MtoM #287: $405K Student Loans Paid Off in 20 Months

Summary

White Coat Investor Podcast: Milestones to Millionaire #287

$405K Student Loans Paid Off in 20 Months

Host: Dr. Jim Dahle
Guests: Joe (Anesthesiologist) & Mary Beth (Dermatologist, Active Duty Air Force)
Release Date: August 10, 2026

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Episode Overview

This episode of the Milestones to Millionaire series features Joe and Mary Beth, a physician couple who paid off an astounding $405,000 in student loans in under two years. Host Dr. Jim Dahle dives into their financial journey: how the debt accumulated, the sacrifices and strategies they used to pay it off, and what comes next now that they’re debt free. The discussion is rich with actionable advice and inspiration for healthcare professionals facing similar financial hurdles.

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Key Discussion Points and Insights

1. Introductions and Background

[03:10-03:44]

• Mary Beth: One year out of dermatology residency, now a first-year attending, active duty Air Force, stationed in the Southeast, just promoted to Major.
• Joe: Anesthesiologist, two years out of training, works in the South, married to Mary Beth.
• Debt Context: Joe accrued all the student debt; Mary Beth had none.

2. The Milestone: Paying Off $405K in 20 Months

[03:49-04:23]

• Joe announces: “We paid off student loans. All of my student loans. Mary Beth had none. And in total, about right at $405,000 in less than two years.”
• Dr. Dahle confirms the feat happened while Mary Beth was still in residency.
• The initial emotional impact: “It's just now starting to sink in… There's a little bit more reserve at the end of each month that we previously really didn't have.” (Joe, [04:23])

3. Why Pay Off Instead of PSLF or Stretching Payments?

[04:44-05:17]

• Joe highlights the psychological benefit:
  “I wasn't fully done with medical school until this debt was gone… Even though you can play the investment game and maybe make more money, I was really much, much more in the psychological debt arena where I just couldn't have that looming over my head.” (Joe, [04:44])

4. How the Debt Accumulated

[05:17-06:18]

• Joe’s total debt is a sum of undergrad and medical school, including living expenses and private loans for residency interviews.
• “I wasn't very good at managing money when I was in residency or in medical school.” (Joe, [05:30])

5. The Strategy: Living Like Residents

[06:32-08:04]

• Dual income helped (Mary Beth’s military salary and Joe’s anesthesiology attending income).
• No children yet, driving old paid-off cars, not inflating their lifestyle, traveling within reason.
• “We did not inflate our lifestyle… all gas, no brakes.” (Joe, [06:59])
• Every non-tax, non-retirement dollar went to loan repayment.
• COVID interest pause helped accelerate payoff before interest restarted.

6. Emotional Milestones and Sacrifices

[08:42-09:22]

• The hardest things to forgo were mostly travel or convenience items, limited by Mary Beth’s residency.
• “I waited over a year to get my custom golf clubs.” (Joe, [09:18])

7. Life After Debt

[10:42-11:36]

• Looking forward to “loosening the straps,” traveling more, saving for a home upgrade, “socking a lot away” for future investments (especially real estate).
• “We are looking forward to having honestly, just extra money to do what we want.” (Joe, [10:51])

8. Did the Journey Get Easier?

[11:41-12:16]

• “It becomes your norm… in the middle of it, it felt easy. I certainly know we made sacrifices, but at the end of the day, the happiness that we feel now makes it feel all… very much worth it.” (Joe, [11:41])

9. Regrets? Was Paying Off Early Worth It?

[12:44-13:30]

• “As of right now, it feels pretty darn good to not have any… It's hard to describe. It feels like a huge weight has been lifted off.” (Joe, [12:44])
• Acknowledges that, mathematically, investing might have yielded more, but the psychological advantage wins.

10. Advice for Current and Future Students Facing Huge Debts

[14:26-15:11]

• Acknowledge how the landscape is changing (private loan reliance, higher balances).
• “You can't bury your head in the sand… Have a plan and work hard, spend money on what's important to you, but it's not impossible.” (Joe, [14:26])
• Importance of having a partner on the same page.

11. Navigating Financial Differences as a Couple

[15:24-16:30]

• Mary Beth was less into finance but fully supportive: “It felt good to accomplish something together, and knowing that… we can just move forward without the debt is really liberating.”
• They paid off the debt and bought a house: “There's been huge purchases during this timeframe. So it is very much possible, and I'm proud of us for accomplishing it together.” (Mary Beth, [16:20])

12. Final Pearls and Inspiration

[16:40-17:20]

• Joe: “Read the White Coat Investor, have a financial awakening. Come up with a written financial plan… Because if you don't… it would have just come into my checking account and it would've sat there and I would've looked at it and smiled, but that's not doing anything for you. So come up with a plan… it takes two to tango and to tackle these kinds of financial goals.”

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Notable Quotes & Memorable Moments

• On the emotional weight of debt:
  “I wasn't fully done with medical school until this debt was gone… I just couldn't have that looming over my head.” (Joe, [04:44])

• On sticking to the plan:
  “All gas, no brakes.” (Joe, [06:59])
  “It becomes your norm… in the middle of it, it felt easy.” (Joe, [11:41])

• On achieving financial goals as a couple:
  “It felt good to accomplish something together, and knowing that… we can just move forward without the debt is really liberating.” (Mary Beth, [16:20])

• Practicality and encouragement:
  “It's not impossible to do. And certainly in a relationship, it's good to have a partner that's on the same page as you as well.” (Joe, [14:26])

• On the importance of a written plan:
  "Have a financial awakening. Come up with a written financial plan..." (Joe, [16:40])

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Actionable Strategies from Joe & Mary Beth

• Live well below your means even as income increases (“live like a resident”).
• Prioritize debt repayment with all available additional funds.
• Maintain clear, shared financial goals with your partner.
• Enjoy some life (vacations, small luxuries) but keep big lifestyle upgrades on hold until key debts are eliminated.
• Leverage dual incomes and, if possible, military or other benefits.
• Have a written financial plan to direct extra income meaningfully.
• Don't get discouraged by big numbers—break them into a plan.

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Key Timestamps

• 03:10 – Guest introductions/background
• 03:49 – Milestone accomplished: $405k paid off
• 04:44 – Why pay off loans early?
• 05:30 – Debt breakdown and accumulation
• 06:32 – Strategy for rapid payoff
• 08:42 – Sacrifices and hardest purchases to defer
• 10:42 – Life and goals post-debt
• 11:41 – Was it easier than expected?
• 12:44 – Any regrets about paying off early?
• 14:26 – Advice for students with massive debt
• 15:24 – Navigating couples' financial differences
• 16:40 – Pearls of inspiration and how to start

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Tone and Flow

The episode maintains a candid, approachable, and motivational tone, blending financial realism with the satisfaction of achieving a major milestone. Joe and Mary Beth’s story is relatable for many medical professionals; their humor and emphasis on partnership and planning keep the conversation encouraging and practical.

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Summary

In this milestone episode, Joe and Mary Beth offer a blueprint for high-income professionals facing daunting student debt. Through discipline, shared goals, and a refusal to inflate their lifestyle, they wiped out $405k in under two years. Their journey underscores the psychological—and eventually financial—relief that comes from aggressive debt payoff and the importance of teamwork and detailed planning. Their story inspires both current trainees and early-career professionals to believe that even the biggest debt mountains can be conquered.

Transcript

[Mary Beth]

This is the White Coat Investor Podcast Milestones to Millionaire Celebrating stories of success along the journey to financial freedom.

[Jim Dahle]

Welcome back to the Milestones to Millionaire podcast. Imagine your capital working quietly in the background, compounding into something meaningful while you stay focused on the life and work that matter most. Black Swan Real Estate Secure Freedom Fund was built for physicians and accredited investors who want clarity, control and a steady path to financial independence. With over 14 years of experience, a $450 million portfolio and over 600 passive investors, Black Swan combines discipline, transparency and hands on stewardship. Their investor first structure is rooted in alignment, offering the choice between reliable monthly income or compounded growth over time. Led by physician Dr. Elaine Stoggerberg, physician and a vertically integrated team, every investment is managed with care and intention. Discover how Secure Freedom Fund fits your [e-mail] BlackSwan all right, welcome back to the podcast, the podcast that features you and your successes and inspiring others to do the same. You can come on the podcast by [e-mail] Milestones okay, the new thing this month is private medical school loans and there are a lot of you out there who need to take them. I didn't realize quite how many there were all the M1s of course, Ms. 1s oms1s dental. First year students are having to take these out because they need to borrow more than $50,000 a year. But also there are a fair number of people out there that were having to take private student loans before. Some people in new D.O. schools, et cetera. Some people in some types of Caribbean schools are having to use private student loans. So there have been some changes as a result of OBA passed last year it changed the landscape for medical student borrowing. So obviously the federal student loans are now capped at $50,000 per year or $200,000 total. So that means many of you are going to need private loans to cover a significant portion of the total education costs. We are doing all we can here at White Coat Investor to help you with this, so we launched a new resource list this year to make this easier. You'll find vetted private student loan companies plus two bonuses you won't get anywhere else. The first one is cash back from the LE themselves and the second one is free access to the fire your financial advisor student version of the course, which is our best selling course for medical students just starting their financial journey. So check out two or three lenders on the list, go with the one offering the lowest interest rate and the best terms and know that you can at least get the best deal out there that you can until such time as you can refinance these loans or pay them off. As we're going to discuss today in our interview, you can get more information about all of [e-mail] loans. Okay, let's get our guests on the line. Our guests today on the Milestones to Millionaire podcast are Joe and Mary Beth. Welcome to the podcast, guys.

[Joe]

Thanks so much for having us, Jim,

[Mary Beth]

thank you for having us.

[Jim Dahle]

Okay, introduce yourselves a little bit. Tell us what you each do for a living and how far you are out of training, what part of the country you live in.

[Mary Beth]

My name's Mary Beth. I am one year out of dermatology residency training, trained in San Antonio, Texas, and am now a first year attending in the Southeast. I am active duty in the Air Force, just pinned on major this past May.

[Jim Dahle]

Congratulations and thank you for your service.

[Mary Beth or Joe (short responses)]

Thank you.

[Jim Dahle]

All right, Joe.

[Joe]

So I am an anesthesiologist, finished training two years ago, and obviously also in the south with Mary Beth.

[Mary Beth or Joe (short responses)]

Very cool.

[Jim Dahle]

Okay, well, tell us what milestone you've accomplished recently.

[Joe]

So, big news. We paid off student loans. All of my student loans. Mary Beth had none. And in total, about right at $405,000 in less than two years.

[Mary Beth or Joe (short responses)]

Wow.

[Jim Dahle]

$405,000 in less than 2 years. And this is while at least one of you was still in residency for most of it, right?

[Mary Beth]

Correct.

[Joe]

Yeah. Mary Beth was in residency for a year of that and just tried to drop the anvil on it, like you say.

[Jim Dahle]

And you did. How's it. How's it feel to have that gone?

[Joe]

It probably just about. It's been about three, four months, and it's just now starting to sink in. Kind of starting to. There's a little bit more reserve at the end of each month that we previously really didn't have or know what to do with.

[Jim Dahle]

Okay, so tell us why. Why you decided to pay them off instead of going and looking for a PSLF qualifying job or something.

[Joe]

Yeah, you know, that was always something that I was back and forth about, and ultimately I felt like I wasn't fully done with medical school until this debt was gone. I feel like at any point in time, if something were to happen to me or if I didn't want to work as much or if I got burnt out, then I would still have that debt and I wouldn't be really free until that debt was gone. And so even though you can play the investment game and make. Maybe make more money, I was really much, much more in the psychological debt arena where I just couldn't have that looming over my head.

[Jim Dahle]

All right, so tell us a little bit about school. I mean, 405 is not a small amount. That's well more than average for MD do, even dental schools. Tell us about how it ended up being that large.

[Joe]

So that's a combination of both medical school and undergrad. And it's, you know, I, I went to a four year university. I didn't get any, you know, I didn't, I wasn't lucky enough to have all that paid for. I had to take all loans out for that. And then same thing with medical school. I took out, I went to a do school. Do schools tend to be a little more expensive. I took out all the money both for the tuition as well as living expenses. And then when it came time to interview for residency, I had to take a private loan out to go on interview trail pre Covid. So I was going around the country, flights, hotels, all that. And quite frankly wasn't very good at managing money when I was in residency or in medical school.

[Jim Dahle]

Okay, so $405,000 is what it was when you came out of residency, correct?

[Joe]

Yeah, when I basically when I graduated, you know, in June of 2024. So two years ago, that was all there, that was all sitting in my Mohela account ready to, ready for me to pay off.

[Jim Dahle]

Okay, so tell us about the 20 months.

[Joe]

Really a huge benefit was that Marybeth was active duty, military, was making a little bit more as a resident than civilian, and I benefited from a very good anesthesia market where we were in Texas and the fact that we don't have kids yet, and the fact that Marybeth was in residency and I picked up just about every shift you possibly could. You know, I.

[Jim Dahle]

You lived like a resident in both senses of the word.

[Joe]

Yeah, exactly. It was, you know, had the big shovel, but I mean, we did not inflate our lifestyle. We each drive paid off seven year old cars, we didn't buy a multimillion dollar house. We did go on some vacations, we did enjoy our lives, but it was, you know, all gas, no brakes.

[Jim Dahle]

Yeah, but basically everything you earned that wasn't going to the tax man you sent to the lender.

[Joe]

Yeah, I mean it was pretty remarkable how at the end of each month, the amount of money, I mean basically we would pay our expenses, we would put money into retirement, and then everything left over at the end of the month went into a little savings, savings account that we had and Then because I wasn't. Wasn't accumulating any interest for a lot of that because of the COVID pause and then that, you know, all that went to loans.

[Jim Dahle]

Well, once that was over, you just wrote the check.

[Joe]

Yeah, there was. I mean, I think in April or. Yeah, I think it was April that we. It was like six figure amount that I had to hit submit on and it was like, there it goes.

[Jim Dahle]

Which IDR program were you in?

[Joe]

So I did the save program.

[Jim Dahle]

Okay, so you're sitting there and save until they basically threw you out of it, Correct?

[Mary Beth or Joe (short responses)]

Yep.

[Jim Dahle]

Very cool. And then just whacked it all at once. That's pretty fun.

[Joe]

Yeah.

[Mary Beth or Joe (short responses)]

Yeah.

[Jim Dahle]

All right. Well, so the hard part, of course, of doing this is not inflating your lifestyle. Right now you're anesthesia tending, you're making, I don't know what you're making, $600,000 or whatever. You can have a pretty awesome Life financially on $600,000, but somehow you managed to not do that. What was the hardest thing not to buy during that two year period?

[Joe]

Man, that's a good question. I think she's going to probably have a better answer for that.

[Mary Beth]

We were mostly limited by the fact that of my residency day, so, you know, in terms of wanting to travel, I think that was where we really spent the bulk of our, our money and you know, we just couldn't do the things we necessarily may have wanted to do or inflate just because I was still a resident and very limited, you know, time wise, experience wise by that. So I truly think that helps.

[Jim Dahle]

It's hard to spend a lot while working 80 hours a week, isn't it?

[Joe]

Yeah, exactly. And I was going to say I waited, I waited over a year to get my custom golf clubs. So.

[Mary Beth or Joe (short responses)]

Okay, so.

[Jim Dahle]

So how much did they drop off your score is what I want to know.

[Joe]

Not enough, Jim. Not. Not enough.

[Jim Dahle]

I should, I should pause for a moment and tell my custom golf club story. I went and got custom golf clubs and as you know, they're not, they're not cheap and is probably the most expensive date Katie and I have ever been on. We both got custom golf clubs and a month later I fell off the Grand Teton and broke my wrist.

[Joe]

Oh my gosh. That's right. Yeah.

[Jim Dahle]

So I have probably played two rounds with custom golf clubs and I'm not even sure they're like the right clubs for me now that my grip strength is worse in that hand. But so, you know, they might, it might be one of my worst investments.

[Mary Beth or Joe (short responses)]

Ever.

[Jim Dahle]

But they do help me hit the ball straighter. Yeah, there's no doubt about that.

[Joe]

So that's what I told her. I was like, it's gonna make me better.

[Mary Beth or Joe (short responses)]

Yeah. Yeah.

[Jim Dahle]

Well, they probably cut a few strokes off and eliminated a little bit of frustration. So I. I played with some very cheap golf clubs before.

[Joe]

So we played with her dad this past weekend, who has, you know, like a three wood that, like, it's a three wood made of wood.

[Jim Dahle]

Very nice. Okay, well, so now what. What's next for you guys? I mean, I know Mary Beth, you got a time debt. You're going to be paying off some time here.

[Mary Beth]

Correct.

[Jim Dahle]

So you can't really speed that up any. You can't pay off your time debt in 20 months. But tell us what you're working on financially next.

[Joe]

So, yeah, I mean, Mary Beth was a couple more years. We. We are looking forward to having honestly, just extra money to do what we want. We want to continue to travel. We want to potentially build a house in the future, maybe upgrade our house. So really, it's loose and it's kind of loosening the straps. It's at the end of the month saying, we can, you know, we can if she wants a piece of jewelry, if I want. If I want to, you know, if I maybe want to buy a new watch, just some of those little spending things we're learning to spend and then honestly, socking a lot away for future potential investment opportunities. You know, I'd like to get into real estate and, you know, dip my toes in that, but I'm not quite ready yet. So having a reserve for when I am ready, you know, is a goal of ours, too.

[Jim Dahle]

So was this process easier or harder than you thought it was going to be at the beginning?

[Joe]

You know, I think that it turned out being it becomes your norm. You know, it's so daunting. At first, it was a huge monopoly number, and at the beginning, I thought that it was impossible. And then each month it's just that it just became automatic, you know, to the point where I wasn't even really seeing that money. It didn't feel like that money was even mine, that it was almost in the middle of it. It felt easy. I certainly know that we made sacrifices, but at the end of the day, the happiness that we feel now makes it feel all, you know, very much worth it.

[Jim Dahle]

You know, I mean, the feeling of being debt free is pretty awesome. People say, oh, you know, you could have invested it. You know, you alluded to this earlier, and maybe you would have come out ahead, you know, not investing in a risk free investment most of the time if these were all federal loans. But you decided, no, I want to have the debt gone, I want my cash flow improved, et cetera, et cetera. Any regrets about that? Now three or four months on, do you, do you wish you'd strung it out longer and invested the difference or anything like that?

[Joe]

As of right now, it feels pretty darn good to not have any. I mean, answering the answering questions like how much debt do you have? And just being able to say our house mortgage, that's it, like three words, our house mortgage. It's hard to describe. It feels like a huge weight has been lifted off. And so, yeah, we probably don't come out ahead financially. Honestly, investing the difference and stringing these out a little bit is probably truly the financially optimized way to do this. But the psychological advantage that I feel like I have now with all this debt gone, I mean, I know 40 year olds, 50 year olds that are still paying off their student loans and they seem happy as a clam. That just wasn't going to be, it wasn't going to be me, it wasn't going to be us.

[Jim Dahle]

And you can build wealth very quickly when you're using that money you were sending to the lender to build wealth with. It's pretty amazing how quickly it stacks up.

[Joe]

Yeah, I mean, we now are able to really start loading money into a taxable brokerage account now, maxing out all of our retirement accounts, of course, and seeing compound interest work its magic.

[Jim Dahle]

Now I'm getting emails a lot this month because of the changes with the OBA bill. But there are students out there that send me emails every month that owe $520,000 that are thinking about not going to medical school because of the expense

[Mary Beth or Joe (short responses)]

and they're going to have to borrow

[Jim Dahle]

the entire cost or they are worried about having to take some of their loans out now as private loans. What advice do you have for those people about the ease or the difficulty with which they're going to have paying off their student loans after they finish?

[Joe]

You know, I certainly feel for, I certainly feel for, for them first of all, because I was blessed with the political landscape that allowed me to take out essentially unlimited loans and the future interest rates of needing to take out private loans and all that is probably going to be very real. But at the end of the day, you just have to come up with a plan. You have to these. You can't bury your head in the sand and look at this giant number as something that's unattainable. You have to just come up with a plan and work hard, spend money on what's important to you, but it's not impossible to do. And certainly in a relationship, it's good to have a partner that's on the same page as you as well.

[Jim Dahle]

Now, before we started recording, Mary Beth, you guys told me that he's really into this finance stuff. You're maybe not as into it. How did you guys get onto the same page with what you were going to do with your finances?

[Mary Beth]

Yeah, I mean, it was something that was a shared goal from, like, the very outset once Joe graduated residency, and essentially once he graduated, he very much said, I want to pay these loans off as fast as I can. I said, if that's truly what you want to do, I'm here to support you. No problem. You know, again, we traveled. I mean, we went on several, like, international trips, you know, over the past two years. I mean, probably like five in total. And so I don't feel like I've been shorted at all by any means. And I. I really just think, like, it felt good to accomplish something together, and knowing that, like, we can just move forward without the debt is. Is really liberating. I do think the loans actually would have been paid off much earlier, but we bought a house last year. So all this to say is we accomplished all the loan, you know, pay off and simultaneously bought a house during that time period. So there's been huge purchases, like, during this timeframe. So it is very much possible, and I'm proud of us for accomplishing it together.

[Jim Dahle]

Yeah, for sure. Well, all right. What have we not talked about? What should people know when they're thinking

[Mary Beth or Joe (short responses)]

about paying off their debt?

[Jim Dahle]

How can you inspire them to do what you've done?

[Joe]

I would say read the Wycote Investor, have a financial awakening. Come up with a written financial plan. Really understand when you have an influx of money that you're going to get, especially when you're a resident attending hood is coming. Have a plan for when that income comes. Because if you don't. I mean, I don't know what I would have done if I didn't have a plan. It would have just come into my checking account and it would have sat there and I would have looked at it and smiled, but that's not doing anything for you. So come up with a plan. You know, if you're in a partnership, if you're married, make sure that you include your spouse in that plan, because it really, it takes two to tango and to tackle these kinds of financial goals.

[Jim Dahle]

Well, thank you so much for being willing to come on the podcast and share your experience and inspire others to do the same.

[Mary Beth or Joe (short responses)]

Yeah, thank you.

[Mary Beth]

Thank you for having us.

[Joe]

Appreciate it.

[Jim Dahle]

Okay. That was a lot of fun. I learned before we started this recording that he didn't know he was coming on the podcast today. He's a super white coat investor fan, so this was a little bit of a present for him to be able to come on the podcast. So that was a lot of fun to meet both of them and look at the success they're having. One of them is paying off her student loans with service. Another one paid off his student loans by living like a resident and taking them in a corner and dropping the anvil of a high income on it. Either way, the student loans go away and then you can start working toward your own financial freedom. It's pretty awesome to see what people are doing with their financial freedom as

[Mary Beth or Joe (short responses)]

they move toward it.

[Jim Dahle]

It's really exciting to see people traveling, to see people cutting back to part time, to see people designing their practice the way they want their practice, see people retiring early. Whatever you do with it is pretty inspiring and we're excited to be a

[Mary Beth or Joe (short responses)]

part of the journey. You often hear the phrase passive investing or passive management as opposed to active management or active investing. And in reality, we're talking about two different things here. Okay, sometimes the phrase passive is used to refer to kind of an index fund strategy, right? When you're investing in stocks, for instance, you are just buying all the stocks via an index fund and trying to match the market rather than trying to beat the market. However, the term also gets used particularly in real estate strategies, right? You can be a passive investor or you can be an active investor. If you're an active investor, you're going down, looking at a house down the street, evaluating it, making an offer on it, buying the thing. Maybe you're going in there and you're renovating it. Now you're finding a tenant, you're interviewing the tenant, you're putting together a contract for that tenant. Maybe you're going out and trying to hire a property manager to assist you. And you know, after a few years, you know, maybe you got to replace the tenant, or maybe you want to sell the property so you got to go sell it, right? That's a very active to invest in real estate as opposed to, you know, just hiring a passive manager to do that sort of thing for you. And there's all kinds of, you know, there's a whole spectrum of passive ways to invest, whether you're just buying a turnkey property that already has a tenant in it and already has a manager set up, or whether you are buying a real estate syndication or a private real estate fund, or just investing into a real estate index fund, right? There's a whole continuum of ways to invest passively, with each step being a little bit more passive. So this term can apply in more than one way. But mostly what we're talking about here is we're talking about mutual funds, which is the easiest way to invest, probably the way that most people should invest, and probably the way most of us should have most of our money invested, right? Mutual funds give you a lot of advantages. They give you instant diversification, they give you daily liquidity, they give you professional management, they give you economies of scale because you're banding together with thousands or millions of other people to invest in this investment. But there are two kinds of mutual funds, right? There's passive mutual funds, there's active mutual funds. Passive ones are generally just trying to get the market return, keep costs low, get you the market return for that particular type of investment return, whether that's stocks or bonds or real estate or whatever. Whereas an active manager of a mutual fund is usually trying to beat the market, at least on some sort of a risk adjusted basis. And so they usually own fewer stocks in an actively managed stock mutual fund than a passively managed index mutual fund. The index fund, this passive manager or computer, mostly just buys all the stocks. You know, it's essentially easy to guarantee yourself the market return. You own all the winners, yes, you own all the losers. But over the long run, you tend to have good returns that are going to help you reach your goals. And in fact, when you compare these two approaches, particularly when it comes to stock mutual funds, you realize pretty quickly that the smart way to go is to invest passively because even before tax, in the long run you're beating 90, 95% of those active managers, and after taxes, it's even higher. Plus, you don't have to worry about manager risk. You don't have to monitor as much. There's all these benefits to using these index funds and investing in a passive way. So it's very clear when you look at the data, particularly when it comes to investing in stocks, and I'm not talking about just us large cap stocks, I'm talking about all kinds of stocks, international stocks, US Stocks, the data is even pretty good for bonds. It's not quite as good for bonds as it is for stocks. But it's very good when it comes to these frequently traded, commonly owned, highly analyzed asset classes like stocks and bonds, that the approach to take is passive. It really does work better in the long run almost all the time. And it's probably you're in that almost all the time category now. There are some funds that are kind of passive. The more passive they are, the cheaper they tend to be, the better they tend to outperform. But there's always a continuum of passivity. You'll see some index fund providers or passive fund providers, such as Avantis or dfa. Some people call them indexing light or something like that because they have a passive strategy but kind of an active way that they implement it. And so there are some mixes where there's a little bit of active going on along with passive, and that's okay. The point is you got to recognize just how difficult it is to predict the future to pick stocks that are going to beat the market. As you move away from these highly analyzed asset classes, index funds often aren't available. There is no index fund for all of the duplexes in your hometown. If that's the type of investment you want to invest in, you're not going to be able to invest in an index fund to do that. That doesn't mean you can't invest passively. If you find somebody else that's building syndications or a fund of these things, or if you're just hiring a turnkey company to run them for you, or hiring out as much of the management as you can. There are other ways to invest passively, even in an asset class that doesn't have index funds. But keep in mind, if you are in an asset class that does have index funds, that's probably the way to go. That's why 85% of our portfolio is in boring, old, broadly diversified, low cost index mutual funds and ETFs, because it's just such a smart way to invest. So when might active management make sense? Well, if you think you have some edge that is going to help you beat the market, I guess active management is how you implement that edge. But mostly the times to use it is just when you're investing in something or an index fund is not available. And that usually means some sort of a private investment, whether that's real estate or oil and gas or a small business or some other thing like that. But if you're a beginner building your first portfolio, the way to start is broad based index funds. We're talking total stock market index funds, total international stock market index funds, bond index funds. Those are the building blocks to build your portfolio in the beginning. Even now, 20 plus years later, those are still the biggest building blocks in our portfolio. Just recognize that a lot of investors out there are making big mistakes when it comes to this question, right? The mistakes usually are just picking an active manager, or worse, trying to pick the stocks themselves and being that active manager. If these professionals can't do it with all their fancy computers and high paid assistants and all their expertise and degrees, what makes you think you're going to be able to do it in between patients? You're not going to be able to. And frankly, neither are they probably when you compare it to an index fund. So the first mistake is just actively investing when you should be passively investing. But other mistakes get made as well. Sometimes people don't pick the right types of indexes to follow. Right? I'm a big fan of broad based indexes. You know, the ones that buy all the stocks in the US for instance. But there are other indexes out there, such as indexes that follow the NASDAQ. That's not all the stocks in the U.S. it's just the ones that trade on one stock index. It tends to be very tech company heavy. It's not a broad based index. So I'm not a big fan of that index nor of index funds that follow it. The Dow Jones Industrial Average is well known, it's been around a long time. But it's not a broad based market index. It's just like 30 big stocks is all it is. So I wouldn't encourage you to buy an index fund that follows that one or some little niche index funds. Right? If you're just buying an index fund that invests in semiconductor companies from Taiwan. Right. That's very niche. And yes, if those companies do well, you're going to do well. But that's a bit more of a gamble than just buying all the stocks when you're using a total market kind of approach. Hope that's helpful in learning to understand the difference between active investing and passive investing. And really the advantages of passive investing that not only help you beat active investing returns, but free up your time and allow you to use your time actively because you're investing your money passively.

[Jim Dahle]

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[Mary Beth]

The White Coat Investor Podcast is for your entertainment and information only and should not be considered financial, legal, tax or investment advice. Investing involves risk, including the possible loss of principal. You should consult the appropriate professional for specific advice relating to your situation.