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Should You Pay Down Debt or Invest? – Episode 73

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Let’s say you have an extra $30,000 in cash. You can pay down a loan with a 6% interest rate or invest in a retirement plan which could return anywhere from -10% to +10% this year. What should you do? In this episode of Dentist Money™, Reese and Ryan dive into the not-so-simple answer and explain why a lot of people get it wrong. They also weigh in on the pros and cons of cost-driven investment portfolios and provide a list of questions to ask before locking yourself into a loan.

Podcast Transcription:

Reese Harper: Welcome to The Dentist Money Show, where we help dentists make smart financial decisions. I am your host, Reese Harper, here with my trusty old co-host, sir Ryan Isaac.

Ryan Isaac: Good afternoon everybody. It is great to be here.

Reese Harper: It is a nice afternoon, Ryan.

Ryan Isaac: It is. It is beautiful.

Reese Harper: We have a special show planned for the listeners today.

Ryan Isaac: Ok!

Reese Harper: I would like to start off with a question.

Ryan Isaac: For me, or for everybody?

Reese Harper: This is for you.

Ryan Isaac: Everyone can play along.

Reese Harper: Listen carefully to the question that I have for you.

(ringing sound)

Ryan Isaac: What was that?

Reese Harper: What is that? This is a chime. A custom, handmade chime.

Ryan Isaac: Yes, I can see it.

Reese Harper: It provides me with guidance and direction during our podcast.

Ryan Isaac: So if you ask a poignant question you will hear the chime? What note was that, by the way, since you are the resident music guy?

Reese Harper: That is going to be a C, Ryan.

Ryan Isaac: Hit another C. Let’s do this again. What is the question you shall ask all of us now?

Reese Harper: The question of the day, and I don’t know that I am going to use the chime only to ask questions. That would be weird and awkward. I am going to let it go viral, however it wants to go.

Ryan Isaac: Please share this on social media with #thechime.

Reese Harper: When you make a salient piece of wisdom that catches me off guard, I could play a G!
I have three options. I have C, E, and G. I can play any of those at any given time for any reason.

Ryan Isaac: Oh my gosh, ok. I prefer the G.

Reese Harper: I don’t like to pigeonhole myself into one arena!

Ryan Isaac: I would prefer if you don’t mind instead of verbal feedback on something nice that I say, you just give me an E.

Reese Harper: I will never compliment you again, but I will chime.

Ryan Isaac: Disappointment you can share in the form of a C.

Reese Harper: Here is the first question. This leads us right in. You have an extra $32,500 that you are thinking about saving.

Ryan Isaac: I have got it sitting in my bank account.

Reese Harper: Should you pay off the debt that you have? You have an equipment loan at 6%. Should you pay off the loan or invest in your retirement plan? The retirement plan might give you a 6% return, but it is not a guarantee. You could get anywhere from negative 10% on the retirement plan to positive 10%, it will be a range. You aren’t really sure what you will get. The 6% interest rate on the loan you could just write a check and pay it off. Which one would you do given that information?

Ryan Isaac: I don’t get to ask any more questions at this point, correct?

Reese Harper: No!

Ryan Isaac: Ok, I would put it in my retirement account, but here is what I am going to say. I am biased to say that.

Reese Harper: You know the answer?

Ryan Isaac: Yes, because this is what I tell people they should do for a living. I will interject the answer of a room full of a hundred and thirty plus people from last weekend when you spoke at a conference and we posed a similar question. When you asked the same question, did everyone vote on that by the way? What was the percentage?

Reese Harper: Well, the survey software only let us take in 100 responses, so it capped at 100.

Ryan Isaac: There were like 130 people there, I saw a lot of hands go up. I would say it was easily 2/3’s that voted to pay it off.

Reese Harper: Yes, I think the software said 60/40. 60% said pay it off, and 40% said put it in retirement.

Ryan Isaac: Let’s just go with the answer that most people would give. That seems like an easy choice. I will take my $32,500 and pay off the debt. The guaranteed 6% because that is kind of a high interest rate for a loan. If I wipe it out, it will save me a couple thousand bucks.

Reese Harper: Ok, so you are going to pay off the loan? Well, first of all, ok, let’s pay off the loan. That would save you about $1938.00 in interest for the year, but that interest is tax deductible which means that really it only cost you about $1,100.00 in interest. This is what happened though. You paid off the loan. That is good because the retirement plan, Ryan, would have lost you 15% that year.

Ryan Isaac: It was a bad year, huh?

Reese Harper: Really bad year. Now you lost money. I am sorry, you made a dumb decision.

Ryan Isaac: I did, I made a bad choice. I said put it in my retirement plan.

Reese Harper: You wanted to put it in your plan, but if you would have paid off the loan like you said in your fake example than you would have gotten it right.

Ryan Isaac: I didn’t choose that, however, I chose to save it. This feels like when we played Oregon Trail on computers in elementary school when we would choose our own adventure.

Reese Harper: Here is another piece of information.

Ryan Isaac: I am kind of bummed out though if I did that.

Reese Harper: Yes, because you lost 15%. Now another piece of information that I forgot to calculate into your decision. When you put the money into your retirement account you actually got a tax deduction, so you saved 45% in tax on your $32,500. That is a total of $14,625.00 in money that goes into your pocket. You got that above and beyond the $32,500.00, but you got this good chunk of money in tax savings.

Ryan Isaac: So this is like a 401k or profit sharing account?

Reese Harper: Yes, now you have that piece of information. Even though your account went down you put $32,500 and it went down 15%. It went down to like $30,000, but you also saved $14,625.00 in taxes, ok? How does that feel?

Ryan Isaac: Better, that makes me feel better about my decision.

Reese Harper: Another piece of information that I am going to throw at you. You actually bought a piece of equipment that year as well.

Ryan Isaac: The story unfolds without a chime.

Reese Harper: So I forgot to tell you that you don’t have any taxes due. It wiped out all of your taxable income.

Ryan Isaac: Oh, the cone beam!

Reese Harper: I thought you saved money in taxes, but you actually didn’t. So never mind, you should have paid off the debt.

Ryan Isaac: Ok, alright. At first I felt good, then I felt bad because it went down, then I felt good because I got a huge tax deduction, but then I didn’t pay attention to the fact that I didn’t need the tax deduction because I had already wrote off all my taxes. I didn’t save anything in taxes, and I lost money.

Reese Harper: Here is our point, ok? There is a thing in finance called narrow framing. It is when you make decisions without considering all of the implications of that decision. It is when you make a decision and you don’t really consider all of the implications. It is a lot harder in life to search out and analyze the implications of each decision that you make. Sometimes we just like how easy it is to get to a fast, single answer solution. For example, “Should I pay down the debt, or put it in my retirement plan?” You just want an answer but there are a lot of things that would affect that decision and a lot of people just make that decision at the high level like we did at the sample survey that I took at the event. 60% of people said they would just pay down the debt. They would just pay down that loan because it was a guaranteed return. They were focusing on the return portion of my question. When I listed it up on the board I just told them that they got a 6% return for paying the debt or they get a negative 10% to positive 10% to put into a retirement account. Most people voted to pay down the debt because they focused on the rate of return that year that they would get from the choice in front of them. That is what a lot of people do. They focus on one part of a financial decision and they neglect or do not consider the other implications. The snowball effect, the dominos that fall from each choice.

Ryan Isaac: Ya, and I think what I liked about that example, especially when you gave it to the room full of people, is that not every decision has a perfect answer. In this scenario it is hard to know what the perfect answer is. There were some pros in favor of paying off the debt, but there was also some cons and visa versa. I think that is the point of narrow framing. Not just that there is one answer, and actually some of the people that originally studied narrow framing would say that part of the problem is that we tend to view these in either or scenarios. We can either do this or that and one is better or worse. That is not always the case. There is more information to learn about something before we actually pull the trigger.


Reese Harper: Salient point.

Ryan Isaac: I got one point on the board.

Reese Harper: Point on the board! Here is what I am thinking. I just want people to take that away. You know in college when they have the trick questions and they put a piece of information in the question that really is irrelevant to the solution to the problem? They will insert something in the question that make you focus on that thing and distract you from what they are really asking about? That is a really common testing technique to check people’s analytical, reasoning skills. They will put a question in like we did in this example. I put in a 6% rate of return that you would get guaranteed if you paid down the loan. And a negative/positive rate of return if you invested in the retirement account. I put that piece of information in there because I knew that people would focus on that piece of information rather than saying, “what kind of account is it? What is my tax rate going to be? How much longer do I have on that loan to begin with? How old am I?” There are a lot of considerations that need to be taken into account, but a lot of times in life we focus on the wrong part of the problem. Especially in finance. Let’s talk about a couple of examples of how narrow framing works in the investment industry. We found an example which I thought was pretty interesting.

Ryan Isaac: Yes, this was fascinating. There was a little research done by Barclay’s.

Reese Harper: Is that the right way to say that? I think chips when you say Bark Lay’s?. Are we talking BBQ, Salt and Vinegar? I do not know, I am not British. I wouldn’t know.

Ryan Isaac: I hear Barklee and then there is a series of race called The Barklee.

Reese Harper: I think of TNT playoffs and my Jazz with Gnarls Barclay. A little aside people that I thought was important to bring up, just so everyone knows. Carry on, Ryan!

Ryan Isaac: Anyway, you know when you sign up for an employer’s 401k and you either get online or they give you a packet and it shows you a list of all of the funds you can invest in? There is a big list. Sometimes there are a couple of pages worth. What they found was that when they showed less stock or equity funds, when there were less funds on the list of stocks that investors put less stocks in their portfolio. Regardless of their age or their time horizon or goals or what they wanted out of their investment accounts. They held less stocks and more bonds when they were shown less options for stock funds. Does that make sense?

Reese Harper: I am going to re state that, Ryan. You are saying I get a list of funds and some of them are stock funds and some of them are bond funds?

Ryan Isaac: Yes.

Reese Harper: When they give me more stock funds on the list, just a larger number of stock funds, then I put more money into stocks.

Ryan Isaac: Yes, more options.

Reese Harper: Then if they give me fewer options, I put less money into stocks. I just follow the number of options that they give me?

Ryan Isaac: Yup.

Reese Harper: I don’t think about whether I should personally have more in stocks or bonds, I just go off of the number on the list.

Ryan Isaac: Ya. That is pretty meaningful too. The research shows that there is a difference of almost 20% between a list that included a lot of stock fund options. People tended to put about 70% of their money in stocks. Then the list that had less than 40% of stock fund options, people had only about half of their money in stocks. There is a spread of almost 20% which is very meaningful over a career, or detrimental depending if you shouldn’t have done that in the first place. The funny thing was that the frame put on this made people feel like they should choose a specific path without asking any outside questions, ya know? This stuff happens all of the time, but let’s go through a few decisions dentists have to make that are common in their businesses and lives where narrow framing can shape or distort the decision that they have got to make.

Reese Harper: Let’s look at the first one that comes to mind for me. That would probably be when it is time to hire an associate or the process of hiring an associate. Someone who is looking at this in a rather narrow view or looking at it as a single issue, kind of like my interest rate example, when we are looking at the loan interest rate versus rate of return in retirement account.

Ryan Isaac: As if this is the only aspect of the decision to make.

Reese Harper: Right, a narrow perspective is that your practice is getting bigger, collections are growing, and you are just feeling like it is time to hire an associate. You are booked out three months, hygiene is slammed, and you would like to increase your capacity. Keep growing collections, earn more money, get personal time back. You also know that there is a perfect, young doctor who’s out there in your mind and you are thinking that that person would probably be eager to come and work in your practice and willing to work some extended hours and maybe work hours that you aren’t willing to. The question is do you pull the trigger and just see what happens? Is being busy and being booked out and being buried a main indicator of whether you need a new associate? In many cases that is the frame of reference.

Ryan Isaac: Ya, that is usually what triggers it. When we have clients start asking about that those are usually the triggers: I am busy, I am booked out, I am working a lot. They think adding someone else who will work extended hours will grow collections I’ll have some of my time back. There is kind of a wider picture to look at though of other indicators that will tell you whether or not it is the right time, or a good idea, or appropriate for your personality fit. Some of these things if you back it out a bit are a bit of the wider frame. One of them would be a question about marketing and patients. Right now you know that you bring in enough patients to keep yourself busy. That is obvious because you have grown your business and you are booked out pretty far. Have you been able to track and measure how many patients you actually need to continue to grow versus how many the new doctor would need? Do you know where those patients are coming from? Do you know based on how many dollars you spend on marketing, and what is that going towards in each marketing channel, and where are those new patients coming from? If you don’t know than that is part of the problem. One of the biggest shocks people have when they bring on an associate is that they come onboard and the owner wants to keep them busy, so they just give them their own production without knowing if enough new patients are coming in to keep the new person busy too. Production is given away and income goes down. That is one of the first shocks, they just don’t know if there is enough new business coming in and where is it coming from.

Reese Harper: In fairness to people who want to grow, it is not easy to just dial all of this in and know it perfectly. There is some element of risk that you will have to take when you hire an associate and you don’t know exactly how it is going to work out. That is part of it. You shouldn’t be completely in the dark about the numbers that are going to drive your growth, however. If you are averaging thirty new patients a month and your personal goal and the amount of income you are making doesn’t require you to look at new patients and quantify how many more you would need in order to support two producers. You will know that if new patients don’t go up in any degree, then it is going to be difficult to support two producers on the same number of new patients. We know that at some degree that is an important indicator, but a lot of people won’t actually quantity their target or their goal for new patients that they would have to have before they decide that this is the right level of new patients to bring on for that associate. I think there are probably five or six numbers that you would want to have in your mind before you pulled that trigger rather than having it be a feeling of overwhelmed and booked out.

Ryan Isaac: Sure.

Reese Harper: Anyway, we don’t need to belabor this a ton. A couple more things about this though that are pertinent.

Ryan Isaac: The other side of the non-business financial side is the personal financial side. Knowing, for example, one of the biggest shocks to people is when they hire this new person and have to give away their own production. Collections can go up sometimes in those cases, but they will often see personal income take a dip for that first year or maybe even a couple of years. That can be a shock to people if they don’t know how that dip in personal income affects them. If you know things like your burn rate, meaning what you spend at home, and how a change of income will affect that. If you know how a lower income might affect your taxes. It might put you in a different tax bracket that saves you a lot of money in taxes. Maybe the savings rate you have been maintaining is high enough to reach your goals and even with a lower income and lower taxes your savings rate can still be maintained at a level that will help you reach your goals in the future. Maybe you still can save money. If you know those things and they are ok than a dip in income to grow and get more capacity might be worth it. It might be worth it just to have some time back, too! We know plenty of people who do that as well. The point is if you don’t know those numbers than it is nothing but a stress. If you don’t know how the change in income is going to affect your own personal goals. Having those measured and benchmarked before this happens to know what kind of track you are on can be a huge relief to you. It can set expectations up the right way or you might know, “look, my savings rate is going to dip a little bit and my taxes are going down too my spending should hold steady and within two years I’ll be back up to break even. Then we will make profit on top of that. Having numbers will just set the right expectations and relieve a lot of stress going into it.

Reese Harper: Perhaps a really important factor will be getting confidence to push through hard times. If something is challenging or you are having a difficult month and your cash is a little tight, than if you have done the math in advance you are going to be able to stick with your plan and see it all the way through. I think it is really important before you make any big financial decisions. Let’s take a quick break. Ryan, when we come back let’s talk about other real world examples that dentists face and that happen in their lives around this narrow framing idea. We will get right back into it.

Ryan Isaac: Ok!


Ryan Isaac: Oh ho, I think those three chimes mean we are back from break.

Reese Harper: That’s the official, “we are back” chime.

Ryan Isaac: : I have a feeling that we might abuse the power of the chime as time goes on.

Reese Harper: I am sure that production and our editor will make sure that doesn’t happen. No matter how many times I chime, they will cut it out.

Ryan Isaac: I have another example of making decisions in a narrow frame that happens really frequently and it reminds me of the first example. Let’s say you have to build out a new operatory in the office and get some new equipment and you have two loan choices in front of you. You can get financing from one of two banks. One of the loans, let’s put this to you. One is a 4% rate, and one is a 5% rate. Which one you gonna pick?

Reese Harper: Well, based on the information you gave me, if I compare the interest rates I am looking at I would say I will go with the lower interest rate. I like less, so I’ll go with that.

Ryan Isaac: That is fine. In my mind as I’m saying this I am thinking, “that is a dumb way to put it Ryan, no one would ever just make the decision based solely on the interest rate. Why are you posing such a simple scenario?” The reality is that it happens a lot. When you are really busy and you have to make things happen we have seen it happen a ton where there are two loans where they differ by a percent and you just choose the lower! That seems to intuitively make a lot more sense. What are some other questions or some other factors when you are getting this loan that would make the 4% less attractive?

Reese Harper: I think it probably boils down to two things. One would be the length of the loan, and the other would be whether the rate is fixed or variable. Maybe a third would be the fees associated with the loan that might be independent from the rate of interest that you quote me. For example, a 4% interest rate may not be the total fees I have to pay for that loan. Fees, length, and whether the rate is fixed or variable. It can cause a lot of problems to choose on interest rate alone. If you pick the 4% rate, but the term is shorter, my payment will be higher than what I am comfortable with. Ryan and I like to measure people’s debt rate or their debt ratio which tells us as a percentage of their income. How much do they have in payments towards debt? In many cases, you would want to pick the 5% interest rate just because the payment will be much more comfortable. It will allow you to do things that will actually lower your taxes and grow your practice and protect you from any kind of recessionary event. Sometimes paying a higher interest rate is a really smart decision. In a world where I would much rather not focus on the rate personally, and I would focus on getting the precise length of term that fits my cash flow the best. If that loan is at 4%, 5%, or 6%, I am not as concerned about that as I am if whether the payment is something that is really manageable. I can always pay the loan off faster and having that flexibility is good. I am willing to pay a little bit more for that flexibility.

Ryan Isaac: That is great, and I think it is important to note, it is kind of like the pay off the debt or invest? There is an argument for both sides, too. What you just said is what probably wins out in the majority of cases, but there are times when you might see someone who is willing to take a loan that is variable rate because they do have so much cash flow and they can afford to take that lower rate. They would rather have the lower rate of interest because they can pay it off faster. They are not going to run the risk of getting into reset periods and having an event on them. It is not going to cramp cash flow. I think the point like the first one you gave is sometimes there is not a right or wrong answer. That is not what we are trying to say, don’t always pick the fixed term loan that is the longest every time. There is just more questions to ask as you go through this and all though it seems like a simple, dumb questions, “which one would you pick?”, it happens that way. Decisions do get made on loans like that all the time and there is just a lot to consider there.

Reese Harper: Ya, let’s go into another subject that I think is interesting. Narrow framing when it comes to selecting different service providers. I think that a lot of times when people are deciding between two CPA’s, for example, where one charges $200.00 a month and the other is $500.00 a month or one is $500.00 and one is $1,000.00 a month. Both have been recommended by friends and are doing a good job for people that you have talked to. They are both credentialized CPA’s that have good experience with dentists and by all accounts they look the same on the surface. One just costs more than the other. Your gut will tell you to go with the less expensive option. If you look back a little bit and ask yourself a few other questions it will change. What is the business process that each CPA uses to communicate with you and reach out to you? Is there any type of schedule that they stick to or communication standards that they hold themselves to internally? How do they keep you abreast of what is happening? Give you good communication along the way throughout the year? If you do get tax planning will you be able to check through all of the deductions that are possible and estimate the taxes that you might owe before the year is already over?

Ryan Isaac: You might be willing to pay more money for someone who will proactively solve your problems before you have to call in with the problems.

Reese Harper: Ya, a little bit more. I’d pay a little more for that. Let’s say a CPA has over a hundred dentists and has a lot of experience working with dentists where another one has maybe four dental clients or six. Then they have a lot of other types of clients. Will they have the same insight and experience as someone who has worked with a lot of dentists and seen more? For every ten dentists that you work with, it is not like they all share the same problems. They share similar problems but two out of ten or three out of ten will have these random experiences. If the number of people you work with is very small and you only end up with ten, then you will not see a problem repeated. Maybe some problems you will have never seen before. For example, maybe out of the ten clients that you have no one even has a second location. Maybe they do not have clients with associates? Are they able to give you good perspective on contracting for example? Or the way to structure compensation for that associate? Or the way that you should put together a benefit package to retain someone? Whether they should be a 1099 or a W2 employee? Those are things that a CPA that only has five or six clients who doesn’t have anyone who has associates will not be able to give you a lot of good advice around. Someone who has 90-100 dental clients might not cost more, they might cost less, but it is an area that is more important than price. If your narrow frame is the price comparison. I think another thing is just thinking about some CPA’s integrate really well with other services. They do really great book keeping in house, or they do great tax planning, they do payroll, etc. Some CPA’s stay away from all of that stuff and then you are left doing maybe a few other tasks outside of their office and when you compare prices you didn’t realize that embedded in one of the prices was a lot more services than the other, right? I don’t know, anything else you can think of with the CPA decision?

Ryan Isaac: No, it is not necessarily the scenario of one being better than the other. The more expensive is not always better and visa versa. There could be a scenario where the less expensive one does work with dentists and they do have a better process and so it has driven the price down. Maybe they even do less services and that is ok with you because you already have a payroll person and maybe you already have a bookkeeper that is doing a great job. The point is that when you are evaluating this, and we hear that too, when someone is choosing a new service provider. It is a smart question, what am I going to spend on somebody? There are just a lot of other things that drive it besides price that will with make up or lose you a lot of value in that relationship too.

Ryan Isaac: Let’s talk about another one where we see narrow framing behavior with investments. We talked a little bit about that in the beginning, with how fund options and how that makes people make different decisions in their portfolios. Let’s talk about the narrow frame of building portfolios solely built on cost. We hear this alot too. I think it is a pervasive mentality in the investment industry. Especially with apps and technology doing investing. Cost is the main driver behind building a good portfolio. Let’s say you open an account in an online brokerage, you are doing it yourself, you build a portfolio and you use a few really, really inexpensive funds. You didn’t have to pay an advisor, your app or technology is really cheap. You have your expense ratio at less than like.01%. It is really cheap.

Reese Harper: That would be really cheap, but yes. There might be one fund that you could buy for that.

Ryan Isaac: That is common, though. You see that!

Reese Harper: Yes, you will see people drive down price a lot.

Ryan Isaac: The narrow frame is, “I have driven my cost in my portfolio down so much that I have built a good investment plan. I have a good portfolio.” There is obviously a lot wider picture to that.

Reese Harper: It is cheap therefore it is good.

Ryan Isaac: Yes, so what is the real story there? What are the other questions that you would pose to someone and or yourself that have more to do than just cost.?

Reese Harper: Well, inherently for me when an investment is inexpensive it is because the construction of that investment is very easy to build. That is why expensive mutual funds cost a lot. Not only because mutual fund managers are trying to earn a profit, but it actually costs a lot more to put together a complicated fund. To select stocks in a way that is highly customized costs more. Some mutual funds are out like interviewing managers and shaking their hands. They go out and are on conference calls with Ford and Apple and make really insightful decisions on what they think makes sense to do with that stock. All of those things cost more, and that is not always a bad thing. The same thing happens even in cheap funds with indexing. An index that is super inexpensive to build is not necessarily going to give you the performance that you want to get. For example, a lot of people do not want to own the entire United States stock market, they want to own a part of the market that is conservative or maybe a little more aggressive. The cheapest fund might be the one that just takes all of the stocks from the entire market and says we will just own these and once every three to six months we are going to reconstitute the index and then every investor is going to hold the same stocks. We are not going to make any decisions at all with the index. That might be perfectly appropriate for the type of portfolio you are trying to build. Something that cost .05%, that might be a super inexpensive index. Then something that is .02% which is slightly more is targeting something specific in the market, like only the companies that have a higher possible return or they are owning the bigger ones, or the more conservative ones. Any time that you break down your search criteria to something more specific and something that takes a little more effort now to make a decisions instead of just owning them all, you own a certain group, there will be more cost associated with that. It is not just like magic that things cost more. The less sophisticated your search criteria, the less it is going to cost. That is not a bad thing, it is actually really good in a lot of cases. I think that people overly simplify what lower cost is getting them. It is not necessarily that you found the right stock because it cost less, you just found the one that is probably a very large fund with economies of scale and it does not have a very complicated search criteria. Hopefully that is not too confusing for people.

Ryan Isaac: I think what you are saying is that sometimes in the name of lower cost people might ignore or exclude things that they might really want in their portfolio. They might want some geographic diversification, or like you said, a different segment of stock types or sizes.

Reese Harper: A different risk profile entirely.

Ryan Isaac: That is what I was going to say. We see that a lot with people that have done things themselves. It is always driven by price. Then when you dig into it, they aren’t always taking on the right risk that they thought they were or that they wanted to. Perhaps it is really conservative and they didn’t intend it to be, or visa versa. There is a lot of considerations. Another thing that gets ignored in the name of low cost, is the right type of investment account. Meaning tax consequences, qualified plan, and the funding of those accounts. Sometimes in the quest to find cheaper stocks or just cheaper funds and cheaper accounts that issue gets skipped over a lot too. Then you have inefficient funding of tax qualified accounts. That can make your taxes worse than they should be or that you want them to be. I think the point is that just don’t assume that having a low cost is the key to having a good portfolio. Low cost funds, no low funds, do it yourself trading and index funds have been around for a long time, but it is clearly not fixing the problem of people being able to retire like they want to.

Reese Harper: It is totally true, man. I think you deserve a bell chime for that.


Ryan Isaac: I was holding my breathe for that. Thank you, thank you.

Reese Harper: I would just encourage people instead of focusing on the lowest possible cost you should focus on the attributes of investments that you want. In many cases that might be the lowest cost funds. The absolute lowest cost fund does not necessarily perform the best. I think it is fair to say that lower cost funds perform better than expensive ones. That has generally been quantifiably true for a long time, but it isn’t fair to say that it’s a race to the bottom. A lot of times it is easy to take advantage of people’s lack of knowledge by just trying to drive the cost of your product down so much that it is more attractive to people, but in reality it doesn’t necessarily mean that it is going to perform the way you want it to. The cheapest furniture, car, house, is not always the best. I can promise you it is the same with mutual funds. The absolute cheapest thing, is not the best.

Ryan Isaac: That is great, and to wrap things up, I would say that none of these concepts are new. This is not rocket science. When you have a decision to make of course you should ask a lot of questions. What we are trying to point out is that we all have a flaw or a bias in the way that we think. We all have precious experiences or insecurities or something that makes us have a flaw in our thinking. It is important to reach out to people around you to gather data and have information without just making the first gut instinct choice on a big decision you are faced with.

Reese Harper: I think that is great, man. I would like to leave everyone with a bell chime to go, and to say thank you from us for today.


Reese Harper: Thank you from Dentist Advisors.

Ryan Isaac: That is the C. With the C note we say, thank you for listening. We would love it if you would take a minute to like The Dentist Money Show on Facebook on Instagram. You can find all of our episodes on, and while you are on the site there is a link where you can click and schedule a time to speak with one of our advisors at your convenience. We are always happy to talk to you, and we would love to hear from you. Thanks for listening.

Reese Harper: Carry on!

Debt & Financing

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