The Physician Investor Playbook: Thrift, Index Funds & Simple Rules with Dr. Robert Doroghazi

Physicians are arguably some of the smartest people in the world, but they're given no instruction at all on business and finance and how to invest their hard earned money. They're really kind of defenseless when they get outside of medicine into the investing world.

Welcome to Truly Passive Income. I'm Neil Henderson.

And I'm Clint Harris. And Today's guest is Dr. Robert Doragazi. He's a retired cardiologist and the author of the Physician's Guide to Investing.

He's built a reputation, is a straight talking voice for financial discipline among high income professionals. So what sets him apart? He retired early from applying his own advice. Living below your means, avoiding debt, invest simply.

And now he's willing to share those lessons through his newsletter and published works and with our audience today. So, Dr. Durgazi, thank you so much for being here. How are you today?

Thank you. I'm doing great and I really appreciate the chance to talk.

Absolutely.

Thanks for joining us.

Yep.

We're excited to have you here. I come from the cardiology background. I spent 16 years in medical sales in that world and I know how hard you have to work in that line of work.

And I always get excited talking about that, that unique individual that is a combination of the science background with the white coat professional mentality for caring for people and being a healer and also having the combination of the business acumen that comes with an investor that that's not something that you see every day.

A lot of people in the cardiology world especially are hospitalists and maybe don't have to think about the private practice side of things and the business mind, let alone getting to the point of how do you invest outside of that to get to the point of where you're not trading time for money. So I love about, love the opportunity to dive into that.

So before we get started with our list of questions, which I'm excited about, why don't you tell us a little bit about yourself, your background and what led you through a medical profession and then investing outside of that.

All of my grandparents came from Hungary, both grandfathers and my father were steel workers and I worked in the steel mills, actually. I worked high school, mowed lawns and fortunately was able to pay my way through college and med school.

Went undergrad to the University of Illinois and graduated in three and a half years.

This was before hospitalists, and we had 10 cardiologists and two cardiac surgeons.

And when you're a young doc, taking call as part of being a document, when you get in your 50s and 60s, taking call and then doing a whole day's work the next day and the next several days is really hard work. And fortunately, I had been careful with my money and was able to retire when I was 54. What encouraged me to write the position's guide to investing?

I didn't retire to do that. The idea actually came along two or three years before I retired.

But I saw the mistakes that some doctors made, and I thought it gave me some insight into writing on that subject.

Dr. DeRogosi, you've. You've been very candid about how physicians are often high earners but poor investors.

What originally opened your eyes to that disconnect and how did you begin educating yourself on finance?

Well, that's really exactly what it was. I saw the mistakes that some of the doctors made. I certainly made a few mistakes along the way too, but I had more victories than defeats.

The physicians can have certainly the same problems with their investment that anyone can have. But I think docs have three particular problems with their investments.

One is that they're taught to trust everyone because the doctor patient relationship is based on trust. Blind trust outside of the medical field in the legal area in investments is a formula for a disaster. It really gets around to who can you Trust?

If there's 10 people on Earth that you think that you can trust with anything, you're either great family, you're a saint of a person, or you're terribly naive. And now, how would I define trust? In the great Depression, Hungarian family was in a legal tussle and they signed their home over to my grandparents.

And when it was all over, my grandparents signed the home back to them. That's how I would define real trust.

If you can trust someone enough to sign your home over to them, then you've got somebody that you want to stick with. Problem number two with docs is a lack of instruction.

You know, physicians are arguably some of the smartest people in the world, but they're given no instruction at all on business and finance and how to invest their hard earned money.

You know, the average doc comes out more than $200,000 in debt now, and they're really kind of defenseless when they get outside of medicine into the investing world. The third problem I think some physicians have is, is arrogance. To be quite candid, docs are smart people, often the smartest person in the room.

And some docs think that makes them smart at everything. And I have found out, my observation in talking to folks that that is a male physician problem.

I have never heard or seen a female do some of this totally blatantly stupid things that some males have done to suffer a life of bankruptcy or indebtedness. So those I think are the three main problems. Physicians are taught to trust, but you can't do that in the legal and real world.

There's a lack of instruction. And then some docs think that because they're smart, that makes them smart at everything.

Dr. Doragazi coming out guns blazing today. That was, that was incredible.

And so because of my background we've had a lot of our early investors are physicians that I used to work with or friends of theirs. And we've had a lot of physicians on the show. I think we're 135, 140 episodes in now.

No one's ever said that, no one's ever brought up the point, specifically your first point about trust, that that patient physician relationship is based upon trust.

And you're trained that when you go in, you listen to the doctor and you believe them and they have the, the, the pedigree to, to know what they're talking about. And that's what that relationship is. And so I never thought about that.

It just makes sense that those physicians would expect the same thing that they're giving. And the reality is that that's not the case. So I love that I'm going to go back and listen to that again. I like that a lot.

But one of the, probably the most common thing that we hear about when we talk to physicians that have gone on to maybe gone part time or retired and are now doing full time investing is the complications that come from lifestyle creep or keeping up with the Joneses. And I know that one of the things that, that you talk about, one of the key principles in your book is about thrift.

And I think it's really easy, probably easier now more than it ever has been for people to compare themselves because you've got social media and websites and the glitz and the glam and, and people want the cars and the house and the toys. And next thing you know, these people coming out of medical school, a lot of them have debt to repay.

But even beyond that, they probably had the, the ability to save their way to Retirement.

But if you start stacking on some of these lifestyle items, suddenly you, you find yourself in those golden handcuffs where you can't really save your way to retirement. And yes, you're a high earning income individual, but you're also a high spender and it's hard to break that cycle.

Now I think that your attention to thrift is something that a lot of people are not focusing on this way, the way that they should.

So talk to us a little bit about that, about what the day to day should look like for high earning income professionals if they really want to build long term wealth.

First of all, as far as keeping up with the Joneses, I prefer to impress people with my character and my compliments rather than the car I drive or the home that I live in.

Number two is when a physician comes out of training and goes into practice, it's an extremely vulnerable time for them because literally overnight their income can triple or quadruple or go up even more. They have to keep that intern, resident, fellow, house staff mentality as long as they can.

And I actually have some very specific recommendations on savings. No matter what you make, all that counts is what you save.

If you make a million dollars and you spend a million dollars, you have nothing, you have zero. So I think everyone, no matter where they are in Life, should save 10% of what they make.

Teacher, an electrician, a steel worker, they should save 10% of what they make. A physician, absolute minimum, should save 20% of what they make.

If you think about it, if a lower earning physician makes $250,000, that would be $50,000 a year. You know, you do that for 25 years, you'll have a lot of money, you'll have plenty to retire.

I think the average physician now in the US earns about $370,000, $375,000 somewhere around there. I think people who make that kind of money and greater should save a third of their money.

I'd say a third of their money should go to taxes, a third should go to their expenses, including their mortgage, and a third should go to savings. So basically one half of your after tax income goes to savings. And it's really easy to do.

I love that. Of the physicians that are following that course of action are able to save and build up some capital.

Obviously I'm sure that you don't believe that capital should just sit into a savings account, that it should be deployed and that it should get up and go to work even when you don't feel like it. So from Your background and what you've learned.

What are some of the offering types that you like for physicians as they're saving that money, what they can they be putting in their money into? And maybe there's also something that we've seen a lot is that these syndication and alternative investment strategies are targeting physicians.

They are coming after the white coat professionals because that's where they know there's money there and they know there's very little time there. And if you've got money and you don't have time, syndication and passive investing is, is a great place for you.

But because of that, you really have groups that are specifically targeting those groups. So what kind of investments do you recommend for people that are following your advice in terms of being thrifty and saving?

And then what are some of the potential pitfalls?

Actually, the advice is easy. Invest in what you know. If all you understand is a CD at the bank, then go ahead and do that. Let me back up for a second.

Actually, a lot of male physicians would be better off letting their spouses handle the investing and they just stick to medicine. But as far as investing, certainly your house is an investment for your heirs, but it's a place to live for you.

But likewise, it's a significant way to accumulate wealth. A second home. After one gets either the mortgage paid off or, you know, well into the mortgage, second homes are really quite desirable.

I think as far as the stock market is concerned.

It's really difficult even for the pros to pick stocks because if you look at managed mutual funds over the course of five and ten year periods, the vast majority of them will underperform the S&P 500 index funds.

So my recommendation would be, number one, everyone, no matter where they are in life, should have six months of living expenses in cash and readily available investment CDs at the bank, treasury bills, checking account, money market, that kind of thing.

If you retired, I think everybody should have three years of living expenses in basically risk free investments because as one gets older, you might not have enough time to recover from a stock bear market. So number one, invest in what you know and don't force it.

Number two, as far as stocks are concerned, the s and P500 index fund is the best way to go for the vast majority of folks. Number three, your home and then a second home. Either a second home and or recreational property would be my basics.

After that, after one gets more sophisticated, more comfortable, a few dollars in the bank, then you can start to consider other investments.

Do you, you sort of follow the J.L. Collins investing strategy, Vanguard Boglehead, kind of, you know, just keep it simple. Low index, low index, low cost index funds.

And, and just keep it simple.

Yes, that's correct.

I think The S&P 500 index funds are the way to go for the vast majority of people and certainly folks who are just starting out and starting to earn some nice money and not sure exactly where to put it. That would be a reasonable place.

Well, let's briefly talk about tax strategy as that as that comes because physicians are high earners. Typically a lot of times they're earning a W2 income which is heavily taxed. That's taxed the highest rate.

So how do you typically recommend people shelter that income? You know, what, what's the. What would be a mix and strategy.

That would you use? It's certainly desirable to avoid taxes, but sometimes people will chase tax advantage investments that end up being poor investments.

So there's no doubt that, for example, legitimate straight line depreciation, you own the home next door and rent it out. You know, that's a nice tax deduction.

When the tax deductions get too high, certainly ratios of 2 to 1 and stuff like that, you really need to be concerned not only about the quality of the investment, but you don't want the IRS in your life. Auditing. I was once audited and it was quite appropriate.

I just started my llc, so I had a lot of expenses and not much income and I justified every penny. There was no change. You know, if you get in on an investment that's structured just to avoid taxes, the IRS just doesn't like that.

And you can have back audits, you can have future audits. So legitimate deductions are a great way to go, but one needs to be careful not to get into investments that are just structured to avoid taxes.

So we've seen more and more of this type of content come out over the past few years, five to ten years. But honestly, you were kind of an early adapter of moving in this direction. So what was that like publishing that book? Did that open doors for you?

Was it controversial? Were there lessons that people you know learned from there that that hadn't been brought up before? Were you steering in another direction?

I'd love to hear more about what the experience was like for the next few years after you came out with that book.

In fact, one of the chapters in the books is Investment Strategies of the Pros. And one of the people who was profiled was Warren Buffett. So I sent two copies of the book to Mr. Buffett in Omaha.

And I said, one is for your library and the other, would you be so kind as to autograph it and send it back to me? And of course, I sent it with a self addressed stamped envelope. Got the book back five days later.

The week before I retired, got a letter out of the blue from Warren Buffett. And it says, I'm not sure exactly how it came into my hands. And I thought, well, I know how it got into your hands. But he says, I read your book.

And he said, it should be required reading at med schools. And I said, the next day I had a letter back to him. Mr. Buffett, my family is already bored with how many times I forced them to look at your letter.

Would you be so kind as to allow me to comment publicly on his endorsement again? Five days later, I got a letter back. Thank you. So, got the letters framed, of course.

And you know, when our boys were growing up, we told them, if there's a fire, you run, you save yourself. They're obviously grown up now, but I've told them, if there's a fire, you grab that rubber from Warren Buffett and then run.

I love that I knew that story from us, you and I, connecting and chatting in the past. And that is exactly what I was hoping you were going to tell when I asked that question. I love that story.

But yes, it did open. Sorry, it did open a lot of doors.

William C. Roberts, who just passed away a year or two ago, he was editor in chief of the American Journal of cardiology for 50 years. And he saw the book and it got me on his radar for many, many years. He.

Over Illumination Weekend in Williamsburg, Virginia, he had a cardiology conference. And so I spoke there three or four times actually over the years and, and attended almost every year after that.

So it fortunately did open a lot of doors for me.

So you favor low cost index funds and CDs. Keep it simple. But have you ever made a more speculative investment that you regret or one that surprised you by working out?

Earlier on in my career, before I had insight into some of those things, I made a couple of investments that were heavily tax advantaged and they ended up going broke. So I Learned the hard way. In fact, I've never taken a financial course at all.

So all of what I know is from watching my parents and grandparents work hard and save their money. And I certainly had a couple of defeats along the way. But fortunately I've had more.

I'm going to take a little bit of a leap with this question.

I've heard you already talk about the differences between men and women multiple times, about challenges that they face or obstacles or getting in their own way sometimes.

And one of the things that I've heard a lot of wise people that I look up to say is that the number one most important financial decision you can make is who you marry, right? Who you associate with, who your friends and your core group is, but who you marry. And that's this for me specifically. And I can speak for Neil too.

We both have married way outside of our coverage.

We've married up and that's a really great place to be, especially when you're raising kids and as you're going through challenging times, I know that that is something that, you know, physicians like you said, you make a lot of money. You have to make very informed decisions.

If you want to follow the advice that you're giving us today of being thrifty, not getting caught up in the glitz and the glam. And my wife and I talk, we have a phrase that we just mentioned to each other of same team. It's two words. Hey, same team.

Remember, the goals that we have for our family are bigger than this car that we want to purchase, this vacation we're looking at versus something more affordable is we want to be on the same team. I would imagine.

What how do you feel about that in terms of like continuity that people need to have in their marriage or in their relationship, making decisions for their family?

Because for people to follow your advice, it's going to require continuity between the two decision makers in the family, partners, spouses, wives, husband who whatever that may be. I have a feeling that you're going to have something impactful here that I need to hear. So I'm really curious to hear what.

Your opinion is, Doc. I really respect said I married a rich woman, she's thrifty. So there's no doubt that the thrift is the most important.

And if one person spendthrift, and apparently money is one of the two most common causes of divorce. And so you're totally right about that. And a couple of further comments. Number two, for a physician, they really need a prenuptial agreement.

Now when you know Your first marriage, you're 25, 26, 27 years old. You know, all that you've really got is, is your human capital, the ability to earn money in the future. But, you know, if.

If you come from wealthy family or that sort of thing, you should have a prenuptial.

I think it is absolutely mandatory that any physician who gets into a second marriage or more absolutely has to have a prenuptial agreement, because there are gold diggers out there. And so that would be my suggestion on that. One of my very best, probably the best newsletter I ever wrote was A Wedding as an Investment.

And Number one, for 50% of people, it's a poor investment because that's the divorce rate. Number two is that the more you spend on a wedding, will it bring happiness? Of course not. It doesn't work that way. A fly for that. Easy.

And then lastly, as far as the straight investment is concerned, if you have lobster and shrimp, as compared to Chef Boyardee straight out of the can, are you going to get more gifts? No, you're not, because the people have already written the check or they've already bought you a gift or that sort of thing.

So anyway, to get back to your very basic point, it's really essential that you marry someone who has the same thoughts about money and thrift as you do.

I think that continuing to talk about that maybe don't fall into the trap that I do.

This is what Neil and I do for a living, is we do self storage syndication, and we interview people like that because we want to learn and we want to. We're students of the game. I think for me, a trap that I fall into is talking about it too much.

And I think that could become frustrating for my wife.

But I do think it's important to have, you know, date night or whatever it may be, a certain time, once a month, once every few weeks, where you talk about the goals that you have for the future and how you can accomplish those, because those goals change over time. Once kids get involved and things like that, sometimes you find yourself moving the goalpost.

And I just want to make sure for my wife and I that we're moving it in the same direction, that we're not. We're moving together and not moving farther apart. And sometimes that requires a course correction.

So I. I love couples being on the same page and continuing to talk about that and move forward in that direction. You just mentioned your newsletter, and that's something I want to make sure that we talk about here.

Good.

Perfect Sunday morning reading. I love that. So for people, we'll start rounding this out now for the sake of time.

But for people that are interested in getting access to that newsletter. I know, I'm curious, what's the easiest way for people to sign up?

Go to the website www.thephysicianinvestornewsletter.com so www.thephysicianinvestornnewsletter.com and you can sign up for three month trial.

I love that. Last question for a nuts and bolts question before we move on to our final question.

That's a good question and a difficult one to answer.

I can give this perspective is that many of the people who bought my book and many of the people who subscribed to my newsletter said I wish I had seen this earlier.

And so I think the best advice I could give there is that either the physician and or their spouse start to study up one hour a week, you know, read about investments, read about how to invest in the stock market, what kind of car to buy, home to buy, that sort of thing. Knowledge just doesn't appear in your magically appear in your head. You have to put it there. And the way to do it is read.

And so I suggest that the physicians and their spouses spend at least an hour a week talking about investments and reading up on investment to try to broaden their knowledge base.

Love that. It's not the landmines that you see that get you, it's the ones that you don't see. Right.

So it's putting yourself in a position where you can recognize challenges coming down the pipeline.

And you know, Neil and I talk sometimes and say that we are right now who we're going to be 10 years from now, with the exception of the places we go, the people we meet and the content that we consume.

So making sure that we're taking the time to educate ourselves, have those conversations with our spouses to try to recognize other people's mistakes instead of having to make them ourselves. I love that. Also one of the things.

Last thing I'll point out, the law of a hundred hours is something that's had a really big impact on me over the last couple years. And that's where if you focus on studying about a certain topic for a hundred hours, you will know more about that topic than 95% of the population.

And 100 hours in a year is only 18 minutes a day, which is less than the average person's commute to work.

So that windshield time that may currently be getting wasted or you're rolling the windows down and screaming Cyndi Lauper or whatever it may be, a lot of that is lost time that I think you could be investing into yourself and try to put yourself in a better position to recognize some of those mistakes, make them.

So that's one more point. Physicians shouldn't be embarrassed to ask the opinion of folks that they respect their banker, a successful businessman, or that sort of thing.

It's a good way to learn.

I love that.

Well, speaking of that, is there a spot aside from your own, Is there a book that you find yourself recommending again and again to friends and family?

1995, Stanley and Danko, the Millionaire Next Door. I think that's one of the five most important financial books ever written.

And it shows you that the guy who lives next door whom runs a local junkyard or that sort of thing, may have 10, 15 rental properties, his business, a fellow who owns the local H vac, the air conditioner servicing units. Those folks can really accumulate a lot of money.

The other thing is the last half of the book, they talk about outpatient economic aid, and they use that in reference to how much money you give your children. And they show very clearly the more money you give your children now, you know, they have to have the basics of education and stuff like that.

But beyond that, the more money you give your children, the less they save on their own. The less you give the kids above the basic needs, the better off they are because they go out and earn it.

So Stanley and Danko, the Millionaire Next Door is worth your time to read. I actually reread it every three, four, five years.

The Millionaire Next Door and the Richest man in Babylon are the first two books that were recommended to me when I was probably 15 years old. I read those before the Purple Bible of Rich Dad, Poor Dad. And that book is.

It goes exactly with what you're saying about thrift, living under the radar, not living in a way to be flashy. Those people are that live by that consistently for probably a thousand years, have ended up doing very well.

Well, Dr. Durgazi, we really appreciate your time today. Thank you very much for sharing your experiences with us, for sharing the Physician's Guide to Investing with us, for sharing your newsletter.

I think I know the answer to this, but just for the sake of our listeners that they can always get to the end of the episode and find out for anyone wanting to connect with you, hear more about what you're up to, to hear more about the Physician Investor Newsletter or what would be the best way for them to connect.

With you and do that via email. So it's just my name, R Dargazi. R D O R O G H A Z I at Yahoo. Com.

Excellent. And then we've got the physician www.thephysicianinvestornewsletter.com Is that correct?

Yeah, correct.

Excellent. Well, thank you so much for your time today. Greatly appreciate it. And thank you so much for your willingness to share everything that you've learned.

Thank you for the opportunity. Thank you.

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