Have a business plan, no matter what size the investment. Poor investment choices come in all shapes and sizes. For example, the real estate market can produce very lucrative returns. But if you jump in headfirst without laying out a business plan, your portfolio could take a massive hit, leaving you with chunks of unsellable land/properties. Another example of an investment lacking business planning comes from a physician who invested in DVD rental kiosks. Without forecasting how profitable (or unprofitable) the investment could be, this physician invested $300,000 with the hope of being a major competitor to Redbox. While this particular physician was able to break even, uneducated investments are risky and should not be made on a whim. As one financial planner puts it, “If there is no financial plan, that money tends to wander off.”
Don’t take a chance without doing your homework. It’s true that sometimes you do have to take a gamble on an investment. As with most people, we are more inclined to trust the advice of a friend or colleague who may be on the inside of a major money-maker. Needless to say, don’t feel obligated to invest in what seems like a “sure thing.” Your peers may make some convincing arguments, but don’t let peer pressure sway your decision. In short, do your own homework. According to White Coat Investor, when it comes to expensive investments, it’s always best to “spend a little time learning about investing, shopping around for low cost advice, and analyzing the true costs of your investments.” This is especially important if an investment means tapping into your savings or retirement fund.
Avoid being overconfident. It’s good to be confident in your medical practice, but that confidence may not translate well into other areas of your life – like investments. Overconfidence and ego can tempt you into taking financial liberties that could leave you in dire financial straits. As a doctor with many years of education behind you, your experience lies heavily in diagnosing patients and treating them. Just as you wouldn’t assume a patient’s ailment or illness without asking about their symptoms, you shouldn’t assume you know which financial investments to make without perspective. Which brings us to our next tip.
Consult with a financial advisor you trust. Be wary of financial planning firms that specifically seek out doctors and dentists but don’t keep you in the loop. Many take advantage of the busy lifestyles of doctors who are so wrapped up in work, that they aren’t able to monitor their investments. This leaves the door open for sneaky investors to reap the benefits while the doctor is taking all of the financial risks. Avoid getting caught up in the latest medical device, pharmaceutical company or investment marketing ploy. If an offer sounds too good to be true, chances are it is. Consult with a trusted financial advisor who can walk you through your accounts, portfolio, investments, and any other financial statements so that you can better understand how your money can work in your favor.
It’s the nature of your job to put others first. However, your financial well-being is also important. Remember just like in your practice, you need to be thorough and have patience. Don’t rush into a situation until you know all the details. If investors are giving you the runaround or are speaking in vague terms, walk away from the situation. Speak with an advisor who can give you the worst-case scenario of a particular investment before you put any money down.
