Inside a Dentist’s Investment Portfolio: What We Changed (and Why)

On this episode of The Dentist Money Show, Matt, Rabih, and Will walk through a case study of a real dentist’s investment portfolio to show how even a solid portfolio can have hidden gaps and missed opportunities when it’s not aligned with a clear financial plan. They break down the specific changes we made and why they mattered, showing how thoughtful, tailored investment management aligned with long-term goals can improve diversification, reduce unnecessary complexity, and create a more confident path to retirement.. Tune in to hear how aligning your investments with your life goals can lead to a more confident and optimized path to retirement.

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Podcast Transcript

Matt Mulcock: Welcome back to the dentist Money Show where we help dentist make smart financial decisions. am Matt and I am joined here with two of our probably, I’m going to say top of the line experts, Will the Brain and Rabih the Professor, Cash GPT. Guys, how are you?

Rabih: Okay, how’s it going?

Will: It’s doing good.

Matt Mulcock: Did you guys like that intro? Yeah. How did we, the only point of this podcast is to boost egos for you guys. So yeah, exactly. Thank you. my gosh. Yeah, this is great. I love this. Yeah. Yeah. Please keep going to keep, keep it coming. Keep it coming. ⁓ no, so I’m, I’m excited about this show. We’re getting, so for those of you that don’t know, and I’m realizing that some people don’t know this shot.

Will: That was great, yeah. I’ll take it, I’ll take it. Anytime you want to say nice things. Yeah, just say how cool we all are. And Matt is such an amazing person too. Yeah.

Rabih: Yes, Matt is great. I need to say something nice, right? It can only be Will. Matt is great, you guys.

Matt Mulcock: This show is brought to you by Dentist Advisors. I found this out recently. Longtime listener was like, I didn’t know that you guys were Dentist Advisors. So this show is brought to you by Dentist Advisors and we are a very, very much a planning first firm. So what I mean by that is investments, investment management is a job to be done in the overall picture of what we’d call, you know, life design and financial planning, but we are very much planning first. And so we want to talk about today is and demonstrate today, like, what does that mean? What does that mean to be a planning first firm? And how do you actually integrate a, sorry, an investment strategy into an overall financial plan and all the intricacies that come with that and the things that you’re trying to consider when it comes to implementing an investment plan for a dentist. So I’m excited about this one guys. And I’m glad that we have this kind of panel together. I’m going to let. Will kind of set the stage, whereas we’re going to talk about a very specific case and, kind of use that to demonstrate our, how we think about this kind of stuff. So, Will, can you just take ⁓ a couple of minutes and kind of set this stage of this situation as we go through it?

Will: Yeah, I think a case study is very powerful and it can benefit a lot of different dentists all across the country, kind of asking similar questions. This is a real case study from clients that recently came on board with us. And so I’m excited to dive in because I do think it provides real world context and decisions that these people are making that you might also be making or that your future self might be making. ⁓ So to set the table a little bit, ⁓ these are great clients. ⁓ the wife is a dentist and the husband teaches school, ⁓ high school, I think. And so dual income couple, they, she’s a dent, she’s a dentist in more of a rural town in California. It’s not like a big city. and one of the, one of the big practices in the area, the area is underserved as a whole. And she’s kind of established this footprint as the go-to practice. She’s completely a overproducer dominant dentist. Amazing. ⁓ really have just built an amazing office and a very solid investment portfolio to boot as a result of the success she’s had in her practice. and you know, she, I think Matt, you might even have more context on this. I’ve got context, but it was interesting because you did the initial interview with this couple and she had recently listened to a podcast around DSOs and she was very far down the line with the DSO. And I think, you know, maybe you can jump in there and kind of add some more color there.

Matt Mulcock: Yeah, definitely. So you’re right. I had an initial call with them and their initial interest in talking to us was after listening to a podcast that Christine and I did around DSOs. And to your point, she was pretty far down the road. I was, we were super honored to hear that we were able to help her through that before even talking to her. The way she put it was, and I think it was amazing. she said was you guys literally saved my life, like saved my career, ⁓ and from making this massive mistake. Cause I hadn’t even thought about the other side of this. you know, and we’ll, we’ll get into this, but I think she’s a somewhat of a victim of her incredible skillset and success where she feels like she can’t stop. And she became enamored with this exit because I think she’s kind of at times teeter on the edge of burnout, which we’ve heard so many times from dentists. And so it was really honestly amazing for us, amazing experience for us to be like, Holy cow, we were actually able to help her. And so that was our first engagement with us was just talking to us more about our philosophy after she heard that podcast.

Will: Yeah. Not all DSOs are bad, but I think in her situation, this was not going to be the right move for her. It was going to be a long work back and something that would have taken control away from her. know, she’s not necessarily needs to be in control, but she’s somebody who, yeah, is very type A and built an incredible business. And it would have been tough to work as an associate, you know, air quotes associate in her practice. ⁓

Matt Mulcock: She’s built an incredible business. Yeah.

Will: and not have full autonomy. There’s so many other options for her that we illustrated. It’s not just this black and white, you grow a big practice, you sell to a DSO. Part of this was maybe just the lack of understanding of their overall financial picture around what they’ve done so far, the net worth that they’ve built and what that can mean for them in the future regarding an early retirement, regarding how much money she actually needs to accomplish from the practice sale and just these bigger picture questions regarding, you actually, do you have to sell to a DSO for the highest dollar or could it, there other decisions that you could make to accomplish the same result without having to go down that route?

Matt Mulcock: Yeah, definitely. I want to bring Rabih in here, a couple of things that we, think that are critical here, we’re not going to give specifics on like income numbers and things like that. But, ⁓ I think a key data point will is as we talk, as we start talking about integrating the investment strategy, ⁓ is one key data point is the exit timeline or the desired exit timeline. Can you talk a little bit about that with these clients of kind of what they’ve talked about as an ideal. When they came to us and now they’re starting to work with us, what that timeline looks like.

Will: Yeah, mean, I think she was in the camp of like, as soon as possible, almost, you know, like, she’s not ready to be done yet, yet, but she is ready to slow down. And the slowing down is the part where she doesn’t really know how to do that. She’s like, it’s hard because I don’t, you know, I’ve been done one thing for so many years of like all in running around with my hair on fire at the office, just jumping from room to room and over, you know, being this insane super producer. And now it’s tough for her to take her foot off the gas and slow down partially because she doesn’t want the practice valuation to drop if she takes her foot off the gas. And I think a lot of dentists resonate with that where it’s like you’re headed into retirement and your collections start dropping because you’ve taken your foot off the gas. So then your business value that you’ve worked all these years to grow is now dropping or diminishing. So she’s trying to find this, to thread this needle around. it tomorrow? Is it three years? Is it five years? mean, I think, I think we’re shooting for five years at this point, but it’s sooner rather than later, which would be an earlier retirement.

Matt Mulcock: And there’s an emotional aspect to this too, as well, right? Where, meaning there’s a story that, that from her, way she was raised that I think has an impact here as well. Which I think is critical to understand the nuances of this and dentist that are out there listening. think an antidote to that kind of thing of saying, I just feel like I need to keep going because I don’t want to ever feel like what I felt like as a kid. think one of the best ways to solve that is data.

Will: Absolutely, yeah.

Matt Mulcock: and a plan and a strategy and like being able to show them, here’s what this looks like. So, ⁓ we’ll jump in with any other context that’s required here to like give more kind of light to this, ⁓ situation. Well, let’s bring Rabih in now from the investment piece. Will alluded to the fact that these people brought in a pretty sizable portfolio that they’ve done an incredible job. They great practice kicks off great cashflow. They’ve saved, they’ve invested over years. Let’s bring you in now specifically around the investment jobs to be done and the things that you’re looking at.

Rabih: 100%. And I love that you guys began with that premise because from an investment perspective, I’m clueless on what plan we should implement and how we would do the small and finer details without having that north star of financial planning to start with. So it is kind of a two section problem or investment problem from my perspective. The first one is related to the fact that they are go-getters. They had a really good practice. And usually when you’re putting all your efforts and all your attention on your practice, you delegate investment management to someone else. And they had another advising firm that was managing their investments. And that advising firm probably had a different investment philosophy. Obviously, every investment firm you go to will tell you diversification is great, right? But how you do diversification differs from one company to another. In their situation, they were in something called ⁓ SMA, a separately managed account. And SMA is an investment device where you are diversified. You are holding a fairly large amount of assets in it, of stocks in it. And instead of buying a fund that holds these assets, you’re directly buying them. There are pros, there are cons to SMA. It’s neutral. It really depends on how you use it that determines whether it’s good or bad for you. But if you want to think about the pros of it is, Because you’re buying the individual positions themselves, which are riskier generally than the fund itself, you have more opportunities to follow the roller coaster that they go on and try to do a lot of tax loss harvesting in between and try to make sure that any time I see a loss, I go out of that position. I go into a similar position under the, you know, constraint that I need to keep the portfolio diversified. can’t drop to like 10 securities just because I was selling from all the other losers. This is pro. A con usually is that this is more time intensive, and it’s usually costly. To go into an SMA, it’s probably three to five times the cost of just being in an ETF, especially in the globally diversified ⁓ aspect. So in this client situation, I actually have something to share with you guys. And this is the data that you presented to me, just so we understand where the clients were coming from. ⁓

Matt Mulcock: And as you go through this, Rabih, we’ll just highlight here, our podcasts are now on YouTube. So this might be the time if you’re really wanting to follow the numbers and data that Rabih’s going to cover, you might want to pop over to YouTube, the dentist Advisors channel and watch it there because Rabih’s going to go deep.

Rabih: Yeah, guys, side note, Matt finally allowed me to share a spreadsheet on the podcast. So this could be the best decision of his life or the worst. So let me know guys, if you’re not seeing my screen, but so far what we did, we noticed that the client has had four accounts between a Roth IRA, a joint SAP IRA and a normal IRA. And every single one of these accounts for the fair amount held individual stocks in it. It was not a fun.

Matt Mulcock: Finally after or the worst. We’ll see. Yeah, we see it.

Rabih: Some of these stocks had gains, some of them had losses with a certain gain percentage. This is cost basis data, so it doesn’t really tell us the proper performance. A cost basis data literally tells you the gain and loss on positions you currently hold. So if you close on a good position, you might understate your performance, but if you also close on a losing position, you might overstate your performance on the gain and loss. So there are some deceits to the numbers. It’s not the full picture. This is just a snapshot. So, yeah.

Matt Mulcock: Hey, Rabih, really, really quick. just want to ask something around the SMA and individual stock positions of something like this is, part of this driven and will I want to get your take on this too? If you’ve seen this is part of this, ⁓ due to perception, meaning like the advisor wants you to perceive it as more sophisticated.

Rabih: Yeah, well, I’m going to, I’m just going to jump before Will on that one. I can’t see your faces, so I can’t coordinate, the, with the SMA, honestly, if your goal is to get into an index fund and when we say an index fund, it means you just want to buy it and forget it. We don’t recommend it at DA by the way, but if you are wanting to go into the basic strategy out there, which is own everything and do not touch it. You can do it in multiple ways. The first one is you could buy a cheap ETF. You could also buy a mutual fund or you could buy that SMA. Usually when an investment firm and honestly competition between investments firms is very hard. When the investment firm doesn’t have a compelling investment philosophy proposition, AKA yes, we’re diversified, but we do it in this manner for reason one, two, three, four, and five, which I will get into for how we do it in our business. Usually what they tend to go to is they’re just going to add the number of securities that you hold just to make it feel like you are doing something special. I’m not making you buy the S &P 500 ETF. I’m going to buy all 500 companies. I’m still not gonna manage it well and it’s going to perform exactly like the ETF, but at least from your perspective, uneducated investor on the other side of this information asymmetry, you think I’m doing more. So it’s not just enough to split the package and have 500 stocks. It’s important on how you manage these 500 stocks to actually harvest the benefit of an SMA.

Matt Mulcock: Yeah.

Will: Yeah, I think there’s some, probably some firms out there that it ⁓ creates a little level of sophistication that might be attractive to a certain subset of clients. ⁓ And, you know, it does allow for some tax benefits like Rabih explained, but again, I don’t necessarily think the tax benefits are, don’t let the tax tail wag the dog kind of in my, ⁓ is like the cliche that we use. So I would say they’re semi unnecessary except in rare cases where it’s a portfolio that really needs to have something like this. also think that there’s probably a lot of active managers out there that will tout returns and things like that that are just never guaranteed. I think we always preach this is don’t overcomplicate it. You can overcomplicate investments and you can always, they’re going to be wrong completely.

Matt Mulcock: Yeah. Yeah, definitely. Okay, thanks for side questing on that. just wanted to highlight that that’s one of the reasons this could just be a perception of sophistication.

Will: Yeah. I mean, there’s like how many positions in their portfolio that came over.

Rabih: 100 % I do have it right here. You guys know what fell, Actually, they’re holding 56 positions that come from the US and Canada. They’re holding 27 positions that are international equity. ⁓ And then 13 that are emerging. The amount of stocks that exist in a globally diversified portfolio that buys everything across the US, Europe, and the rest of the world.

Matt Mulcock: Your light. was your light.

Will: Yeah, 98 total.

Rabih: is usually 15,000. So do I have a question mark around whether these hundred positions are enough to give me a full exposure that is diversified and enough of a, you know, moving parts for me to do tax law servicing? I’m not sure.

Will: Definitely not. Yeah. You become more concentrated in certain spots.

Rabih: 100 % an SMA that we usually work with and look at for our clients has around a thousand positions in it. So that’s 10 times more than what this would have. So not all SMAs are created equal. One last point, just because not to say that I’m negative on the SMA is that the SMA has a really nice purpose. If your situation is not the basic global diversified situation. If you are, for example, an employee of like Apple or Microsoft, And for reasons such as you’ve got a lot of vested stocks or you get gifted stocks or equity as part of your compensation, usually your portfolio is already over-concentrated in Apple or in Microsoft. And SMA is a great tool to build around that one individual position, which you would not get if you’re just buying an ETF or a mutual fund. But how often do we get dentists who have a large chunk of their holdings in just one publicly traded company. So it doesn’t show up as much. ⁓ And SMA is very ⁓ popular as a tool in the industry, in the investment industry, but it’s really specifically famous with employees of large Fortune 500 companies. Dentists, not so much. Not saying it’s bad, it’s just the benefit that you get out of it isn’t as large. OK, so.

Matt Mulcock: Makes sense.

Rabih: Aside from the fact that they’re in an SMA, they’re holding a lot of common stocks like 100 % in the Roth, 97 % in their joint, 100 % in their SEP, in terms of like how much individual stocks they’re in, we wanna look at diversification from a 10,000 foot lens and see what the portfolio is in. Their portfolio is mainly in US markets and developed ex-US markets. The amount of emerging those 15 stocks is really a small sliver when we first got the portfolio and we couldn’t really consider that they were invested and emerging markets. Emerging markets include stuff like China, Singapore, Hong Kong, all North Asia, all the BRICS countries. And in 2025, even with the currency impact, emerging markets were the best performing asset class for the year going up 35%. So for us, proper diversification is making sure no matter where money flows around the world, and how global monetary policy changes and regime and currencies devalue and appreciate, we want to be able to have a say in or have a piece of the pie no matter how it goes. So the first thing that we were looking at is like, how are we going to rebuild that emerging market portion and their portfolio because it lacks it. The other thing we were interested in, so the first 10,000 foot view is looking at the geographical regions and more of like a political risk. The other risk we’re interested in is a business cycle risk, which is related to the sectors that you are in. Over here, I’ve got the different sectors, technology, financial services, industrial, healthcare, consumer cyclical, et cetera, as you guys can see. I have the weight that the portfolio is in versus the weight that the benchmark is in. And as we can notice, this portfolio, from what we’re looking at at face value, is definitely overweight by 4.5 % in financial services and industrial. as well as consumer defensive and energy. So this portfolio, just by looking at this underweight tech, underweight cyclical stuff, overweight finance and energy and defensive tells you that this portfolio is trying is designed in a manner where either whoever is designing this portfolio has an outlook that we are heading into the downside or the end of the business cycle where the economy will be slowing down, where our session will be showing up or ⁓ there is a special request that the client does not like the volatility in the portfolio. You’re getting the risk exposure that you want, but on the flip side, this is the allocation of the global market. But for the last couple of years, what has been lifting the portfolio? Which sector out of these 11 has been moving the S &P 500 up, the Dow up, the NASDAQ up? It’s Bintech. So the whole idea would be there’s going to be a trade-off to look for between

Matt Mulcock: Tech.

Rabih: The sector risk, which sector you’re in, versus the underperformance that you’re willing to take as a function of you choosing that sector. This is something that we would look into. And the decision is made here depends on exactly what Will said, or Will mentioned earlier. It’s like, when do you guys plan to get out of your job? AKA, if retirement is in five years, I wouldn’t go into this drastic measure of a conservative portfolio. Until we’re a couple of years into retirement already. We have a couple of years of tech that can lift the portfolio even higher and make retirement even better as we come through. But these are just first impressions as we get the portfolio. The third level, and I promise this is last one before I give you guys the mic back. I know, I told you Matt, it’s your worst mistake. Is looking at the different, and this is more of a quantitative, like quant finance lens about portfolio management.

Matt Mulcock: This is great. Nope, this is great. I love it.

Rabih: You can look at all the investment universe and divide it regionally for political risk. You can divide it by sector for business first, but you can also divide it up relatively based on how companies compare to one another where there’s really a big divergence between the winners or the losers. How far away are they from each other? And in the investment universe, more of a rule of thumb of how we divide the investment universe, we divide it based on a three by three quadrant. The first quadrant, the left-hand side that you guys are seeing here, is we try to divide the investment universe into large companies. And usually it’s companies that are worth probably over $500 or $300 billion, right? Medium-sized companies between like ⁓ half a billion to like the $300 billion. And then small companies in their market size, the ones that are much slower. Fun fact, when we’re investing in the S &P 500, we’re only investing in those large companies. When we invest in the Russell 2000, we’re only investing in those small companies at the bottom. When you invest in the total US market, you’re buying all of these nine quadrants. So in this portfolio that they’re in, this left-hand side, they are in large cap and medium cap, but the amount of weight that their portfolio has in small cap is zero across the board. So this is first a gap that we immediately identify in trying to analyze their diversification. And this is how their portfolio equity wise compares to a globally diversified portfolio and how much globally diversified portfolio has on the right hand side. The other way we divide the investment universe is based on how cheap or expensive the companies are with respect to each other. the company, if two companies have the same amount of earnings, but one has a higher stock price, this means that when the one has a higher stock price is more expensive. And that would be considered a growth company because the stock price has been popped out. Because market participants thought this company will grow faster than the other. The other company, which is same amount of earnings, but a lower stock price, this is a value buy. This company is, if the market likes it, it will have its stock price go up similar to the other stock. So that one would be considered a value buy and there’s balance in between. So you would want to allocate your money across all types of companies, the value companies, the balance companies and the growth companies. And why is this important? Because this way of dividing the universe is not independent from the sector way of dividing the universe and is also not independent of the global diversification aspect of how you divide the investment universe. So usually value companies, which you see over here, 32 compared to an index of 20, 32 % of the portfolio compared to the index that has 20 % in the portfolio. This is very similar to why defensive stocks are overweight in the sector component of the analysis. So there is a lot of consistency over here. And it tells us the story that this portfolio is probably a defensive portfolio, does a defensive, neutrally, it doesn’t have to be good or bad, is a defensive portfolio, the right portfolio for the clients in this current situation. I’m gonna stop sharing my screen here just so I can see you guys and we can come back to this in a second.

Matt Mulcock: Rabih you said something earlier and I think it fits really well to bring that back which is Every investment firm or financial planning firm or anyone who has investment management would tell you the diversification is good But I think which which I agree with but what’s so interesting about what you just went through and I’m gonna cascade back to you very simply in simple human terms Which is there’s diversification as an idea as but if you break down the components of diversification You just highlighted three big categories being global, you know, geopolitical diversification. There’s ⁓ industry, actual like different industries in that economy. And then there’s the size and then the, guess there’s four, because it’s the size of the company. And then there’s actually like the stock price, how cheap it is, right? Value versus growth. So I highlight that to say, yes, every firm you would talk to would say diversification was good. It’s like a nice tagline. But when you just broke that down, the way they’re executing diversification, we would say, based on these clients’ situation, is completely lacking. It has pretty huge gaps. I just think it’s worth highlighting that there’s the marketing, yes, diversification is good, and then there’s how nuanced and detailed that actually gets in the execution of it.

Rabih: It is like, it has gaps, yes.

Will: and not all diversification is created equal. And I think like, you know, could say skiing is fun and there’s lots of different routes you could take to get down the hill. So it’s like there’s, there’s a lot more nuance just than, diversification is a good thing.

Matt Mulcock: Yeah. Yeah. Yep. And, and when you talk, I love that analogy, Will. ⁓ I really appreciate you bringing up skiing because I couldn’t ski this year. So just kidding. ⁓ but when you bring up the case of this, these particular clients, ⁓ Rabih, you’re talking, and this is what we talked about being planning first. Rabih, it feels like this was designed, like you said, more defensively to reduce volatility. The question becomes, and I don’t know the answer to this. But did those, did that other firm actually figure out and try to ask the right questions around their life, their business, their cashflow, their timeline to understand like, should they even be in events of portfolio? I don’t know if that happened. I feel like it probably didn’t.

Rabih: We actually got that answer and we didn’t get that answer from investments, right? We got that answer from financial planning as you guys were looking at the full financial picture of those clients. What did we end up seeing? They were outside of their portfolio. They were sitting on $2 million of cash. So not only is your portfolio defensive, you’re also leaving almost half of your investable assets in cash in a period over the last three years where we’re seeing inflation higher than usual.

Matt Mulcock: Yeah, yeah. Yeah.

Rabih: So what does that tell us? If their portfolio was completely aggressive and then they had cash on the side, we’d say maybe they’re trying to balance in an unorthodox way. But if you’re a defensive portfolio and you’re sitting in cash with a financial planning situation where you need to make sure everything is appreciating and your portfolio is the highest value it could be before you go into retirement, and this is honestly, it’s a red flag from this side of financial planning that was done.

Matt Mulcock: Yeah, that’s a good point. Go ahead, did you have something on that Will?

Will: I was just going to say, think in the grand scheme of things, it’s important to understand. think you hit the nail on the head, Matt, just saying like, did this investment plan line up with their life? And I think planning first just says like, hey, we got some gas left in the tank. These clients have some time to let this grow ⁓ and huge cashflow to make it so that we don’t really need to be defensive at this point.

Matt Mulcock: and huge cash flow, right?

Will: I think we can be a little bit more aggressive and they’re comfortable with that. And, ⁓ you know, it’s something that we, had a conversation about and we’re going to implement and go forward and see how this pans out over the next couple of years, because they are in a position where compounding will make a really huge impact over the next couple of years, because their portfolio is the size that the returns are meaningful and significant.

Matt Mulcock: Yeah. Go ahead, Rabih.

Rabih: 100%. And when we say aggressive, it’s not saying that we want now the portfolio to have a 10 % exposure to tech above the index. All we want just at the baseline to make sure that we’re starting from a good scratch level zero point is to make sure that we’re not overweight defensive. We don’t want to be aggressive by over weighting tech. We want to go back to a neutral amount of risk exposure by just making sure that we’re not overweight defensive stocks rather than being underweight tech stocks.

Matt Mulcock: Yeah, that’s a great point. Um, the other aspect of this, when we talk about where we’d say we’d want to be a little bit more aggressive, I think there’s some nuance here for their particular situation when it comes to her practice, the location of her practice, the fact that she’s a super producer, there’s reason, there are reasons for us to say, you might not. And she, we’ve talked about this, right? Well, you’ve talked about this with her where it’s like, she said she doesn’t want to rely on a practice sale or a big practice sale to like fill in major gaps, right? Can you give more color to that conversation and her that part of her plan?

Will: Yeah, it’s such an unknown because it is a, it feels like a hard practice to sale because, or to sell because she’s a super producer and it’s going to be hard for a young up and coming dentist to get in here and do the same amount of production and same stuff she does. Um, so it’s tough to put evaluation on it that really reflects what she’s, you know, what, what she’s accomplished so far. It’s same thing with a DSO to be completely frank, like I don’t know, I didn’t see the DSO valuation that she got, but I assume it would have been something to where it’s going to be hard when she decides to be done working to replicate her no matter what. it’s, can’t just plug an associate in there and replicate her production. So my take on it with that was it’s up in the air and she didn’t want this to be like the thing that makes her breaks her retirement is her practice sale. So she’s like, I want to make sure that I’m basically good outside of the practice sale. And that’s not to say that. The practice sale shouldn’t be an important part of the planning picture. It should be. you get, you know, the dentists that have built their practice valuations have, uh, put a lot of eggs in that basket and it’s going to be a large part of the financial picture. I, you know, we told this to the clients, like it’d be a responsible to not, uh, include some version of a practice liquidation here because it is going to be significant. It’s just a question mark, right? It’s a question mark to know when it gets purchased because it’s going to be a more illiquid section of the market and for how much it goes for and what kind of a person is it a husband wife couple that comes in and buys or is it, you know, multiple doctors that come in and buys or how is it going to be sold? And so because it’s such an unknown, it was really important to shore up the financial success outside of the practice to say how likely are we to have success if the practice sells for this amount or this amount or this amount. And we have a Awesome software that allows us to do that, that kind of takes the guesswork out of it. We can say, here’s what your life looks like. Here’s the Monte Carlo simulation probability of success that you will have if your practice sells for a million dollars, for $2 million, for $3 million. And here’s how much money is going to be left over at end of the day. So it was pretty powerful to go through that process and say, things look pretty good, even in a scenario where you don’t get top dollar for your office.

Matt Mulcock: Yeah. Yeah. I think that’s a really good point and good to highlight the nuances that can come from individual situations and how, how that informs the investment discussion. Rabih, I’m curious too, from your perspective, how did the significant sums of cash on the sideline, how did that impact your evaluation of this analysis as well?

Rabih: it actually made my life easier. That made my life easier. And the second thing that made my life easier was the client’s own personal preference that they want to feel like they are organized and they don’t have so many holdings out there in their portfolio. they were kind of, yeah, we were recommended the SMA, but if we’re going to be in an ETF and it’ll do as good, if not better, just because it’s cheaper, right? Then why don’t we do that? So Usually when we have a client, before we go into this client case, usually when we have a client that has an SMA and the SMA is lacking in certain parts, we think of it in two ways. We either get rid of that SMA, right? We sell everything and we’ll see the tax situation up there and see if it fits. Especially if like the SMA is an IRA, it’s a no brainer. We can just get out of it and get organized and clean as quickly as we can. But if it’s in a brokerage account, we have to think about the capital gain consequences of getting out of SMA one way to think about it. The other way we would think about it is like, okay, this is SMA, only has large cap and major cap stocks. We would want to fill it back in. We can go and put that SMA in a bigger SMA where they also buy individual positions that fill the gaps to where we think diversification is better implemented. In their situation, the fact that their portfolio, the cash on hand is also as big as the portfolio, we were going to say, Let’s do the cheapest, most tax efficient way to get your portfolio back on track. That was the idea. And the reason I want to get that portfolio back on track is because as Will said, we have a new investment problem in the next couple of years. The Monte Carlo simulation is going to give us different scenarios on how feasible retirement is going to be. And I would want the portfolio from this moment in time to be as flexible as possible for me to adapt it to the circumstances of what the practice sale is going to be like. So we really secure a very robust path to retirement. So in this situation, this specific case, we said, okay, we have so much cash on hand on the other side. We got blessed with that. Only from my perspective on the spreadsheet, I got blessed with that. They were missing on returns, right? And what I’m going to do is I’m going to use that cash to fill in the gaps with ETFs. The decisions that I have to make, okay, I have a gap in small cap. I have a gap in emerging markets. I have a gap in within each sector. Like in the US, we said we had like 56 holdings. Well, the US stock market on its own is 3000 holdings. So I need to fill up the gap of those smaller ones that are 2000. The first thing I have to think of, which next step gives me the most, what are the low hanging fruits in a sense, right? The biggest low hanging fruit right now is to make sure you’ve got emerging markets exposure. So we are on a plan where we’re not doing them all in once. We’re trying to face out the investment as we do it. We are now in the stage. We are building back the emerging markets exposure in that portfolio. The next step would be building up the small cap exposure in the market. And once you are everywhere, you start going into each cell of these cells that I showed you and start making more, make it more dense. If each cell has 500 stocks in it and now we’re at 50, let me add a little more here and there. And that is the path we’re going to take to bring the portfolio to a globally diversified portfolio that is long-term in nature, that is, I would say passive in… It’s exposure. We’re not trying to time the market, but it is very active in its implementation because a passive implementation would be yeah, let’s just buy an ETF and We might be over concentrated somewhere under concentrated somewhere No, our implementation is very active because we’re going and trying to fine-tune pick the highest lowest hanging fruit, but to get to a point where the portfolio is very passive in its outlook AKA no matter what happens to the global economy, global stock markets, we are diversified and we are on a path to be able to have a higher probability of success going forward.

Matt Mulcock: Go ahead, Will.

Will: I’ll just add some color to, yeah, I love that because it is, like the way you use, it’s not a passive implementation, it’s an active implementation. I’ll just, part of the reason there was so much cash on the sidelines is just because I think this is common. We hear it all the time. I even fall trap to this myself when I’m a financial advisor is just like, when is the best time to invest? Right? And I think we all become. not victims, but just like a little bit caught in like this, I want to wait for a better deal or I want to wait for a market downturn to put my money in, which is the right attitude to have. Like I’d rather have that attitude than, you know, a lot of other attitudes that you can have about the stock market, but it’s the right behavior. I want to wait for the market to go down before I buy because I don’t want to buy at all time high prices. So that’s part of the story here is like, and they put some money in last year when the market dipped when Trump announced tariffs, but you know, not the whole thing. so it’s just what part of the active implementation is what we call dollar cost averaging. You don’t have to pick the right day. You don’t have to pick the right. Perfect downturn timing, but actively we are going to start putting money into the market over time and you take the guesswork out of it. You pick a number and you start putting it in the market and you close your eyes and you let it happen. And you know that if you have a long enough time horizon, it’s just not going to matter. So for a lot of people out there that may be sitting on extra cash or, you know, deciding on, I’m going to time the market and wait, why not pick a number and just start getting some, something in over time. And if the market does go down over the next two, three years that you’ve picked for your time horizon of entering into the market, at least you are actively entering and you know, you can say I was doing something and it was happening. So that’s, that’s what we’re doing now, which is, which is awesome. It’s the active implementation side.

Matt Mulcock: Yeah, that’s great. So with the last ⁓ few minutes we have here, Rabih, I know you’re itching to get back to the spreadsheet. Why don’t we hit a couple of these specific examples of how you actively are implementing these changes.

Rabih: Yeah, sure. Let’s go back. what we can look at is that, well, this is where each scenario is going to be different, right? So far, I’m trying to look at, we’ve been buying, and as you guys can see the cash amount, trying to calculate what the buy order has to be in each geographical region, because we’re still at that position. But as of now, what we’re interested in, trying to see what is the diversified portion, aka the ETFs. or the mutual funds that are fully diversified that they have exposure to compared to the undiversified portion. As you guys can see, we started looking at the portfolio when I first showed you that table. 100 % of the account almost was in, ⁓ like the Roth was 100%, their joint was 97 % in common stocks, ADRs, right? ADRs are American depository receipt. It is when you want to invest in like a foreign company like Ikea or Toyota or Mercedes. They’re not a US company. They’re in Europe and in Japan, et cetera. And you have to buy an ADR to get exposure to it. Only the IRA had funds. So we’re moving from a position where we’re 100 % in these stocks. And as we’re building it through, right now we have already done a lot of work where now the diversified portion of the portfolio is 55 % of all the money out there, of all the money that’s invested. So we are almost done with stage one. And then we can work on stage two and stage three. Hopefully, with these two positions, like US broad equity, international broad equity, and emerging broad equity, those are diversified positions. The two that you’re seeing over here has probably in it 3,000 compared to the only 52 that are both up here. The one over here that’s highlighted in yellow has probably 5,000 compared to the 22 European depository receipts that are showing up there. So from that perspective, We are following the portfolio every single day and the portfolio has, as you guys mentioned, active cash flow coming in. So there’s not only the cash that is up here, we moved it to money markets ⁓ just not to waste opportunity costs while we’re implementing the strategy. We’ve got the money market cash, we’ve got the cash flow cash that are coming in, and every single day you are trying to see when is the proper way to realign that portfolio slowly to the target that you need.

Matt Mulcock: So good, Rabih. I think what I like about this discussion so much is I think it gives us an opportunity and our goal is not to overwhelm. We hope this hasn’t been too overwhelming for people, but I think it gives us an opportunity to highlight areas of financial planning and investment management that falls into the category of like optimization. Right. I think we talk a lot about core principles, which should be the foundation of everything that you do. Where even in this discussion, we’re talking about the core principle of like planning first and their life and all that. But I think it’s really a good opportunity to say there’s also a lot that goes into this and a lot of optimization that needs to be done in order to kind of maximize your opportunities to grow your wealth and to reach your goals. So that’s what I think is cool. And just give you a chance to get to dig into the spreadsheet. So that’s what I think is awesome. ⁓

Will: I agree.

Rabih: So all about that’s good news.

Will: I like that, Matt. I think that’s a good point is like good, better, best, right? Like you could have a really decent plan. That’s probably going to like, may stumble into retirement eventually, and you probably will, right? Like these clients, because of, you know, the amazing career and just situation they put themselves in, they’re going to be fine based. I’ve told them this, like kind of no matter what you could just stumble into retirement and be on fine. But the optimization is important because why

Matt Mulcock: Beyond fine, yeah.

Will: If you’ve done all of the work to create this amazing asset for yourself, why not optimize? Why not take the quick and easiest route that you can take the path of least resistance to retirement and riding off into the sunset and happiness.

Matt Mulcock: Yep. Yeah, totally. Rabih, any other final thoughts on this, of your analysis, or just things that you saw on the investment side?

Rabih: No, we have a plan and we’re following through. There’s also the fact that the market fluctuates. So if it dips, you would be more aggressive and when you’re buying, if it’s keep going up, you’d ⁓ monitor that. But honestly, all of these numbers that you guys are seeing, ⁓ I would be working in the dark if I did not have the North Star of like, this is the client situation. This is what they can afford to handle in terms of risk. These are the goals of when they will need money out of that portfolio. And these are the financial planning guiding principles that makes proper investment management efficient versus just a sales the investment management

Matt Mulcock: Yeah, great. Will any other final words on this or just context you want to give or light you want to bring to this?

Will: No, I’m excited to see it play out. think it’s, that’s like part of the fun is this is a newer client and implementation that we’re putting into place and it’s going to be awesome to see the tree bear its fruit and watch as hopefully they have more, the, the, the more mushy, gushy side of financial planning, hopefully some more peace and guidance and peace of mind to know like we have a plan it’s on track and we’re going, if we just can, you know, check these checkpoints along the way, we’re going to live a really happy life and retire and not have to stress.

Matt Mulcock: Yeah. Love it. We started with this. think we want to finish with it is that planning first should be the focus. The investments should serve the ultimate plan and really serve your life and the goals and the design you have in your life. And our goal, and hopefully we achieved it, was to highlight that with going a little bit deeper in the optimization things. But investments are a job to be done. They’re critical. It can get super complicated. And obviously we want to highlight this case. It’s a unique case. We’re not saying that every dentist that comes to us has a portfolio of this magnitude of this complication, but we thought it would be good to highlight that. But bottom line is your investment strategy should be serving your life, not necessarily the star of the show. So really appreciate you guys bringing this. ⁓ Rabih going deep and will, you know, helping us give context to this and doing the hard work that is kind of bringing these two worlds together of the quantitative and the qualitative aspects of financial planning if you were out there listening and thinking, Holy cow, I need help with this. You are not alone. We talked to hundreds of dentists all over the country. We work with hundreds all over the country. We’re here to help. You can go to dentistsadvisors.com book a free consultation. We’re happy to talk to you. We’d love to hear your story. See how we can help for now. If you’re still listening, you’re one of the cool ones. Thanks so much for being here. Everyone, ⁓ will and Rabih, thanks for sharing your words of wisdom till next time. Bye bye.

Keywords: financial planning, investment strategy, dentists, retirement, portfolio diversification, active management, planning first, case study, global diversification, risk management

Finance 101, Investing