PIMD welcomes doctor on fire as our guest post. POF is a personal finance website created to inform and inspire physicians and our patients with insightful writing from a physician who has achieved financial independence and the ability to retire early. doctor on fire is an affiliate partner.

During the first decade of my professional career, I invested money in mutual funds and didn’t spend much time or effort thinking about other options. However, after realizing that we were in fact financially independent, my investments changed as I added different asset classes for various reasons.

Five years after the start of my career, I invested in a small craft breweryand it would be my only “alternative” investment before achieving financial independence.

I didn’t even add any obligations until about halfway through my 13-year career in anesthesia.

However, since realizing we were truly financially independent at the end of 2014, I have changed the way I invest the extra money. I would like to share how and why my investment has changed.

I’ll start by saying that I believe in the effectiveness and simplicity of a three-fund portfolio or any variation on it.

Buy a few index funds (US stocks, international stocks, bonds), rebalance once in a while and reap the rewards. It’s simple and time has shown how well it can work.

My portfolio basically has a portfolio of four funds as a foundation. I added a REIT index fund as a “fourth fund”. I also did some slicing and dicing, dividing the US stocks into different funds and doing the same with the international allocation.

Collection of tax losses, which is worth between $1,000 and $1,500 a year, is one reason to mix it all up. If I have a fund in my taxable brokerage account, it is better not to hold the same fund elsewhere.

I’ve also traded funds a few times, so I now own both Vanguard’s S&P 500 fund and their Total Stock Market fund, although their performance is almost perfectly correlated.

I also subscribed to the idea that small value stocks can offer a higher return over the very long term. It hasn’t been for the past decade, but it’s actually a small window into the grand scheme of things. I rely on the mean reversion to start at some point.

I also moved into emerging market funds as part of my international allocation in hopes of a slightly better return there. Increased volatility is a price to pay, but it also means more potential losses at harvest.

I recently read Dr. Bill Bernstein’s book The investor manifesto. Dr. Bernstein, a retired neurologist, financial historian, prolific author, and manager of very wealthy investors, is famous for saying, “If you won the game, stop playing.”

What he means is that if you have all the money you need to live the life you want, why not reduce the risk and redirect your investments towards safer and less volatile assets? ie more bonds and fixed income instruments, and a lower percentage of equities.

“If you won the game, stop playing.” -Bill Bernstein, MD

Suze Orman, who does not understand the FIRE movement and is worth tens of millions of dollars, is known to be invested almost entirely in zero-coupon municipal bonds.

She won the game decades ago and she quit playing.

Meanwhile, Coach CarsonClemson’s alma mater led the Georgia Tech Yellow Jackets 52-7 at halftime in a recent duel on the gridiron. Clemson continued to play, win the match 73 to 7. Four players threw passes that were caught by 17 different receivers and 11 players recorded distances on the ground.

Even the esteemed Dr. Bernstein is known to say that if you win the game by a large margin, such as in your annual spending of 2% or less of your total assets, there really is no reason to stop playing. You can afford to give up a lot of points and emerge victorious.

When I quit my W-2 job in 2019, I found myself at the edge of this 2% mark. It’s true that if I put all our money in a safe investment that could keep up with inflation, we’d be around 50 years old with no money worries, as long as our spending assumptions turn out to be true.

I would also give up the opportunity to see our nest egg over the years, most likely double at least a few times over those same 50 years if I were to stay invested in assets that are more likely to appreciate, like stocks and real estate.

I decided to keep playing the game, allocating about 5 years of living expenses to bonds and continuing to invest the rest more aggressively.

Like Clemson, I started spreading the ball a bit more with the income I’ve earned since becoming financially independent.

My investments in alternatives have grown from a small investment in a brewery to about 40 times that amount invested in a variety of real estate and start-up investments.

I have investments in debt a second brewery and in a fixed and reversible real estate lender.

We bought some lakeside propertythought we could build on it, but decided to sell it instead for a nice profit.

I started my crowdfunded real estate investment with small investments, like $500 each in Fund raising and Diversity fund. I saw several offers come full circle with Republic Real Estate, Alpha Investment, EquityMultiple, Peer Streetand RealtyShares, now defunct (and fortunately without bad surprises).

There are two construction projects in Texas that I’m involved with through Crowd. I have also invested in real estate funds from both DLP (Dream Live Prosper) and Original investments.

I even have income-generating agricultural landtwo acres in Arkansas obtained on the AcreTrader platform.

At the beginning of 2020, I invested in shares of a high-end condominium in Miami through Compound, a company that was later acquired by Republic.coa mature startup that, among other things, helps other startups connect with investors around the world.

See here for an update on my various real estate investments and their performance.

I had the opportunity to invest in Republic itself, an opportunity that wouldn’t have been possible if I hadn’t trusted Compound before acquiring the company. I jumped at the chance; Republic.co is like a much better Kickstarter with serious verification and the ability for investors to have a real stake in the small percentage of companies that pass their due diligence process.

Not only do these investments add a new level of diversity to my portfolio, they’re also pretty fun to collect, create different post-IF revenue streamand I’m learning a lot in the process, too.

Yes, each of these investments carries a degree of risk, some higher than others, and all higher than Ms. Orman’s municipal bonds. I am also able to make these investments with money beyond what I need for my family to be financially independent.

In total, I have allocated about 20% of my portfolio to alternatives (including real estate). This percentage may increase for two reasons. First, if these investments outperform our combined stock and bond allocation, there will naturally be a higher percentage than before in the alternatives. Second, we can better afford to take on additional risk as our nest egg grows relative to our needs.

If all of these “alternative” investments were to drop to zero, which I would dare to assume statistically impossible, we would not be helpless. In fact, we’d still be fine. We still have the modified portfolio of four funds with around 40 times our annual spend to back us up.

Clemson kept playing because they want to win another championship. They were able to gain valuable playing experience for many of their athletes, and the margin of victory will impress those who vote in the polls and for the final playoff standings, assuming they keep their momentum going.

I keep playing because I don’t just play for myself anymore.

Yes, I believe we have beyond enough for my wife and me, but there are others who could benefit from an increasing amount of money.

We have children, and probably they will have children of their own one day. I hope by the time my wife and I leave this earth our boys (then men) will have achieved financial independence on their own, but if not, we should be able to leave a legacy if that’s what what we choose to do.

In addition, my site has a charity mission, and we were able to donate hundreds of thousands of dollars in online profits. We have awarded grants to hundreds of charities while continuing to develop a donor directed fund that will benefit the charities we choose for decades to come.

If the Make a donation accepted people like me with a single digit number of millions, I would sign it. By continuing to play the game, maybe we will have enough one day to claim a signature. I don’t know if I would like to give it all away, but the pledge requires you to give only half of your accumulated assets.

I’m up for that.