EPISODE 41
Money Miniseries 3: Investing
Episode Transcript
Dr. Randy Lehman [00:00:00]: And welcome back to The Rural American Surgeon Podcast. I'm your host, Dr. Randy Lehman. We're in our financial miniseries, and this is episode number three. Our first episode was about purpose—what's the point of money, what's the point of trying to create financial independence in the first place? Episode number two was more about frugality and its more inspirational upgrade counterpart, in my opinion, which is minimalism.
Dr. Randy Lehman [00:00:31]: Explaining how stuff kind of ties you down and limits your freedom, and just changing the mindset on what exactly the overall goals are. Also, understanding how basically frugality and the value of your own time, your own energy, and the resultant money that you're generating by expending your energy can be treated in a way that gives yourself a margin. And that brings us into this episode, which is about investing. This is not investment advice.
Dr. Randy Lehman [00:01:07]: I am not a financial advisor. I'm a surgeon with a deep interest in making my money work wisely because I've learned that money either works for you or you work for money. Warren Buffett has a quote that says, "If you don't learn to make money while you sleep, you'll work until you're dead." I think that most people who have the opportunity to get financially independent, we talked about last episode, the 4% rule.
Dr. Randy Lehman [00:01:38]: It's about getting your net worth to a point where you can pull out 4% per year and consider yourself financially independent as long as your spending is below that threshold. Therefore, your freedom is determined a lot more by your spending than by your income, net worth, or any investing results. It's more about your spending. That being said, you could take that mass of money that you have, whatever your net worth is tied up in, and it could be all tied up in your personal residence.
Dr. Randy Lehman [00:02:08]: Right? And you're not financially free at all, because it's not generating any return. So, you can't pull that out indefinitely. You could have it tied up in a lot of other things that don't necessarily generate a return like cryptocurrency, actual precious metals. Maybe you have art investments. Maybe you own stocks and bonds, but maybe they're growth stocks and bonds rather than dividends, or you've got your real estate investments depending on what you're doing.
Dr. Randy Lehman [00:02:40]: The 4% rule, again, may or may not apply, but it's a good place to start. It's a good understanding that you need to start basically tracking your net worth. I track my net worth monthly on a big Excel spreadsheet, which has really turned into quite the work of art itself over time. But it's a lot of fun to watch it grow and to understand that the best thing about tracking your net worth on a monthly basis is understanding all the activities you do throughout the month and how those are going to contribute to your net worth.
Dr. Randy Lehman [00:03:12]: You're standing at the store, thinking about buying something, and you know that dollar amount is going to show up in your net worth the next month. So, if you're holding yourself accountable, the most important thing is that most people just close their eyes and keep the accounts closed. They don't really know where they're at. But what we're talking about today is investing. Investing conceptually means taking your money, trying to make it work for you, and getting a return.
Dr. Randy Lehman [00:03:42]: Turn a dollar into a dollar fifty, right? This is different from taking an hour of your time, trading it for money, and then taking that money to buy the things that you have to have to live or want, and then going back down to zero again. This should be considered inspirational for you to educate yourself more and is not investing advice. There is such a thing as a certified financial advisor. The problem is there are things that the financial advisor can or cannot do.
Dr. Randy Lehman [00:04:13]: For the most part, financial advisors are going to talk to you about risk tolerance. And I'll talk to you about risk tolerance right now. They'll talk to you about saving and frugality, getting some money, and then they'll say here are the things you can buy: stocks and bonds basically, and a diversified portfolio of stocks and bonds. The easiest way to get diversity is maybe to buy an index, right?
Dr. Randy Lehman [00:04:44]: I would encourage you to go to the White Coat Investor to learn more about this topic because they go into great detail about having a three-fund portfolio. You could buy a total international bond index or stock index fund, a total domestic stock index fund, and a bond index fund. But these things are not the full gamut of investing. I think that's where a financial advisor conversation falls direly short.
Dr. Randy Lehman [00:05:15]: The financial advisor will not talk to you about the best investment you can make, which is in yourself. They will not talk to you about real estate investing, which is how more people have gotten wealthy in the world than any other type. They won't talk to you about the most common way that the so-called millionaire next door or the most common one percenter got wealthy, which is by investing in a personally held business.
Dr. Randy Lehman [00:05:46]: They will not talk to you about other types of alternative investing. I'm not even talking about crypto. I'm talking about more like gold and silver, investing in things like oil and natural gas, agriculture, commodities, and collectible things such as art and vintage cars. Numismatics—it sounds like something you need to take medication for—but investing in rare coins, timberland, or things of that nature. Those are investments.
Dr. Randy Lehman [00:06:17]: I feel like it's not fair to have a discussion about investing when all you're talking about is should I buy my stocks in bonds in a certain retirement account or a post-tax account? Should I do a Roth IRA or a non-Roth IRA? You see what I'm saying? There are limits. It's kind of like how the news media you consume nowadays has these two options, these two opinions. You have to choose between them.
Dr. Randy Lehman [00:06:48]: Or the presidential candidate—you choose between these two candidates when, in reality, there are an infinite number of candidates, much different. The two options that are presented to you are more similar than they are different, and there are vastly different options. I personally am doing this, and I think that people who are generally really getting after it do this too. People buying sports teams, for example—it's a type of investment.
Dr. Randy Lehman [00:07:19]: Aircraft ownership is a type of investment. You can do litigation financing, invest in music royalties, or buy wine and invest in that. You can buy non-fungible tokens. These are totally different types of investing that I'm going to cover fairly high-level because we could talk for hours, probably weeks.
But before we go into those types of investing, the first and most important thing is to know yourself and understand that any kind of investing includes a component of risk. So, what is the risk? We've all heard that phrase, Russ. You know, there's a component of risk in investing, right?
Dr. Randy Lehman [00:09:23]: To me, there are two different types of risk. One is losing the money that you invested, and the other is losing more than what you invested. For example, if you buy a stock and the company goes bankrupt, then you lose the money that you invested. But because you are a stockholder on a stock exchange, while the bank is going after the company that went bankrupt, they will not come to your house and knock on your door because you are a part-owner of that company. Your stock value will just go to zero if you're buying on the regulated stock exchange.
On the other hand, if you buy part of a company that is personally held and you are personally guaranteeing in some way a component of a loan that the company holds and the company loses everything, then there's a potential open door for the bank to come asking for payment back for the loans that that company had from you, right? So, the first thing anytime you're talking about the risk of investing, it's one of those two risks. You're either going to lose the money that you invested.
And so, you want to ask yourself, with this, with this thing that I'm buying, do I have the potential to lose what I have invested, or do I have the potential to lose more than I've invested? And then you have to ask yourself, am I okay with that? I personally am. I mean, I feel like in order to really get to where I'm trying to go, I have to be okay with some of that component of risk. But then it's about managing it and it's also not fixed. So, it's very personal and very dynamic risk. Risk is. And risk management.
So for me, for me personally, when I was 31 years old, I was just out of residency. I had basically nothing. I mean, I told you on the last episode, you know, I had gone from a negative net worth to a positive net worth. I did have some investments, I did have some cash and some real assets. But the main things that I had were I had spent the last 13 years of my life investing primarily in myself. I'd done a lot of good job educating myself and I was really prepared when I graduated mentally to handle the first paycheck right, and I didn't blow it.
I bought the small house and I lived a simple, frugal life. And I invested really hard because that was the time for me to invest really hard. So, I had a good-paying job. I also had life insurance. So, if I died, my family's taken care of, disability insurance. So, if I lost the good-paying job, I would still be covered.
I had a willingness essentially to hustle that was the time in my life to take big swings, because what could happen if I lost the money? Then I could recover, right? So, fast forward a few years or a few decades, and things are very different. My risk tolerance would change. So even a few years forward now. I'm. My kids are older. I have now made the amount of money that I've made over the past five years. I've spent that time, and now I have a desire to not lose that. I also have certain business obligations.
My risk tolerance has changed. So, what makes sense at 31 doesn't necessarily make sense at 40, may not make sense at 60. So risk, I would say, I would suggest to you, is not bad. Smart risk is definitely how you go, how you grow, and it will be necessary in order for you to, to invest. But risk is something that you manage. It's not something that you ignore, and it's not something you bury your head in the sand.
My dad told me that sometimes I move quick, really quickly. And I asked my. He said that most people like to have firmly a hold of the next rung of the ladder before they let go of the last rung. And he, he told me he thought that I was sort of swinging through the vines in, in the forest like a, you know, a monkey and letting completely go and expecting that that next vine is going to come. Maybe there's a certain element of my life that is actually kind of like that, where, you know, you're the construction worker on the top and you're. The next boom is just moving in place for me to step onto the next boom.
And I'm not necessarily arguing with that. I sort of feel like I have been somewhat protected in life by basically providential means. Although I've been through tough times and tragedy and things like that. I think that there's definitely something bigger going on. There's something bigger than just me. But that's not my investing strategy. My investing strategy is not just take uncalculated risk and expect God to figure it out. For me, that's definitely not my strategy.
And I had then to have some conversations with my dad about, no, here are the risks that I do understand and I, and I have calculated, but I understand all of these other options and things that are pivots and, and ways out. To a certain extent, also having multiple different streams of investing might seem a little scattered. It's. If one area kind of fails, it doesn't work out, then there's a buffer which can be covered by the others.
So, we've, we've kind of moved past that. And then I, I asked my wife in preparation for this episode. I said, you know, who do you know that has a higher risk tolerance than me? Because in some regards, I'm looking around at my personal relationships and just general people that I know around me, and I move more boldly than almost everybody that I know. And she said, nobody, which isn't necessarily good, right? At first blush. But then I said, so would you consider me be a risky person?
And she said, no, no, I wouldn't, because I'm not a cowboy. I'm taking. That's. It goes back to managing risk. So being comfortable having an element of risk in your life and being smart about how you manage it are two very different things. There are people that do risky jobs and love it, and I might love those things too, but I wouldn't do them right now because they're not a, they don't fit with my overall self.
For example, like, I'd love to go to Mars, right? And I'd love to be an astronaut, but I would never do that right now because I have certain responsibilities. I have an 8-year-old and a 6-year-old that I'm not gonna like, leave hanging. You know, I might, but it's not gonna be because of me doing something dumb, you know, and, and I, it's a time in my life where I want to be present for them.
Now, at some point, they're going to be grown and I may, you know, you have people that are younger that don't have, they're not married and they don't have children, or most importantly, probably don't have children. And, and those are generally the people that are, you find appropriately so, taking occupational risks like that. And you know, working in jobs that while they might be fun, they might have an element of risk.
And then, you know, you get older, and a lot of people, they settle in and they would not take increased risk. However, it may be reasonable for somebody to do that when their kids are grown and, you know, you know, they're off, you know, when they're off of the dependent from the IRS standpoint, they're also off of the dependent for you from other things, you know, but you want to be there for them. But, you know, here's, here's a, you know, to make it personal for me, right?
One thing that I hear a lot is you talk about flying. So I fly almost every day, fly helicopter and, and every.
Dr. Randy Lehman [00:18:34]: People are just when I leave and I'm driving somewhere, sometimes people say, you know, safe travels, especially if you go on a long trip. Let's say safe travels or whatever. But they always tell me, oh, fly safe, fly safe. Right? Because there's this unthought that what I'm doing is riskier. And the reality
Dr. Randy Lehman [00:19:05]: is that I lost my mom in a car accident on the interstate. Single vehicle, sunny day, flipped her car, was ejected, and she was 49. Meanwhile, my grandpa bought his airplane when he was in his 60s and spent several decades flying, you know, thousands of hours. My dad has had his license, flies a lot. I fly all the time. My wife has her license. There's a
Dr. Randy Lehman [00:19:37]: feeling within general aviation that possibly a minority of pilots cause a majority of the accidents. Right. But that's not to say that I'm just some safe pilot that's going to be protected because I'm maybe in the majority of people that consider themselves safe. And, you know, different things that people say can age poorly or well based off what actually happens in the future. Right. And the thing is that accidents do happen.
Dr. Randy Lehman [00:20:07]: And so some of that stuff is not just a specific 100% risk or zero. Because the thing is, there is a percent chance that my mom dies in a car accident in her lifetime. And there's things that she could do that would increase that risk or decrease that risk. Driving without a seatbelt, you know, driving recklessly, drinking and driving, things like that, that will increase and decrease the risk, but it
Dr. Randy Lehman [00:20:38]: won't make it 100 or 0. But then at the end of the day, it is 100 or 0. It either happened or it didn't happen. Right. And so the same thing is also true with things that we do in surgery. So we have a certain percent risk of DVT after varicose vein procedure. We have a risk of infection after we make an incision; we have a risk of anastomotic leak. Those risks, when they happen to the patient, it's not like, oh, you have a 1% DVT, they either have it or they don't.
Dr. Randy Lehman [00:21:08]: But when you take 100 patients, there's a percentage of them that do or don't. So when you're taking these risks and investing, the question is, are you going to. How are you going to feel when it actually happens? You know, but you got to understand that also it most likely is not going to happen. That's a difficult thing for a lot of people to kind of wrestle with. But I think it does help on one hand to think
Dr. Randy Lehman [00:21:41]: that it's not your money in the first place. So that's a powerful. When you feel like you're a steward rather than it's like my money, that helps you to say, you know, and you read the—what's the Bible say, right, about the stewardship discussion. God expects you to get a return. I mean, because there's three servants
Dr. Randy Lehman [00:22:12]: and they're given a talent. So a talent is not a talent like that. We think about it, it's actually a unit of gold. It's a unit of weight. And it was basically like a million bucks at the time. One guy's given ten talents, the other guy's given five talents. The other guy's given one talent. And master goes away, comes back and says, show me what you did. And the first guy, I
Dr. Randy Lehman [00:22:43]: took 10 talents, turned into 10 more, doubled it. The next guy, five, I turned into five. And what the master said to those two guys is, well done, good and faithful servant. Art thou enter into the joy of thy Lord. And the funny part about that story and what it pertains to the things that I was just talking to you, I mean this topic is basically risk tolerance that we're talking about is that the day
Dr. Randy Lehman [00:23:14]: in June, 13 years ago that my mom passed away, I came into my house and all her sisters were there and she would text me a Bible verse daily. And I didn't really know that it came off this tear off little daily calendar. And they had it, it hadn't been torn off yet. And she tore off, they tore off and turned it to the day that she passed away. And they brought it to me and they said, hey, look at this.
Dr. Randy Lehman [00:23:44]: Isn't this incredible? And what it said was Matthew 25:23. And it said, well done, good and faithful servant, enter thou into the joy of thy Lord. And it's like the day that she passed and you know, they're saying, well, she's in heaven, you know, she was taken home. And I did not want to hear that. I was very upset about it. I basically, I was like, you know, you. She has Bible verses all
Dr. Randy Lehman [00:24:14]: throughout her house, you know, like, it's not, this is not a message from God, you know, and you're talking to a guy that just like is 23 years old and just lost his mom. Monday after the first day of med school. Just started my internship and a couple hours into it, get a call, you know, from my dad. That's just like changes your whole life forever. So don't tell me that I don't want to hear it. How could this be, you know? Well, then the rest of the
Dr. Randy Lehman [00:24:44]: week goes on. And my dad had given a topical presentation and he had used a picture that had an inscription on it and it was, it was that along with other paraphernalia was present in the car. And what he was talking about was, what's the point of life? What's the point of what you do? And he had a lot of trophies that
Dr. Randy Lehman [00:25:15]: were in the car and they were trophies from when he was in FFA as, as a kid. And, and they had, you know, people, men standing on top of them, cheering, raising their arms and stuff. And his point of his presentation that he had given was that those trophies were sitting out in the barn and they were all like, dirty and dingy and rusted and those trophies and the glory and all that's going to fade and then what's going to last is basically what you did for
Dr. Randy Lehman [00:25:45]: others and what you did for God, you know, so your service for others is basically how you act that out. Well, the picture, you know, my mom had breast cancer like, three years before this all happened. And so she went through chemo, she lost her hair, her hair grew back. And it's weird because my dad went to, basically to the wrecker where they had hauled the demolished car and my mom had been ejected. Yes. She wasn't wearing her seatbelt.
Dr. Randy Lehman [00:26:18]: A semi driver had witnessed the accident and actually had a conversation with my dad. And definitely she was alive for a few seconds but was unconscious at the scene. Another physician had actually shown up, was driving and that was there on the scene. Of course, they launched the, the, the helicopter and. But then it didn't take off because she'd passed, so. But it was remarkable how really limited her injuries were in terms
Dr. Randy Lehman [00:26:48]: of, like, how her body basically looked fine and then. But the car was like, destroyed and it had gone like end over end and was crazy. Well, she'd been ejected and it's probably like 30, 40 feet away from the car and the trunk had been ripped open. And so my dad went to the talk to the wrecker and somebody that he knows from our small community, and he said, by the way, you know, I found this stuff and he had a box of stuff and he. And
Dr. Randy Lehman [00:27:19]: gave it to my dad and it was the stuff that was in the trunk and the trophies, you know, if they were dirty and dingy before they were destroyed, broken off. The, the little men, you know, with their heads broken off and their arms and limbs broken off and, and the trophies just demolished. And the. The guy at the wrecker said, I've got one more thing for you. There's this. And. And I found this laying basically
Dr. Randy Lehman [00:27:50]: next, next to my mom's body, kind of far away from the car.
And it was the picture. And the picture was of a person embracing Jesus in the clouds. And again, I've talked about too much for coincidence, but at the same time, cannot say that I saw the laws of physics be broken. Right? But too much for coincidence. The back of the head kind of looked like my mom's head after she had chemo. More importantly than that, there's an inscription. And on the daily calendar, you know, Matthew with the first servant, ten talents. Well done, good and faithful servant, enter thou into the joy of the Lord. And the inscription on the picture is two verses later, the second servant. And it said, well done, good and faithful servant. Enter thou into the joy of thy Lord.
And so then I said, I give up. Like, I actually cannot deny this. And this is an opportunity. This has been something that's been given to me to show me some clarity in this moment and to explain that tragedy in a believer's life isn't always tragedy. Sometimes it's time to go. And her purpose had been accomplished. And then we had a funeral with a line that stretched all the way down the street, and over a thousand people showed up. My dad got a sympathy card, at least one every day, for, I believe, it was like the next four, four or 450 days over a year, until the sympathy cards started spacing out to have a couple of days in between them.
And my roommate found Christ because of that experience. And it changed my life because I was just kind of farting around, and it was an Ebenezer, you know, basically for me. And so that's a story about investing from the Bible. There was an expectation for those investors to get a return, and investing to get a return is not wrong. But you have talents, if you will, time, and money. I think there's an element of accountability that at some point you're gonna have to stand and say what you did with the time and the energy and the talents that you had.
I think there's an understanding that perfect, efficient management of our life is also not the primary goal. I say that mostly because of illustrations with Mary and Martha. Martha's running around the house trying to cook and clean and get things done, and Mary's just being present and spending time with Jesus Christ while he's available. Martha's mad, I'm sorry, and tells Jesus to do something about it, tell her to get to work. And he says that she chose the better part.
So you gotta make your own decision. Fortunately, I have a hard enough time managing, putting too much pressure on myself for how I spend my time. But I know that at this point in my life, there's a certain amount of balance that's required. There's kids that need to. I have time to spend time with them now. I have, you know, my dad, my other family members, my wife, my grandparents, that I have time. It's very important that the big buckets get filled first, and then there's time for the other things when. But, you know, how many days, how many hours is the right amount of hours to play Mario Kart in a year, you know, and just totally waste time?
What is the right amount of time to work, and what's the right amount of money to make? The other story about Mary is that she anointed Jesus' body before he was crucified with expensive oil. And of course, Judas Iscariot was somewhat indignant about that as he said, well, that could have been sold and given to the poor. Right. I think it's so funny. I had actually someone that I talked to not too long ago that I would say is too hung up on appearances, in my opinion. I would say that straightforward to the person.
But anyway, we were talking about aviation, and we're talking about the cost of it, you know, and I was talking about time and cost and balancing things. And then somehow there was like, thrown in there, oh, yeah, and that could be sold and used for the. For good. And I'm like, this is not. You know, the poor are going to be with you always. You need to give, obviously, you need to care about others. That's like, core to what I'm saying here. But to think like that is not the way that, for example, Jesus thought. Because Jesus said that she did the right thing, you know, with sort of wasting, you know, or using the very expensive oil, which I think the time. I can't remember it was. It was like a year's wage, I think was the value, the average year's wage maybe for the oil that was used.
When you're taking this back to investing in risk tolerance. Okay. I think that when you have a mindset like what I just described, if you do, it's easier for you to realize like in 100 years from now, nobody is going to care what you did at all about, nobody's going to care about the money that you made, how you invested. Like no one's going to care if you made a mistake, you know. And so it should allow you more boldness to be able to, you know, get your first off, get yourself right financially, depending on where you're at, you know, get yourself out of personal debt, like unsecured debt. When I say unsecured debt, I mean things that you can't sell something to pay it off, right?
And then after you get yourself out of unsecured debt first, which just to be clear, debt for student loans is unsecured debt. You can't sell anything. You have to work your way out of that hole to get yourself out of unsecured debt and then get yourself out of the secured debt that you have on depreciating assets. So, for example, cars would be a good one, you know, boats, anything like that. Don't take out loans to finance a vacation or whatever. And then you have appreciating assets, and then you have cash-flowing assets. So there's unsecured and then they're secured on a depreciating asset, secured on an appreciating asset, and then secured on a cash-flowing asset.
So, for example, an appreciating asset would be your house. If you have debt on your house, it's going up over time, but it's still, maybe it's a liability depending on how you define it, based on our last episode, because it's costing you money every month. So it's like a forced savings plan. But you're, you know, and you're buying something with a loan that is appreciating, may or may not be appreciating faster than the loan interest rate is. And then you have what I try to buy, which is an appreciating asset that is also cash-flowing. And that would be like investment real estate, right? So you have to start wherever you're at, kind of get yourself to the core and then realize where you're at from a life perspective, risk tolerance, you know, what's your age, what's your runway, who's around you, who's depending on you, how can you insure yourself against terrible things that would happen?
So, for example, if you're a high-income earner, insuring against your job going away, disability, I have the issue with my hands that I've talked about on this podcast, you know, and it makes you understand that disability insurance is very important, seems very expensive, and it is, but it's too expensive not to, because what you're insuring against is financial catastrophe. Okay? So if you have a $2 million building and a building burns down and you still have, you know, a million and a half of debt against it, that's financial catastrophe for you.
But if it burns down and you have insurance to replace it, and you've insured against business loss and all these things, you can—in the 21st century—insure against all that stuff. And there's still risk, but it becomes more of a business risk, like the risk of vacancy, et cetera. We're kind of moving from a perspective of talking about risk to actually talking about the actual investments.
Dr. Randy Lehman [00:38:10]: I have some very clear thoughts on the difference between leverage and debt, and I have some very specific thoughts on tax management and how to really manage those two issues. I think they are going to have to be saved for separate episodes, like one on debt and one on tax management. I'd like to close out this episode by going back to what I was saying at the beginning: most financial advisors can't talk to you about all the different types of investments.
Dr. Randy Lehman [00:38:41]: I have essentially a list of different types of investments you could possibly make. It's not necessarily a comprehensive list, but it's a starting point to say that there aren't just A and B options; there are from C through almost infinity. Warren Buffett says the best investment you can make is in yourself. If you're listening to this podcast, you may be a doctor already, or you may be working in that direction or as some other type of professional.
Dr. Randy Lehman [00:39:11]: Consider the cost you put into doing that thing. College isn't the answer, but investing in yourself is. There's a big difference between just going to college and getting a degree, and truly investing in yourself and imagining what you're going to be doing with that degree. I have this list: there's stocks and bonds. Stocks are equities—a portion of a company, a percentage of a company. You can buy them as individual stocks like Apple or Tesla, or you could buy them as an index fund.
Dr. Randy Lehman [00:39:42]: An index fund is something like the S&P 500 index fund. The S&P 500 represents the top 500 market cap companies in the United States on a specific index, and they're purchased and continually rebalanced in that percentage. If a company is shrinking or contracting and another is growing, it buys a higher percentage of the stock that is growing. You can have a total stock market index fund where you buy all publicly traded stocks in the percentages they exist.
Dr. Randy Lehman [00:40:12]: This means you're going to be buying some stocks of companies that are shutting down and going to zero, but at the same time, when that happens, another company takes advantage of that opportunity and grows. Warren Buffett has also said that for the average investor, investing in index funds is probably the way to go. He mentioned, I think, if he were gone, he would tell his wife to buy index funds. It's a strategy. You can also buy mutual funds that are managed by a person trying to beat the market.
Dr. Randy Lehman [00:40:42]: The problem is almost no one beats the market long-term, especially not you. So if you're picking your own stocks, are you going to or are you not? You can't do insider trading. If you have true insider knowledge, you can't use it on the public market. But if you know certain things or have beliefs, yes, you could try. Like Peter Lynch with the Magellan Fund, for example, he beat the market for 17 years, if my memory serves me right, before regressing to market returns.
Dr. Randy Lehman [00:41:12]: It's very difficult, and those you're competing against in trying to "beat the market," especially if you're day trading, are extremely smart people working in New York City in suits. They look at spreadsheets daily to identify values. I don't invest in stocks that way at all. I invest in stocks for the long term, primarily as diversification away from other things I'm doing. It's a way to save money for me, but not like a real investing strategy. You kind of buy because all you're getting for a return is a non-leveraged asset.
Dr. Randy Lehman [00:41:43]: You get whatever return it gives you, usually less than 10% long-term. What you're doing is trying to keep up with inflation, maybe staying a bit ahead of it. Do you believe in the future of the American economy? I have no reason not to believe in it. The American economy is like the craziest social experiment ever. The melting pot of the United States is a very blessed nation and has been on a tear for a couple of centuries. I think we have more runway.
Dr. Randy Lehman [00:42:14]: There are types of headwinds, especially when society starts to take from producers. That's where we're at, and it can become a problem that could start a spiral. But I would still say if I had to pick a country, I would obviously pick the United States. In the field of stocks, you have dividend stocks, growth stocks. The difference is one's a mature company now chipping off a return; the other is a company still growing, reinvesting any returns.
Dr. Randy Lehman [00:42:44]: There's a concept of value investing, but it's hard for individual investors. You have a price-to-earnings ratio and try to determine when it's low enough. For example, imagine buying a restaurant company with a million-dollar income and $900,000 in expenses—a net income of $100,000. How much would you pay for it? Or for 5% of it? If I wanted to sell 20% of my company, you'd receive $20,000 a year if all continues as is.
Dr. Randy Lehman [00:43:16]: What would you pay for that $20,000 a year? That's where your price-to-earnings ratio comes in. How many total stocks are there for the company? What percentage are you buying, and what are its earnings? But there's much you don't know. I don't know who's running the company or its inner workings. Many accounting maneuvers can be done. I tend to invest closer to myself and in things I can control.
Now, that's a lot of pressure on me because if, for example, I invest in a commercial real estate asset and then lose my tenant, then I've gone from a property that had a loan on it to one that was cash flowing, to something that's really a liability for me. That's how you can end up bankrupt, right? And you cannot go bankrupt if you don't owe anybody any money. So that's Dave Ramsey's strategy, right?
He went through bankruptcy and he said, "Never again is that going to happen to me." And I don't want that to happen to me when I'm 60, but when I'm 31, even if I lost everything, I would still have my job that I had invested in that couldn't be taken away from me. Again, this comes to your risk tolerance, right? It's a very different scenario.
So, you know, and I'm living on a farm that I don't actually own. My grandpa still owns it. And might I even think more differently about my risk tolerance if I were ever to buy the farm from them? Because right now I'm not risking the family farm with any of the potential risks that I may be taking with my investments. We'll talk about that in the leverage episode a little bit more.
And I get through this list and then close it out. But your other types of things you can buy would be bonds, right? Bonds are like a loan to somebody, like a government bond, a U.S. treasury bond, where you're borrowing money from the government. You can also borrow money from corporations, or you can have higher yield, more junk bonds, or you can just straight up loan money to somebody. And I've also done that.
And you can definitely get a higher return, but there's a lot more risk associated with that. Now what's your risk? Your risk is you lose your principal that you invested, but nothing more. You know, it's not like you took out a loan against your loan, right? You can also buy on publicly traded exchanges, REITs, which are real estate investment trusts.
There are publicly and non-publicly traded REITs. And you can buy exchange-traded funds which focus specifically on commodities. Like you could invest in just tech or healthcare or whatever. And those are different types of funds buying against stocks that you can invest in. Then you have a whole other category which is real estate.
And that's mostly what I do. But even within real estate, there's so many ways you can do it. You can do land like flip, buy, hold. You can develop, you can buy commercial real estate, which is where your tenant is a business. You could buy residential real estate that could be a single family home up to fourplex, multifamily big apartment complex. You could be short-term rental. Airbnb could be destination. You could be as involved or not involved as you want to be.
You could also invest in a group and just put your money into a group investment. That'd be called a syndication. You could buy farmland, timberland. There are crowdfunding platforms like Fundrise. Those are again more different. There's more within this category than there is alike. And that's just one category of types of investments you can make.
Then, you know, if you've ever heard of 'The Millionaire Next Door' by Tom Stanley, I believe is his name, great book. And what he talks about is the blue-collar nature of most wealthy Americans. And they basically bought and owned their own business, which was usually a boring, profitable business, meaning not a restaurant. It was something more along the lines of manufacturing.
Or, you know, it could be like a boring, profitable business in my mind would be a laundromat. Okay. Something like that. Even more so if you can niche into something. You know, you have a business that makes some little niche product. The nice thing about it is it's stable. And since it's boring, maybe there's a moat around it that other people can't necessarily easily get in or don't want to get in.
And, you know, you have a long-term relationship, you just take care of people. I've got friends that have businesses doing, you know, selling machinery for certain industries or pieces of equipment, stuff like that that you can, that are necessary but they're not commodities. Okay? There's a difference between investing in a commodity where the price is dictated by the market.
So for example, if you're raising hogs, all right, that's a commodity, you're going to sell it. If you're raising corn, you're going to sell it for the market price. The problem with a lot of those things is you have to commit to buying the hogs and raising them before you really know what the market price is going to be. So you then have to worry about your marketing a lot more and potentially, you know, selling your futures and hedging and things like that.
So there is a difference between selling a commodity as your primary business and something that's less so, where you can change your price if you need to, but you can have direct business ownership. You can also take your money and invest it from a venture capital perspective into something you think is going to take off. Sometimes that could also be called angel investing.
Private equity funds. Generally, what private equity does, and a lot of you have seen it in hospitals, is they try to come into a profitable business and usually use some leverage on it and then sometimes put the business in a worse space, but then sell the business. It works to a point but it's not working super well in healthcare right now, as most of you know. Because the people who end up running the business, like what I've seen them do is they'll come in and take a certain department and they'll just close it down.
Fire all the people, fire a doctor and the associated staff. But then what they're trying to do is real quick sell the business before it becomes obvious that the revenue stream has been lost. But they showed that they decreased their expenses by firing a doctor. Well, if you fire the doctor but you lose the revenue stream, obviously you didn't do well. If they don't sell the business in time, then they're going to be left holding the bag. Or if they sell the business real quick, the next person that bought it is going to be the one holding the bag. But either way, that's not real investing. Don't do that.
Lending to other people. I had on here commodities and hard assets. Gold, silver, precious metals, oil, natural gas. There can be certain tax advantages to those things. Look it up on your own. You can buy agricultural commodities, corn, wheat, cattle futures, collectibles, art, vintage cars. I have a lot of people that bought those things and they've made good money. Airplanes, you can do the same thing.
A lot of airplanes are worth a lot more now than they were when they were new. I talked about rare coins, crypto. The thing about crypto is that it doesn't make any sense to me as an investment. I have lots of friends that have made millions of dollars on crypto and they swear by it. But again, it doesn't really make sense because crypto in and of itself is either a store of value or it is a currency and either way, it's not generating a return. So. And I feel the same way pretty much about gold.
You know, you could take gold and use it as a currency. They make little gold things that you can buy that have break-off stamps, so you can just break them into smaller pieces in an apocalyptic scenario. Should we need to be piecing this stuff out? I don't know. I would rather own an asset that is generating cash flow. For me, that's my core concept.
Dr. Randy Lehman [00:54:29]: I do cash flow, buy and hold, long-term investing. If you had to sum it up, crypto doesn't fit that mold because it doesn't really generate you a return. I mean, it's kind of, there's an element of tulip fever right now. Another alternative investment that I have is in cattle, right? So I'm buying cattle and I'm buying very, very niche cattle—Scottish Highlands purebred.
Of course, the type that I wanted are the silvers. And of course, they're by far the most expensive and theoretically might work out. But I think the Highlands are extremely popular right now, so the prices continue to go up and up. But at what point is this going to be like a tulip fever implosion where the cattle prices actually drop? Do my cattle really have any true value greater than another cow?
There are things I could tell you—well, the horns, the dual hair coat, and the meat quality generally stand second to Wagyu in most major tests. I could tell you that's due to the double hair coat causing a lower stripe of back fat, more marbling that goes into the meat. With the horns, they are more heat-tolerant. With the hair, they're more cold-tolerant, they have small calves. Raised on the Scottish Highlands for hundreds of years, they've been left to fend for themselves. They're one of the least genetically messed with breeds. You don't have to pull their calves, and they're moderate-framed.
Although being big and growing fast is effective for feeding America, if you want to have a small acreage farm, and you want an animal that their foot, because they weigh a thousand pounds instead of 1500 pounds. Each individual foot is only 250 pounds when it steps instead of 375 pounds. It's potentially easier with less compaction on your ground. I could say all that stuff. I don't know if I left anything out. They have the highest IQ of any cow, right—still stupid cows with an IQ in the 40s, so don't forget that. But in the end, if you're trying to put pounds of beef in your freezer, the Highland is not the best tool. It will do it, and it will do it quite efficiently because, you know, how else do you turn sunlight and water through grass into beef you can put in your freezer? A cow is an amazing animal for that, no matter the breed.
The rates for Highland cattle are much higher right now; it may just be a bubble, or maybe it will continue and stabilize at the new higher levels. But I'm not investing money in these cows that I can't lose. If it goes down, okay.
The tulip fever story, apparently in Holland, I can't remember exactly when, but hundreds of years ago, tulip bulbs became like a currency. They were traded and sold, and the prices just kept going up. If you had a very rare type of tulip you could breed—well, plant them and sell them for more money. Some bulbs were selling for incredible prices, traded in bars and taverns. Then one day the music stopped, nobody wanted the tulip bulbs, and it was a sell-off, a race to the bottom, how quickly you could get rid of them. Because what you realized was it's just a tulip bulb. So same thing with a cow. There's always going to be a value to a cow—it has inherent value, but there's a floor to that as well. You want to be aware of the things that you're investing in.
That's like, I guess, bitcoin. There's also NFTs, which I feel similarly about, but I feel obligated to mention. If you don't know what an NFT is, good for you. Maybe look it up. Any other blockchain kind of fits in that same category. These are vehicles for how you invest, but not investments themselves.
Here I'm talking about your 401k, your 403b, your 457 plan, your IRA or your Roth IRA, your Health Savings Account, your 529 College Savings Plans, your Solo 401K, or your SEP IRA, defined benefit pension plan, or charitable giving using a donor-advised fund. These funds allow you to invest inside that plan, account, or fund.
If you have a 401k, you can still buy Apple as an individual stock in there, or a total stock market index, or leave it in a money market account. Don't forget if you put money into one of those accounts, you still need to choose your investments and could lose money, but probably won't.
I talked about business ownership; you could own your own business, be it a franchise or a concept you made. Intellectual property, a patent, trademark, or royalty, or buying others' patents or royalties that become your ongoing income. Investing in yourself through education, courses, licenses, or personal growth, listening to podcasts for growth. Finally, if you have cash and cash equivalents, this is very low risk, also low yield. In inflationary environments, cash is worth less tomorrow than today. You have to have a reserve.
My grandpa told me a story about a mechanic who heard of a good car deal but didn't have the cash for the car or repairs, missing out on a good return. You need cash aside for buying opportunities and downside risks in personal and business potential. You can hold funds in a money market account, certificate of deposit, a high-yield savings account, or buy Treasuries. These are cash equivalents. Lastly, some unique investments for entertainment—aircraft ownership. Aircraft tends to appreciate over time because of production costs.
And there's also barriers like the FAA, which is driving a lot of costs up because it requires so much work just to get something pushed through. The FAA, you could buy cattle, have a breeding plan, you know, things like what I do. We also buy tax liens. It's sort of a litigation finance sort of a thing where if somebody else didn't pay their tax on a property, the government wants that paid, and you have a legal right to buy that tax lien. Then you can charge a certain amount of interest and your first lien on the property in front of the bank, in front of anybody, if you buy a tax lien.
So I have a little bit of money invested in tax liens. My point of saying all these things is to tell you that there's an infinite amount of types of investing that you can do. You could, and once you get to the point where you're kind of rolling it all up, you can buy your own sports team if you want to. But I've got my own other opinions about that. Maybe a better option is domain name investing.
People can make money doing that. I used to have sports cards. Right? I didn't make any money off of that. Buying luxury watches is good when the market's up, but when the whole market goes down, those kinds of specialty things are going to be the ones that probably suffer the most because there's not that inherent underlying value. So again, invest in anything at your own risk.
I'm not telling you any specific real estate investing advice or investing advice in any other category. But what I am telling you is to know yourself and understand that at the end of the day, the biggest return on investment isn't measured in dollars. It's measured in your freedom. So the freedom to take a mission trip without checking your bank account, the freedom to cut back on your clinical load when your kids are a certain school age, the freedom to invest in other people around you, your patients, your staff, your community—that's the real ROI.
So learn about yourself. Consider what you actually want. Consider that you're potentially just a steward for the resources that are in your control for the long haul. You have to think. I have to think now. I'm 36, I've got four living grandparents. That's pretty incredible. But yet I lost my mom when I was 23, so I have to consider: maybe I'll live to be 100 or maybe I'll die tomorrow.
All I can do is manage the resources, which I do think talent is a good word—the skills that I have now, as well as the money that I have now, relationships that I have now, and more importantly, the 24 hours that I have today. And in a way that I can live with. Hopefully, I do love to be old and when I'm old, I can look back and basically, I love that quote, "The goal is not to arrive at the end of life in a safe and well-protected package, but rather to come skidding in, worn out, used up and saying, 'Whew, what a ride.'"
That's how you're thinking of managing your day today. And that's really all you have: just today. I really appreciate you joining me on this episode where we talked about investments, all kinds of investments. I look forward to the next episode where we can talk about the concept of debt versus leverage when I have some very specific and unique thoughts that it took me a couple of decades to sort of clarify.
Then we'll talk a little bit more about what I specifically do. Again, not telling you to do it, but managing taxes for a high-income professional could become one of the best things you can do with your time in terms of your efficiency. Several other topics come in this money miniseries on The Rural American Surgeon podcast. So thanks for joining us, and I'll see you next time on the show.
