Your Financial Future May Be At Risk

Trust But Verify. Easy to Forget. Hard to Apply.

by Dr David Phelps

by Dr David Phelps

The need to trust AND verify promises and facts. That is one significant need I see in the investing marketplace as well as in the financial planning for dentists arena today.

Ronald Reagan’s quote, “Trust but verify”, bears much relevance in the present day. Reagan was speaking about other countries' leaders. The need to trust AND verify their promises and facts. 

I invest mostly in alternative investments. I am secure and confident in my investments because I have proximity. I have a direct connection to where my money is going which is what you want as a passive investor.

In my 20s and 30s, I was boots on the ground, dealing with contractors and tenants. It was a great learning experience, but today I value my time more. I want to make prudent investments but I want to do it through other people so as to have the freedom I want.

Investment Criteria – Beware of Charismatic Characters

DO NOT make investments solely based on an affinity or an affiliation with someone. Liking someone isn’t high on the checklist for finding good deals. They may seem consistent and likable, like they have it all together, yet what happens if that person is not who you thought they were?

Warren Buffet has a popular saying, “When the tide goes out, you find out who's been swimming naked.” Today, we are finding groups of investment companies large and small that have been swimming naked for years. They may have had a good “track record”, people who have spoken highly of them, but what works for a few years isn’t always sustainable in the long run.

Don’t get Caught in the Flames, Only the Sage Survive

We are currently going through a downturn. A market correction. A recession. This is like a forest fire that cleans out the underbrush and deals with the overgrowth. Excessive growth always occurs when there’s an abundance of resources. The same occurs in the economy and with investing.

The monetary policies of Congress and the Federal Reserve have created this exuberant, explosive marketplace where money has been made in owning or investing in most assets. Money has been made hand over fist over the last 14 years.

This overabundance of resources (cheap money and low interest rates) causes many investors, operators, and business owners to lose focus on what makes them profitable, and on what protects their principal. You didn't have to do a lot if you had any investments or operational skills to make money, yet everybody thinks this growth will continue forever.

It won’t.

This is what I call recency bias. We think that what we’ve seen in the last few years is what will continue to go on. That's a big mistake.

You need to understand the market cycles, the patterns in our economy, and how to play at a higher level. Then you’ll know when it’s time to move your capital to higher ground.

Moving your capital to higher ground isn’t always fun. Everybody wants to get the double-digit returns that we've seen in the last number of years. It’s difficult for some investors to ignore what everybody else says you should be doing and go for the safe/boring position or wait until you have done all your due diligence before jumping in.

Trusting Blindly Has Consequences Even In Financial Planning For Dentists

Most of the great people I work with and help are professionals, well-educated in their field and specialty. But very few of them have the financial acumen to understand how to invest their money, particularly if they're not doing the traditional model of handing their money over to a financial advisor or putting it in a traditional 401(k).

Those are the methods that most people default to because they follow that group-think. It’s what they’ve been told to do. Trust the “financial expert”. Trust the certified professional. Trust but don’t verify…

“Everybody else is doing it. My CPA says that's how you save taxes, so, I should do it too.”

That's exactly the wrong way to go, particularly in times of economic turmoil like we're in right now.

There’s nothing wrong with having a CPA or other certified financial advisor, but blindly trusting their every suggestion without verification, without input from other seasoned experts, leads to many professionals losing their retirement savings right before they need it most. I’ve seen it too many times. 

There will be much more economic volatility coming down the road, notwithstanding regular market cycles. These will be very different times.

Economic Trouble is a Pattern

We can look to history for this pattern of volatility. Decades ago we went through the 1986 tax reform act. It took a lot of the benefits of investing in real estate and caused a market crash in real estate. Government interference, no matter the consequences, seems to be the way of the world going forward.

And we've seen huge government interference in the last two or three years with COVID. Not saying it was all bad. It may have been somewhat necessary, but the government is very inefficient in how they try to steer this massive US economy like a Titanic through a Panama Canal.

They overturn every time. Trouble is a pattern in this economy, and we need to learn how to face it. Every iteration of it.

You can't just be complacent and say “Well, I'll just put my money in the market and the dollar cost average will be enough.”

That is not going to work.

How to Know Your Investments Will Succeed

I love the fact that I can be close and have proximity to the people I invest with. That proximity is vital to do your due diligence, to ask the questions needed for discernment of operations and investment models.

In order to have that proximity you have to have a network, a community. You can either build that yourself, which requires a lot of time and effort, or find and join such a community (That's what we have in Freedom Founders).

A community gives you the leverage to verify beyond what individuals can do. You can ask the hard questions and dig deeper to verify what's behind the scenes.

They might seem like a good person, like they have a good track record, but what's behind them? Who is behind the operator? What's the culture? What do the business operations look like? What do the financials look like?

These are questions that a single investor rarely thinks about and even if they do think about asking these questions they just go along with everybody else. It might sound like it's been good in the past. BUT is it really good for today?

The Profitable Investment Models are Changing

The economic environment is a 180-degree flip from the past year, five years, and even the last ten years. The models have changed and people are searching for expertise, guidance, the “know-how”.

You need to be at the forefront of this change. This is critical to your future and to your kids' financial future. You invested your time in your training to become specialized in your profession and in the business that you run.

That is the earned income approach. Trading your time for more and more dollars. We all start there, but how do you transition from earned income to getting your money working for you?

Are you going to continue to do it in the stock market? In the 401(k)? Is that your game? If it is, good luck.

If you're not looking at alternative investments. If you’re not going in a different direction than the masses. If you’re not in a community at the forefront of managing their own financial future, who are making the progress you want to see, you are going to have a lot of frustration leading you to desperation.

I don't want to see that for you. This is important. If you're reading this now, wherever you are in your life, your success and your future success will not be predicated on what you've done in the past.

Yes, it got you to where you are and that's admirable. But the shift in the economy, affecting which investment models will be sustainable and profitable, is happening at light speed.

Being “in the know” is crucial in order to steer yourself and not depend upon outside people, who claim to be a fiduciary. In reality, you are the only one who can look out for you.

Keep that in mind as you plan for your future.

To your freedom!

– David


P.S. Whenever you’re ready, here are some other ways I can help fast track you to your Freedom goal (you’re closer than you think) :


1. Schedule a Call with My Team:

If you’d like to replace your active practice income with passive investment income within 2-3 years, and you have at least $1M in available capital (can include residential/practice equity or practice sale), then schedule a call with my team. If it looks like there is a mutual fit, you’ll have the opportunity to attend one of our upcoming member events as a guest.

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