ryan Isaac:
They still have a gain because they’ve been around for so long and you can pay taxes on those and then keep the newer shares around to not take a loss on them, let them grow. You can pick. Or we can take a mix of the two. And every time I explain that situation, people are always like, oh, oh yeah, cool. Yeah. I didn’t realize that. Because people think in their head, I have a portfolio, market goes down, I need money, the whole thing is at a loss.

Matt Mulcock:
Yeah, exactly.

Ryan Isaac:
And that’s not how it works mathematically when it’s been around for awhile. And if you’ve built a portfolio with anything that is not a stock, so a bond, cash, CDs, maybe gold, whatever, something that’s not a stock, that’s not always exactly correlated with the stock, meaning it doesn’t go down when a stock goes down. Although in major crashes, kind of everything does that temporarily. But you also will end up building a pretty, fairly sized chunk of pretty conservative money in the portfolio. So if you’ve got 20% bonds and 80% stocks, by the time that things a million dollars, you’ve got 200 grand of bonds sitting in that portfolio that don’t go up and down as much like stocks do. The volatility’s not there.

Matt Mulcock:
Yeah. That if you have a March of 2020, you got a pile of money there in the portfolio that you could pull from that didn’t get impacted nearly as much. So a risk that I see, and I’m sure Ryan, you’re the same way, that I see all the time when it comes to investing, they’re thinking of the shark attack, the market versus getting in the car and driving, which is way more risky. What I would compare that to is these people, you out there, are so nervous about investing because again of that shark attack type of motion that you choose not to because you’re going to wait for this or that or whatever metric or some person to tell you, when’s the right time.

Matt Mulcock:
You’re getting in the car every day and what that compares to is sitting on cash. You think sitting on cash the same way we think of driving in the car, you’re like, oh, it’s just cash. It just sits there. No, you are literally losing money every single day. You’re losing purchasing power, you are locking in a loss. And the longer that goes on, you are guaranteeing yourself a loss because of inflation. You’re losing purchasing power. This is what we always say. Investing in the markets over the long-term is less risky if done correctly, caveat, than sitting on cash. Sitting on cash is literally riskier than investing in stocks.

Ryan Isaac:
This is an important announcement from the Dentist Money show podcast system. Go to dentistadvisors.com and click the big green book free consultation button and schedule a time for your free consultation and save your financial future.

Matt Mulcock:
I mean, Ryan, don’t you think it’s a bit much?

Ryan Isaac:
Yeah, it was probably a little bit much, but I think some of our listeners might find getting a consultation should be more like an emergency.

Matt Mulcock:
They probably should. I mean, we are saving financial lives.

Ryan Isaac:
Cool. Maybe we could just do two more. I wanted to do another pretty concrete example of risk that dentists face and what they can do to mitigate it, which is the risk of illness, injury, disability, and life insurance. Let’s talk about insurance for a minute. And then I want to end with something that’s not exactly financial, it’s a lesser thought about risk of being a dentist that you and I talk about all the time with people. So we’ll get to that.

Ryan Isaac:
Because this discussion came up in the webinar and it was a really good discussion on insurances. And if you go to the website again, dentistadvisers.com, search for, I mean, there’s podcasts and webinars on insurance that are much longer than we’ll spend here about this. But the risk that a dentist takes on by spending almost a decade in school, and I mean, at this point, students are taking out 500 grand plus of student loans. Couples are seven figures plus of student loans if they’re both dentists and especially if they specialize and so you do all that, all this money, and then you buy a practice if you do. And I mean, that’s hundreds of thousands, if not another seven figures. [crosstalk 00:24:24].

Matt Mulcock:
No big deal. Just throw on an extra couple hundred thousand. No big deal.

Ryan Isaac:
Just chuck it on the pile, man. My goodness. Talk about getting used to something, right? Talk about getting used to risk. The average person feels like debt is a risk, which in some cases it probably is. But talking about getting used to something that happens so much or such high magnitude that you just get numb to it. The amount of debt that dentists carry.

Matt Mulcock:
That’s true.

Ryan Isaac:
And not everyone’s numb to it though. A lot of people are very not numb to it. But what I’m saying is there’s so much money and time in specializing that goes into a profession that a hundred percent of it relies on your ability for your hands to move.

Matt Mulcock:
Your skillset, yeah.

Ryan Isaac:
Yeah, do your hands work? That’s it. All the stuff that’s in your head, all the money you’ve paid, everything you’ve built, all the debt you carry, do your hands work today? Which is like, holy cow, how many activities are dentists in besides normal daily activities? They put their hands at risk, any number of hobbies, right? So let’s talk a bit about life and disability and liabilities for a second. Statistical, the greater financial loss due to either death or disability lands on the side of disability. So you have a higher risk of financial ruin if you have a disability than if you die, which sounds kind of crazy.

Matt Mulcock:
Yeah, but what is more likely than a dentist you just meet, what’s more likely they’re going to, in my opinion, have life insurance, in my experience, than they will have disability.

Ryan Isaac:
Yeah. Yep. Why? Because disability is really expensive and it’s very nuanced to buy. It’s not easy to buy disability insurance because it does matter which company you pick and it does matter how much you pay for it because-

Matt Mulcock:
And it does matter the writers you have on it.

Ryan Isaac:
Yeah, the fine print, the way they define things, some policies, cheaper policies will typically be a lot more strict and more expensive policies will be more generous and lenient if you go on a claim from any kind of disability or illness, and it’s not uncommon. And the longer I do this, the more dentists I meet that have… I’ve met a lot of dentists who have scary injuries that luckily only lasted six to eight weeks. They got in crazy accidents or did something stupid on a motorcycle.

Matt Mulcock:
You think it’s going to be months?

Ryan Isaac:
It should have been, it should have been years or so. It could have ended their career, but it would be like, oh, it’s going to be six weeks. I’m going to be all right. And I’m like, holy cow, man. How many dentists I know ride motorcycles or cycle or mountain bike or do all kinds of things that they crash all the time. They’re getting hurt.

Ryan Isaac:
So again, this isn’t an insurance episode, but I think we just want to point out that what you said, Matt is true. It is more common to find a dentist who is more adequately covered with life insurance, because it’s easier to buy, it’s cheaper, term life insurance than it is to buy disability. But an easy way to do this, again, tons of content on this if you want to learn on dentistadvisors.com, but carry as much disability as you spend in a month as close as you can. I mean, if you spend more than 20 grand a month, you won’t be able to get it and just know that when someone gets disabled, especially if it lingers for awhile, your cost as a family go up, they don’t go down. Yeah. That’d be our advice around disability. And again, it’s pretty nuanced.

Ryan Isaac:
You’ve got to talk to a trusted advisor who’s not getting paid on a commission to sell disability. Look, I’ve met insurance people who will tell someone no, you don’t need this policy. I’ve met honest, good insurance people too. You just got to find someone you trust that’s going to teach you about the right kind of disability to purchase. Talk to someone about it when you’re going to go figure that out. But that’s necessary. Life insurance, there’s so many ways to calculate life insurance. One easy way I’ve found that’s been kind of a really quick way to calculate how much life insurance would actually provide to a family is for every million bucks of life insurance you carry. And the same goes with net worth, but every million bucks that you’ve got, will pay your family 35 to 40 grand a year tops, indefinitely.

Ryan Isaac:
So if you’re just trying to think of indefinite streams of income to replace family expenses, every million bucks is going to pay, call it 35 grand a year to your family indefinitely, meaning they can spend 35 and it will never run out. If they spend more, they’ll spend it down and it will run out. So if you need 200 grand of indefinite income for your family, you’re going to have to get, what is it? $6 million of life insurance to provide $200,000 of indefinite income that never stops and never runs out, which might be too conservative. That’s just a really conservative place to start. So you might say they need 200 grand, but we’re going to get 4 million and it’s just going to run out.

Matt Mulcock:
A lot of nuance to it, yeah.

Ryan Isaac:
Very nuanced. This stuff shouldn’t be sold, this stuff should be taught and advised and then implemented not sold, which is kind of hard to do. So anyway, we got into a good discussion about that. I mean, that’s a very real risk that dentists run, especially how much investment has gone into just their hands and you got to protect that. That’s what insurance is for and you got to do it. If anyone’s wondering how that fits into a normal… The question out there is people are like, well, who do I go to then? Who in the financial industry does this? I just call an insurance person, my brother-in-law’s an insurance agent.

Matt Mulcock:
Stupid brothers-in-law. Brothers.

Ryan Isaac:
Yeah, brothers. It’s tough. In our business, we focus on a pretty wide range that’s what’s called comprehensive financial planning, focused on a really wide range of every possible financial topic a dentist can face. Insurance is one of them. Now we don’t sell it. No one kicks us back any money to recommend or implement it at all. Not a penny. But we do spend hours analyzing and discussing insurance every year with our clients. And the crazy thing about insurance to make it even more nuanced is there’s this weird trajectory where early in a career, as your spending builds up, your families grow and your spending is just still hitting a peak and your debts piling on, you need as much as possible, but there’s kind of, what do we call it? An inflection point?

Matt Mulcock:
Yeah.

Ryan Isaac:
Or just the peak. There’s a peak in your life where your net worth starts to outpace your spending. You have more net worth than you could spend and your debt starts coming down and your spending doesn’t decrease really ever but it flattens a little bit, at some point. You kind of hit a spot you’re comfortable at.

Matt Mulcock:
Kind of plateaus a little.

Ryan Isaac:
Plateaus a little and you become self-insured basically is what I’m saying. Eventually a lot of dentists will hit a point where their net worth is big enough to be self-insured and you can actually start chopping off chunks of insurance every year.

Matt Mulcock:
And that would be the goal for pretty much everyone, right?

Ryan Isaac:
That’d be total goal, which we were laughing about on the webinar. I was asking Cody if he’s dealt with his and he’s like, oh yeah, I’ve had to get on the phone with insurance agents and clients and say, hey, we’re going to start cutting some insurance. And usually agents are like what?

Matt Mulcock:
Yeah, why would you do that?

Ryan Isaac:
Why on earth would you get rid of insurance, man? This is crazy. But that’s also to add to the nuance, that’s kind of the trajectory of what it should look like as your net worth grows. And so it should be analyzed frequently, annually. Take a look at it annually, compare it to net worth, debt, spending, dependents, that kind of stuff. Act accordingly.

Matt Mulcock:
You should have someone in your life that is independent, objective, that can sit with you once a year at a minimum, just to talk about this topic. I’m not saying sit with you once a year period. I’m saying some time throughout the year, they’re talking just about this topic. They’re reviewing with you your insurance every single year and someone that’s not selling it to you. So if you’re wondering who should I be going to? It’s someone that fits that criteria.

Ryan Isaac:
Yep. A no commission fiduciary advisor which is what we are. We’re not going to hide from that.

Matt Mulcock:
I mean, we just so happen to be that. But no, just someone that you trust that knows what they’re talking about. They can say, hey, we can sit here and here’s an underrated thing that we do for a lot of clients that I’ve had a lot of feedback on that my clients will be like, man, this is so helpful. They already have a broker, let’s say an insurance broker. Their insurance person comes to them and says, hey, we should do this, this or that. Well, they come right to me. And they say, hey, Matt, what do you think?

Matt Mulcock:
I have no skin in the game. I’m not getting paid for any reason other than to give you my objective opinion on that presentation of product, sometimes it looks like a great idea. Other times I’m like, eh, I’d stay away.

Ryan Isaac:
Most definitely not a great idea.

Matt Mulcock:
Most definitely not. So it just depends on the situation. And sometimes I’m making recommendations for them to go up their disability and to go to your broker and tell them, you need more disability. That broker then loves me because I’m telling them to get more insurance.

Ryan Isaac:
Sending business man.

Matt Mulcock:
Exactly.

Ryan Isaac:
Yeah. That’s a really good point, man. So if you have questions, go to the website, dentistadvisors.com, click on the book free consultation link. Let’s have a chat. Anyway, well dude, thank you for the episode. That was a good one.

Matt Mulcock:
It’s good to come back to that.

Ryan Isaac:
Come back to it. We started with the announcement of the Hollywood hill from the mighty mountain and sharks.

Matt Mulcock:
The little baby mountain.

Ryan Isaac:
Yeah, man. We’re just feeling good. So everyone thanks for tuning in and listening. And if you’re new to the show, thanks for being here. Hopefully some of this was helpful.

Matt Mulcock:
If you’re old to the show, thanks for being here.

Ryan Isaac:
If you’re old to the show, thanks for still being here.

Matt Mulcock:
We also love you.

Ryan Isaac:
Yeah, it’s cool when people have been around for a long time and you’re like, man, you still choose to push play on my voice. That’s really cool. That’s awesome. I hope something’s helpful. And if you’re like a lot of people, these discussions they’re meant to be generally helpful, but they probably spur more questions than the answer sometimes. And so there’s some resources for that. Obviously our website and our podcast is full of free education, training and information you can learn about and you never have to talk or interact with any human on our team ever in your whole life.

Matt Mulcock:
You never have to hear my voice ever if you don’t want to. Turn off the show and never call us.

Ryan Isaac:
But if you’d like to interact with a human and have a more personal conversation, we love doing that too. So you go to dentistadvisors.com and there’s a big green button that says book free consultation and do that. And you’ll chat with one of our awesome advisors about your situation and maybe it’s time for you to have an advisor in your life to just kind of take this off your plate and stop worrying about it. You can also go to our Facebook page. We have a group, private group, Facebook, the Dentist Advisors discussion group on Facebook. Post a question, we’ll post an answer. And we love hearing from you. So Matty, thanks for being here. Appreciate it.

Matt Mulcock:
Yeah, thanks Ryan.

Ryan Isaac:
Thanks everyone for being here with us and we’ll catch you next time. Take care.

 

Investing, Insurance

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