The Investment Your Financial Advisor Doesn’t Discuss

Written by: Dr. David Phelps, DDS


Are You “Staying the Course” with Inflation?

Despite inflation, rising interest rates, and recent losses, many financial advisors will tell you that market upheaval is just part of how investing works. Dollar cost average and everything will be okay if you “stay the course.”

In my decades of experience, I’ve witnessed many professionals receive disturbing advice from well-meaning, yet uninformed or inexperienced advisors, who were acting in their best capacity given their traditional education and background. The problem is that they only know what they know. Their one size fits all, “here’s what everybody does” approach to investing creates average results at best.


I don’t want average results. Do you?

“Staying the course” is often shorthand for “keep working until age 65” (maybe more). For numerous dentists and doctors, this leads to mental and physical burnout with the burden of financial uncertainty and no end in sight.

Specifically, many financial advisors use “Monte Carlo scenarios.” This is the accumulation to depletion model often prepared for their clients. They use fancy software programs with algorithms that are somehow supposed to be able to predict the economic variables of inflation, interest rates, and market returns for an estimated lifespan.

You just have to keep your fingers crossed that your money doesn’t deplete before you do. Personally, I didn’t obtain the education and assume the risk of a business owner to bet my final years on a Las Vegas model. Did you?

When their clients retire, the financial advisor moves their client out of the risky stock market because the client cannot afford a big loss in principal. Typically, this means putting them in t-bills, bonds, and low-volatility investments that generally don’t even keep up with inflation.

Historically, the bond market (essentially, being the “bank”) provides a safe haven from volatility and a safer place in the capital stack. The problem is that we have just completed a 40-year cycle of declining interest rates. In a rising interest rate economy, the safety of bonds will not produce the income necessary for one’s desired lifestyle.

The requirements of the accumulation model are extremely difficult to achieve.

Many practitioners are told they must accumulate $8-10M dollars before considering retirement. For self-employed professionals, this is a very high bar to reach. Unless you are a trust fund benefactor or hit a very big home run, accumulating $8M working and saving will entail a working career well into the 60’s or beyond. Using an alternative mode of investing, we regularly have doctors who are able to comfortably retire with between $2m and $5M without depleting their principal.

There is an alternative!

Real estate has always been an excellent inflation hedge on two fronts; the value of real estate keeps up with inflation, as does the cash flow. I can’t control inflation, the government or interest rates, but specific investments in real estate, on either the equity or debt side, allow me to navigate these market cycles.

Most of today’s financial advisors have only read about inflation and have never navigated the economics of higher interest rates and stagflation. This is a major secular shift. The maxim often quotes is, “hang on and eventually the market will come back up again.” The problem is, will the market come back in time for you? This does not build confidence, especially if you are contemplating an exit from active income production.

We’ve all heard the sad stories of business owners who exited right before a recession, lost much of their principal investments, and were forced to downsize and return to work.

To me, real estate provides an alternative that is not about buying and selling but about investing in cash flow. All roads lead to income. When I bought my first house in 1980, interest rates were above 13%, but it didn’t matter because I bought the house at a price where the cash flow was strong enough to cover my leverage and expenses with margin.

With real estate, you can use fixed long-term interest rates and create cash flow despite volatility. You can’t do that on Wall Street. In addition, while there will be a rebalancing in the market as rates rise, adjustments don’t happen as quickly in real estate due to marketplace inefficiency. Wall Street is such an efficient marketplace, everything can change in a moment. This doesn’t happen in real estate because change happens more slowly.

Now, your financial advisor may inform you that you can invest in real estate through the stock market.

For example, they’ll tell you that if you invest in a company like Outback Steakhouse (owned by Bloomin’ Brands, a publicly traded company which includes numerous restaurant chains), you own part of the real estate sitting beneath those properties.

To be clear – I don’t do ANY real estate investing correlated to the stock market.

The real estate sitting underneath an Outback Steakhouse might be a great investment, but their stock value is not based on the valuation of that real estate. It is subject to the stock market and the valuation of their business operation. There are numerous case studies of businesses whose stock values were destroyed despite being built on prime real estate.

It is fundamentally a bad construct to equate the value of Outback Steakhouse’s stock with the real estate the restaurant sits on.

There is a potentially valid approach to investing on Wall Street that is based on extensive due diligence of individual specific companies. This is Warren Buffet’s model. He does extensive research on the underlying business fundamentals of each company he invests in. But do you have that expertise? It can be learned over time, but there are so many variables to consider. given the inseparable correlation with the market as a whole.

To me, real estate is a lot easier to understand, and I want to understand the fundamentals of my investments. Rather than just buy stocks based on a technical chart or behaviors and emotions, I want the fundamentals of the assets to be driven by actual data from the cash flows. This tells me I’ve got sustainability.

This is what I’ve done my entire life, and I’ve also seen the results in hundreds of other people’s lives. It’s not the only path to investing, but it works. I’ve always tried to figure things out for myself by finding the right people and consulting with professionals with the expertise I need (attorneys, CPAs, etc). But consulting with professionals is not the same as abdicating the decision to them.

The bottom line is that the majority of financial advisors don’t understand real estate as an investment.

If it’s not part of their actual experience, education, or background, they will not offer it. Plus, they may lose commissions, fees, or other assets if their clients choose to invest outside of Wall Street products.

Most financial advisors will not be able to guide you to success in real estate. It’s simply not in their wheelhouse. If you want to take advantage of alternative investments in real estate that provide more control, you need to become your own financial advocate and take responsibility for your financial future. After all, no one cares more about your hard-earned money than you.


When his young daughter was hospitalized with leukemia, Dr. David Phelps, DDS was able to turn to his alternative investments, step away from his dental practice, and be by her side. From this experience, he created Freedom Founders in 2012. This community helps dentists and other professionals take control of their retirement investments to produce passive cash flow and security and live life on their terms.

To contact Dr. Phelps, visit