Articles

December 11, 2018 Articles

Stocks Are So Volatile! What Are We To Do?

By: Arturo Bonilla, M.D.

Fellow colleagues, just look at today’s financial news:

Stocks Tumble in US., Europe as Brexit Vote Delayed (Wall Street Journal)
Dow Drops 500 Points as Market Sell-Off Continues, Bank Shares Lead Slide (CNBC)
Dow Sinks 799 Points as Trade Truce Enthusiasm Fades (CNN)
U.S. Stocks Plunge by 500 Points Before Staging A Comeback After Volatile Morning of Trading (Associated Press)

How many times have you heard that it is not a good idea to look at your stock portfolio every day? Why? Because you are supposed to be in it for the long haul! Well, of course, that is what you are being told when there is so much uncertainty in the stock market. Doesn’t it seem like everything affects the market… wars, gas prices, politics, the Kardashians (just kidding about the last one).

The experts are preparing you for a big stock market correction, but when is it going to occur (is it happening now?), and what is going to happen to the value of your stocks? A commonly asked question is “If my stocks go down, how long will it take to make up for the losses?”. That is a real concern because it could take months or years to get back to where you were before. Why take this risk with your hard-earned money? As a fellow doctor, that is why this topic is so dear to my heart.

If this graph isn’t convincing, I don’t know what is. Just look at the difference that a $10,000 investment would have made in commercial real estate versus the S&P 500 over a long span:

No matter how the economy performs, people still need a place to live. That is why we invest in stable, income-producing commercial multifamily apartment complexes.

Why do the ultra-wealthy have a large percentage of their assets in real estate?

1) They receive passive income (mailbox money) while they are vacationing all over the world.

2) They usually do not pay taxes on this mailbox money because the depreciation usually covers the income from their investment (this is tax-deferred until a liquidation event)

3) The properties appreciate (hidden money) because the renters are paying the mortgage down.

4) They can transfer this wealth to their heirs when they die. The basis points reset, where taxes could possibly stay at zero. All this while the properties continue to make money for their children.

I ASK AGAIN, WHY DON’T MOST DOCTORS KNOW ABOUT THIS ASSET CLASS?

1) We are too busy running our practices.

2) We are too busy trying to figure out how to make up for the losses from decreasing insurance reimbursements.

3) We are too busy working more hours to make up for these losses.

4) We are too busy completing our electronic health records.

5) We are brainwashed by our advisors…telling us to avoid getting involved in something we know nothing about and letting them handle our money.

6) Maybe we are just burned out?

There has been no one to teach us. Perhaps after so many years of education, we just don’t want to be taught any more. Albert Einstein stated, “Education is what remains after one has forgotten what one has learned in school”.

Well, it’s time to listen and learn! If we are in this together, we will be able to achieve more than we ever dreamed of!

To your Wealth!

Arturo

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