Ep 010 - Investing in Startups Part 1

Summary:

• The Concept In Investing In Startups [0:02:11]
• Good Ideas Fail All The Time In The Marketplace [0:06:50]
• If You Cannot Put Numbers To It, You’re Gambling; Not Investing [0:09:25]
• Everything Goes Up Including Housing [0:16:04]
• Have A Specific Time Horizon When Investing [0:18:23]
• Dunning-Kruger Effect – Expert Bias or Self-confidence Bias [0:23:10]
• By The Time You Hear About It, It’s Too Late [0:24:39]
• Fear Of Missing Out (FOMO) – Step Away From This [0:31:14]

 

 

Welcome to the Financial MD Show. This is the only podcast designed specifically for residents and young physicians to help you become educated on financial planning for physicians and avoid many of the common financial mistakes doctors make. Your hosts, Jon and Trevor, explore a different topic with each episode. Jon Solitro is a financial planner and certified financial education instructor. He’s been working with young physicians for the better part of the decade and lectures to graduate medical programs around the country. Dr. Trevor Smith is a board certified ophthalmologist with a full time practice and he has learned the ins and outs first-hand what it takes to make smart financial decisions as a young physician. And now here’s your hosts, Jon and Trevor.

 

Jon: The topic that came to my mind which I don’t think we’ve really delved into before is – I think people probably hear about investing in startups so I know some about that. I figured, you know, that’s something that comes up as people just…I don’t know. I seem to read about it all the time just in any kind of investing news about researching startups and ventures and tech startups and just all that kind of stuff so I figured that should give us a good amount of conversation on that. We’ll start up pretty basic and maybe get a little bit more advanced into what we know or what we’ve been experienced in the tip of things and what comes to mind and see if we can give some helpful information that would apply to people that are doing it currently or thinking about doing it or think about one day maybe down the road they’ll do it. In general, we talked about investing in terms of you put your money somewhere hoping it will grow whatever different purposes. Most people know of investing, they think of Roth IRAs or stocks or mutual funds – all these different words – which, yes, basically means putting your money somewhere to grow for a purpose.

 

The Concept In Investing In Startups [0:02:11]

 

And when we talk about investing in startups or small companies, most of the things that 99 percent of the public is invested in are publicly traded companies or funds through their IRAs or their 401(k)s or brokerage accounts or whatever, but they’re all typically publicly traded and that’s something we’ve kind of gotten into a little bit in previous episodes or if you watch any of the Didactic Minute videos from my YouTube or Facebook. We talked about kind of basics of investing and that would be explained in there, so reference that. But today we’re going to talk about investing in businesses that are very small businesses – sometimes brand-new businesses – and they’re not publicly traded so you can’t go in a stock exchange and get them and so they are technically a private transaction between you and this company getting shares of a company and there’s a lot of different ways and forms that this can take, and typically, your money’s going to be locked up for a certain amount of time and you’re hoping for drastic growth compared to, let’s say, you put into mutual funds or S&P 500 Index Fund or whatever. You’re hoping for a pretty steady rate of return, maybe some slight ups and downs, but long-term, shooting for maybe 10 percent a year growth, give or take, and so that’s predictable. What’s not predictable is when you invest in a small startup company because it’s really a gamble. It could go either way. The startup company has no history. It’s got a new idea sometimes, but you’re putting a certain amount of money and usually there’s minimums – 50,000, 100,000, whatever – so this is not necessarily geared towards residents typically but a lot of attending physicians that we work with get to the point where they’ve got this cash and they’re maxing out other things and they say what are some other creative things that I can invest in. And there’s tax benefits that we won’t necessarily get into but you’ll see these called private placements or Reg D, RD’s private transactions. A lot of times you do need to be in an accredited investor – so making 200,000 a year plus or net worth of a million dollars or more – those are the SEC’s guidelines for what is an accredited investor that can then invest in these private investments. They assume that you’re knowledgeable, experienced, and savvy enough with that kind of money to both: A. have a capacity to risk that, and B. you probably know a little bit about money given you’ve reached that point. Now, we’re talking to doctors here who just because they’re wealthy doesn’t mean they know a lot about money to be honest which is why Financial MD is here. So that’s not necessarily and all-encompassing, hey, you make decent money, you must know something about investing – no. So when you hear things like a tech startup or you see an IPO – an IPO is basically a startup that got a lot of investments over the years and has finally decided to go public – and again, that’s another conversation. This is before these companies go public and you’re getting kind of on the early stage or you’ll see things like the seed round or a series A, you know, these different terms that involve what phase of the business is it getting this money. When these investors invest, they get shares in the company, get equity so that when eventually it gets bought out for a billion dollars by Google or Amazon then everybody who invested early wins big. So that’s the gist of the concept. Trevor, what do I miss?

 

Trevor: Yeah, let me. For anybody that didn’t make sense to you because Jon’s kind of giving you like some different perspectives and different parts – different terminology – kind of like adding analogy throughout, so if that didn’t all make sense to somebody and they were just following like, oh, yeah, I know that…oh, I know what that is like, and you’re not investing in a company – don’t. I mean that’s not financial advice because I’m not an advisor. It’s definite not individual advice, but in general, you want to understand, you know, the market that you’re investing in. You want to understand the market for a startup for sure. You want to have some sort of kind of advantage to know whether something is BS or not.

 

Jon: Yeah.

 

Good Ideas Fail All The Time In The Marketplace [0:06:50]

 

Trevor: Good ideas fail all the time in the marketplace, like good ideas that are turned into businesses fail all the time. So you don’t want to invest in an idea so much as you want to invest in people and the application of a good idea, so the execution, and the business of the idea is what you want to invest in. My favorite book on the topic or maybe like the best book on running a startup and if you’re trying to be the startup guy would probably be Venture Deals which is kind of like the bible for raising any sort of capital from multimillion-dollar companies all the way down to smaller raises. It just gives you a good understanding of what all that mean like what are stocks, what is common stock, what is preferred stock, how do you want to structure a deal – that’s why it’s called Venture Deals. It’s a good book. It’s written by a couple like kind of Silicon Valley insider guys that wanted to educate themselves and other people on the system. They wrote a book and it sort of just…it’s almost like a how-to manual so it gets them into the nitty-gritty. That’s a solid one for people looking to do raises, for people investing. I haven’t done that but I know, you know, we know some people that do that. That’s like their thing, you know. They pull in people like me essentially so I’m hearing about things. I haven’t invested. I’m hearing about things and yeah, you want to big picture things like how big can a company get, you know, if you’re putting in 10 grand and it’s going to give you 10 percent and then the company is going to be 100,000 dollars so you got 10 grand for 10 percent. If you’re just even amount, then what’s that company at a 100 grand today, what it’s going to be worth later, what if it’s like successful because you’re ideally you’re getting in really early. So if it’s going to a million, you got like a potential 10 x return on your money. Now a 10 x sounds incredible and those are actually pretty rare even though you hear doing like a 50 bagger or 100 bagger or something like that. A ten bagger is still like ridiculous. You get a few times with a decent amount of capital and you’re going to crush it. But if you’re doing with 10,000, you know, and you get a 10 x, it’s only a hundred thousand, like that’s great, but like I think a lot of people think they’re going to get down on something or going to get rich, and you have to kind of look at numbers.

 

If You Cannot Put Numbers To It, You’re Gambling; Not Investing [0:09:25]

 

If you cannot put numbers to it, then you’re not investing. You’re just gambling. I think a lot of people end up gambling and they’re like, oh, it’s cool, I invested in a company. Don’t be cool. Be smart. Be cool. Do other things that are cool like get a new set of golf clubs or something.

 

Jon: Yeah, trying to be cool is how us guys get into trouble throughout most of our life.

 

Trevor: Yeah, yeah. That’s true in general. If you want to be cool, like buy a car and buy a 40,000-dollar Corvette, and at least you’re downsize is 40,000 dollars.

 

Jon: Yeah.

 

Trevor: Yeah, plus repairs and maintenance, but like at least it’s capped, right. But if you put the money in, you may end up investing more, you could get dragged through the mud. You got your emotions. You could lose a friendship if it’s a friend, so when I hear about startups I think high returns if successful, low likelihood of success. There should be a limit of size if they can articulate to you long list of risks and then the emotional toll of that.

 

Jon: And you’re not typically like involved in this company. It’s not like you’re all of a sudden…

 

Trevor: Yeah, you just give the money.

 

Jon: A partner.

 

Trevor: Right.

 

Jon: So you’ve got to be willing to a. this is money that you can part with and be ready for it to be gone forever, right. That’s the worst case scenario.

 

Trevor: Right, yeah.

 

Jon: But totally likely or, you know, also be ready to just invest it and not…like you said, the emotional volatility that goes into it too, like, don’t be following this company everyday seeing how they’re doing or checking up like…you don’t have that kind of stress sometimes so if this is something you wanted to get into at some point just know, yeah, it’s something, hey, I got this completely.

 

Trevor: Right.

 

Jon: Discretionary money that I can lose. It’s 5 grand, 10 grand…whatever it might be for you. I’m going to put it here and if it grows, great. I’m not going to pay…you know, I may get updates every month or quarter, whatever.

 

Trevor: Yeah, if you’re just the investor, that’s true. If you end up being a big investor or if you’re taking an active role, then it does get more interesting. You can do a lot of things. You can try to get on board. If you want to have control, you got to get a board seat. If you want to have like decision making that’s required to be considered by the rest of the group. You got to really have some things in a contract and then you’re like advisor and/or board seat and like there’s a lot of components. But if you’re like just giving your time, that’s another way people especially doctors can invest in a company. You can become an advisor. That’s nice because it just costs your time and potentially many have the emotional component. You have your own expectations. Expectation is like a huge part of this. It’s like what I’m getting to get out of it? How guaranteed is it? The answer usually not much and there’s no guarantee.

 

Jon: Yeah.

 

Trevor: That’s like business so doctors aren’t used to getting into business. Oftentimes, they’re like, I went to medical school and then I became a doctor and then now I get the salary and they always pay it to me and the only variability is how many RVUs or how much surgery I performed or patients I see and then maybe I get more or less but that’s not how everything else works out and that’s usually uncertainty and doctors often tend to go into medicine because they like certainty. Even though there’s uncertainty in medicine, there’s certainty and safety in the job.

 

Jon: Right.

 

Trevor: So I think there can be a…there’s a lot of doctors who have gotten ripped off, right, just in general, and especially I thin in investing. Not so much as financial advisors to be honest. I think it’s a lot more like people doing companies and doing raises or things that sound like a sure thing. I don’t about you but when I hear about something that starts to sound like a sure thing, my first response is skepticism. If I liked it and I’m interested and that still sounds too good to be true then my second step is research, thorough vetting and investigation about something. We’re not even talking about startups. I mean, again, the risk level, the likelihood of failure goes up dramatically. I’m just talking about like stocks that I’m interested in or something or cryptocurrency or whatever. I should say a Bitcoin because I don’t really endorse crypto in general.

 

Jon: Well, that is good. That’s a lot of…people talk about, oh I just got...I heard about this group or I heard about this on and this one… you know what I mean? That is getting as prevalent as any time of random...

 

Trevor: It is. It’s terrifying. Every time I hear it, I’m like RIP.

 

Jon: Yeah.

 

Trevor: Put in that just be ready to never ever see it to go on and on.

 

Jon: Yeah, so if you’re looking for tips and tricks on that, I mean that’s inventing a new cryptocurrency is just so easy to do that these things are popping up all the time – oh, I just heard about today. I must get in early because it’s going to grow and I’ll make money like no. For all these ones you’ve heard that have grown incredibly, I mean, how many dozens or hundreds have not?

 

Trevor: Oh, yeah.

 

Jon: That’s kind of like an IPO conversation, though – ooh, if I get an IPO today, it’s going to have to go up right? Not typically, honestly.

 

Trevor: Yeah most go down 30 to 40 percent before they end up and then now everything goes up but before they go back up, they usually are go down for a while.

 

Jon: That is not financial analysis right there.

 

Trevor: That’s just sarcasm.

 

Jon: Everything goes up. Everything goes up! Invest in whatever you want.

 

Trevor: Well, the Fed tends to buy everything right now so it’s a weird time to be.

 

Jon: Yeah, that’s true today.

 

Trevor: Yeah, it’s a weird time to be about specific investments because it’s hard to not to be doing well right now.

 

Jon: Well, everyone relates.

 

Trevor: Right, everyone…

 

Jon: To our conversation.

 

Trevor: In a bull market.

 

Jon: Yeah, and the problem with that is if you just started investing in the last 5 years then that’s what you know and that’s going to influence your bias towards how do you feel about the future of the market. That it just always goes up. You had such a good…that must be how it is, you know.

 

Trevor: Housing.

 

Everything Goes Up Including Housing [0:16:04]

 

Jon: Housing, for sure. You know, I have been alive long enough to see 2008, 2009 and 2010 and I probably told a story before but in 2012, I bought a foreclosure because they were everywhere and stuff was undervalued and so I was just lucky enough to be looking for a house for me and my family. We bought a 4-bedroom in Lansing area for 150,000 dollars and then sold it for 300,000 eight years later. So that’s not something you can expect, and if you buy a house this year or last year, you can probably expect that that’s possibly going to go down in value in the next 5 to 10 years. So, you know, a thing cycle and just understand what goes up does often come down and if we’re talking about basic long term like retirement planning, you know, we based that on things typically long-term do go up but there are ups and downs along the way. But when we talk about startups and we talk about cryptos, like any of these things like that that can just pop up and say hey, invest in me, that doesn’t mean anything, and when you’re investing in IPOs, say something just is going public, you think, great, I’m getting early. You’re not getting in early. There’s tens or hundreds of thousands of other investors whether it was the employees that got some shares, the founders, the early investors – they’ve all got shares that they’re going public because they’re ready to cash out and not everything but a good chunk like they get together and say, okay, I’m ready to become a millionaire or like let’s go public. So that means the public gets to invest in it. They typically are selling their shares now. That’s what you’re buying is their shares at a very high price.

 

Trevor: Right, somebody bought for you to be able to buy it.

 

Jon: Yeah, so that’s what like the early winners already got it. Now that’s not to say… like a lot of IPOs we see like start out high in spark and then come down and maybe gradually go up, it’s truly a good company but just be ready for that and investing in a startup early on with venture capital is even more so like that.

 

Have A Specific Time Horizon When Investing [0:18:23]

 

Trevor: One other huge factor – this is in general, this is a nice general point – investing in general, you want to have a specific time horizon of what you’re doing with this investment. So you want to look at if I’m getting in a startup – and it applies to all but startup is nice – how long am I…when am I looking at getting my money back? What’s my return on investment…the time to my return on investment? That’s an important factor too when you’re putting your money in because if you’re putting in 10,000 and you just have a gambling attitude – well, it’s gone and we’ll see what I get someday – but an investor who goes, I’m putting in 10 grand and that’s whatever percentage of my net worth or maybe a hundred grand and I expect to get such and such return and I think the chances of that happening are 25 percent. So when you start to invest multiple things at that level, you’re putting in a hundred grand, you think 25 percent chance of return, you’re just estimating; people who are really good at estimating could do this across the board. So essentially that, when you give that away, it’s worth 25,000 dollars to you. Like you do the math on that for the risk level of like okay, I just sunk 75 grand in the hole on this. I think I might get 25 back. Maybe nothing. And then back to the time horizon – you want to know how long like okay how long until I get it back and/or how long do I want to be willing to let go of the 100,000 dollars, so I want, you know, this portion of my net worth to keep cycling back to me in 5 years so I can make different decisions or, you know, this is a one-year plan. I just want to like stake you and then you’re going to give it back to me as soon as you have it or it’s 10 years or 20 years and just like I just want to hold this forever. like people who buy gold, they don’t really ever plan on selling it. They just want to have some percentage in their net worth and a less fungible asset.

 

Jon: Yeah, it’s a hedge, right?

 

Trevor: Yeah, it’s a hedge, right, so they have different purposes and they have different time horizons but startups tend to be high-risk, high-reward and I am currently doing a raise for like a bitcoin mining thing right now and one of the things I found is people want like a 5 x or higher return in 3 years, 3 to 5 years. Those are like the startup mind itself, and I don’t think there’s anything wrong with that but when I learned that I was like you guys are here to lose all your money. Like not literally, but you better have some winners because those are hard to find, you know, 5 x are pretty, pretty hard to find in general especially in the 3-to-5-year range. You got to be talking software and like what I’m doing is hardware, right, so you’re buying a lot of expensive machinery so has a different multiple but then in your portfolio maybe that goes in the more conservative range. Now Bitcoin sounds speculative and not conservative, so it’s hard to find an investor who thinks it’s conservative as the returns are – if that makes sense.

 

Jon: Right.

 

Trevor: I’m probably getting a little off track there, but I found that really interesting because I’m like I see this as a conservative bet, you can reliably get this but it’s not a startup return but it kind of requires the emotional or mental tolerance of a startup because to the guys with money, it’s expensive to start. To most of the average, say, like boomer kind of population – these are effectually not to say criticism, I know how that goes – but they have a different time horizon. Part of their reason, they’re like, I kind of want to do a 5 x in 3 years because I want to retire in 5.

 

Jon: Yeah.

 

Trevor: But a lot of these guys are like oh, they’re doctors late in their career and they kind of want to accelerate their retirement and they still wanted to feel low risk. I think startups feel low risk because, oh, that’s a familiar concept. Oh, these young guns, they’ve got a great idea. They’re going to triple my money and that’s not…I don’t know.

 

Jon: Why do you think people think that that is safer than it is? And I don’t necessarily understand that.

 

Trevor: People are persuaded by narratives. Why people get in these random other cryptos? Because they sound cool, oh, we’re going to solve that problem with a blockchain and, oh, I read something about the blockchain. I think I understand that. It sounds cool when I talk about it in my weekly coffee meeting with my friends, you know, what’s like.

 

Jon: Yup. Well, because they’re relative an expert compared to the people they hang out with, right, so they make them feel smarter than they are. It’s expert bias or self-confidence bias, we call it.

 

Dunning-Kruger Effect – Expert Bias or Self-confidence Bias [0:23:10]

 

Trevor: That is of the Dunning-Kruger effect.

 

Jon: Yeah.

 

Trevor: Well, as you know about something, the more you feel like you know more than you know. That’s the short version of it. It’s basically like you go in and you take a test and you’re like, oh, I nailed that, and it comes back and you got a D minus, you know, 68 percent or something – whoa, I didn’t know what I didn’t know so that’s I would bet in investments and startups especially if you got lucky with one.

 

Jon: Do you think it has to do with just the psychology of maybe optimism of you kind of convince yourself that?

 

Trevor: Totally.

 

Jon: Yeah.

 

Trevor: Gambling, right?

 

Jon: Yeah.

 

Trevor: Do people have a good understanding of their odds when they place a bet on a sports team?

 

Jon: I bet it’s a very similar place in the brain, right?

 

Trevor: It was for me when I…you know my story like I got into the crypto trading stuff in 2017 at the peak like an idiot, you know, and it taught me some lessons, but you kind of have to learn them on your own. I’ve talked to people who are like getting into it right now. Most things are at all-time highs.

 

Jon: Yeah.

 

Trevor: In general, not just in cryptocurrencies.

 

Jon: Yeah.

 

Trevor: So if you think you know more than the guys who are selling at all-time highs, what are the chances that you’re going to do better? I mean…

 

By The Time You Hear About It, It’s Too Late [0:24:39]

 

Jon: Yup, exactly, and it’s not like you walk on…Yeah, and for most of us, 99.9 percent of us, by the time we hear about it, it’s too late.

 

Trevor: Yeah, that’s a good rule of thumb. It’s kind of like it’s a misnomer, but if you heard about it, it’s too late.

 

Jon: Yeah, unless you work at a company, it’s not inside information, okay. It’s public. Unless you work at the company and then it is inside information and it’s illegal and you can’t invest in anyways so there’s no winners here.

 

Trevor: Yeah, so conservative investing over the long term is much wiser, but the trick right now is you have to put your money in something or else you’re like rapidly losing value from inflation so I just think today that like the U.S. like the CPI, right. They pull out basically everything that inflates and then they don’t include it in the inflation metric? Yeah, it does not include like housing, doesn’t include cars, doesn’t include some food items…yeah. There’s a good website on it. I’ll see if I can think of it but there’s been three versions of CPIs since the 80s and they just kept taking out things that were inflated. Germany doesn’t do that in their year-over-year inflation as a I think a month ago was 11 point something percent. That’s a more honest metric than ours which is 6.

 

Jon: Well, and it’s like we can all feel these things and if they put out these crap numbers like, oh, inflation’s normal this year like there’s no way like you’re looking at…I mean, freaking price of steak is going up and obviously, gas and houses. Now, there are other things that are obvious but, yeah, that’s another story for another time.

 

Trevor: It’s one of those things where it’s hard for me to understand how people can’t feel like…how people can’t be sure that they’re being lied to.

 

Jon: Yeah.

 

Trevor: We are all being lied to and the narrative is being controlled including the math behind the reality, right, and that’s not conspiratorial. You can just go and read about the changes to the CPI and what’s included. It’s a basket of goods is the term and they’re not representative of living costs and CPI is designed to tell us the inflation of living costs so that’s a direct manipulation.

 

Jon: No. Housing is the biggest one and they’re not including it. That’s crazy.

 

Trevor: So, anyhow, it was nice to hear like an apples-to-apples…

 

Jon: Yeah, no, that’s good to know. I didn’t know Germany was that way. That’s a huge help and makes me think I’m not so crazy like I feel like prices are going up everywhere but the government says they’re not.

 

Trevor: If you’re feeling like for me, it was one of my like spidey sense things because if I feel like I’m crazy, I’m what, okay, maybe I’m crazy but let me look into it first, right?

 

Jon: Yeah.

 

Trevor: It’s that I feel like I’m crazy usually also it’s like, ah, it’s probably fine. It’s either like it’s probably fine or you should be a little worried, you know. That’s kind of like the little red flag in your mind. Look into it and your mind attacks those things because it’s trying to protect you.

 

Jon: Yeah, I know there’s some truth to that for sure. We are built with a certain sense. You know we’re created with some good…there are things that set us apart but even animals like I feel like have some of that – you know what I mean? Like somehow dogs just inherently know when somebody is a good guy or a bad guy.

 

Trevor: Right, right. I had thought you’re going to say that because I was thinking the exact same thing. There’s just something there like, yeah, it’s a smart thing.

 

Jon: You know, how can residents and doctors apply this kind of knowledge like whenever you’re dealing with an advisor or an insurance agent or something like that and there’s like you’re starting to be like hmm, this seems great but something’s…this can’t be right…you know, and again, not that it can’t be but do some homework. Talk to somebody, you know. I mean, anyone listening to this, you guys can shoot us questions if you’re like, hey, I was told about this deal or this product or whatever, what do you think, you know. We’d be happy to debunk stuff.

 

Trevor: For doctors, there’s just like so much you can add for companies and startups and things like that like I can say from personal experience that it tends to just be networking, making friends in areas and talking to lots of people and listening to podcasts and just like throwing caution to the wind a little bit in terms of just reaching out and chatting with the if you’re curious.

 

Jon: True.

 

Trevor: I had a buddy in residency. He reached out to this guy. He was developing like an AI algorithm for something he found interesting with, with retinal imaging and he just like reached out to the guy and then he ended up doing an internship there for a year like kind of created a little mini internship dream job for himself. I have been able to work with some people and some companies I’ve really enjoyed just from reaching out or even doing a little bit of free work or like hopping on some calls and answer some questions – that’s just a specialty now. That doesn’t cost me a thing, you know, other than opportunity costs of my time if I wanted to try to go for it. You can do a little bit of that or you know just…I started out just doing stuff for free and giving away just a lot of time and then you build some connections and friends and it’s fun if you enjoy it and that’s a good form of work.

 

Jon: Absolutely.

 

Trevor: Yeah, so, just networking and have fun with it and then you can learn about a company too like if you’re like at a startup. In your knowledge base, you can tell it’s a waste of your time, it’s a waste of your money. So get in there and see how you like spending your time on it and then maybe invest from there.

 

Jon: Yeah, 100 percent.

 

Trevor: But just bumbling around and trying some things, wasting your time is like the perfect way to find out you don’t want to waste your money.

 

Jon: Yeah, I think that’s good and that’s how a lot of good things happen and we find opportunities and you know like you said opportunities that don’t create a lot of risk because you’ve invested the time and the knowledge and good things don’t happen overnight, I’m sorry. They just take time.

 

Trevor: Correct, and there’s one good deal.

 

Jon: Yeah.

 

Fear Of Missing Out (FOMO) – Step Away From This [0:31:14]

 

Trevor: FOMO-ing into a job, FOMO-ing into – FOMO meaning fear of missing out – FOMO-ing to an investment or a stock or a crypto or whatever, it’s just a false understanding of the reality of the decision of do I invest or not. It’s a biased mental space. So you step away from that, and then if the price goes up, that’s okay. Prices are going to go up in other things too. You have to miss out on things. Good investors miss out on things all the time. They get into the right stock and then they sell on the way up and it keeps going up after they sell and they call that missing out on profits or something but if their time horizon was, I need that cash or I want that cash for something else, they’re not missing out on anything.

 

Jon: Yes, that’s good.

 

Trevor: With their written plan.

 

Jon: And I tell people about that all the time that talking about stocks with my buddies and then like, oh I wish I would have stayed…Like you cannot beat yourself up over that or you’re going to lose. Accept that that’s going to be a part of that.

 

Trevor: And if you beat yourself because you’re afraid and you sold it at the last minute, bounced back well, examine your ability to trade or invest. I mean trading means a specific shorter time horizon. People are terrible at trading. Statistically, it’s like 99.9 percent of people, you know. I think it’s one in a thousand will be profitable traders or something like that.

 

Jon: Really.

 

Trevor: It’s extremely unlikely, yeah, so I guess that would be…

 

Jon: Yeah, good to know.

 

Trevor: That would be accurate.

 

Jon: All right. No, that was good. Yeah, I think we, as always, we came out with some good stuff. Let’s do a part two of this at some point and have Rueben on here from Washington Avenue Ventures and I think…

 

Trevor: Oh, that’s like the thing when we first started talking about him like man, this is the guy and he’s going to…I feel like I gave more of a con argument and he will give much more pro which is perfect. That’ll be a good convo.

 

Jon: That will be good. Yeah, the cons of startup investing and then episode two the pros of it. Yeah, that’ll be good.

 

Trevor: Cool.

 

Jon: All right, super. Well, anything else you want to add Trevor?

 

Trevor: No, that was great. I appreciate your time.

 

Jon: Okay so reminder to you guys, subscribe and share this. This is how we get the knowledge and good info out. If you like stuff you’ve heard, please share with your colleagues and friends and buddies and family. Join the Financial MD community on Facebook, look it up, and get in on there. That’s where we have continued conversations from these episodes and articles we shared. Any of our other social media is going to be out there – Instagram, TikTok, Facebook – is where we’re putting out new stuff in a hurry and then, yeah, shoot us a message if a question came up. If you’d like us to speak to your residency program about any of our basic financial topics, we do that as well. You can message us about that and for those of you in the Detroit area, we got our first graduating resident dinner of the season on December 15th in Royal Oak. Invitations will go out soon but get on the website or shoot us some email if you want to know more about that. It’s been fun. Again, this is Jon Solitro with my colleague, Dr. Trevor Smith. It’s been great. We’ll see you guys next time.

 

Trevor: Thanks Jon.

 

Thanks for joining us for another Financial MD Show. Be sure to head over to financialmd.com to get more in-depth resources on financial tips for physicians and don’t forget to join the Financial MD community group on Facebook, where physicians at all stages of their career gather to share tips and get ideas on achieving true financial success. We’ll see you next time.

 

The Financial MD Show is for informational purposes only and is not an offer to invest. It is not financial, tax, or legal advice. Be sure to seek financial, legal, or tax professionals when making any financial decisions. Before investing, you should make sure that any investment strategy or investment meets your individual investment needs, goals, and objectives. Financial MD makes no claims or guarantees to individual investment performance. All investing involves the risk of loss as well as the potential for gain.

 

 

Resources and Links:

• What is a startup? – https://startupsavant.com/what-is-a-startup
• What is a Roth IRA? – https://www.schwab.com/ira/roth-ira/what-is-a-roth-ira
• What are mutual funds? –

https://www.investor.gov/introduction-investing/investing-basics/investment-products/mutual-funds-and-exchange-traded-1

• What are private placements or Reg D? –

https://www.sec.gov/smallbusiness/exemptofferings/rule506b

• Guidelines of an accredited investor –

https://www.sec.gov/capitalraising/building-blocks/accredited-investor

• Definition of an Initial Public Offering (IPO) – https://www.investopedia.com/terms/i/ipo.asp
• Seed round vs Series A – https://www.abstractops.com/seed-vs-series-a
• Venture Deals (book) – https://www.venturedeals.com/
• What is a Ten Bagger? –

https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/10-ten-bagger/

• What is venture capital? – https://www.business-standard.com/about/what-is-venture-capital
• What is a blockchain? –

https://www.euromoney.com/learning/blockchain-explained/what-is-blockchain

• Overconfidence bias –

https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/overconfidence-bias/

• The Dunning-Kruger effect –

https://www.verywellmind.com/an-overview-of-the-dunning-kruger-effect-4160740

• What is Consumer Price Index (CPI)? – https://www.bls.gov/cpi/
• Financial MD Website – https://www.financialmd.co/
• Financial MD YouTube page – https://www.youtube.com/channel/UC6qEAQxK8L8JM7joy3wvdkA
• Financial MD Facebook community – https://www.facebook.com/FinancialMD/
• Financial MD TikTok – https://www.tiktok.com/@financialmd
• Financial MD Instagram – https://www.instagram.com/financial.md/
• Financial MD Twitter – https://twitter.com/financialmd2
• Financial MD LinkedIn – https://www.linkedin.com/company/financial-md/?viewAsMember=true
• Financial MD App – https://apps.apple.com/us/app/financialmd/id1507757039
• Financial MD Apple Podcast –

https://podcasts.apple.com/us/podcast/the-financialmd-show/id1548024586