Physicians should be crackerjack investors, but they are not. Overconfidence and gullibility make them easy marks for financial salesmen, whom they mistakenly assume to be seriously credentialed professionals like themselves, and not boiler-room bunco artists. Physician contact information is readily harvested and then their habits and preferences are carefully analyzed, the better to transfuse their assets into the broker’s pockets. Doctors are too smart for their own good, because they assume that their high I.Q.s will lead them On Old Olympus Towering Top of the investment hit parade. Unfortunately, this head bone isn’t connected to that wallet bone.
Picture-Alliance / Photoshot Extenuating Factors:
The history reveals several complicating factors. First, thanks to long winding MBBS, MD degree education,required to become a physician and train in one’s specialty, entry into the labor force is often postponed until after age 28-30. While salaries ramp up fast, there is the inevitable lost decade when savings otherwise could have been compounding. Second, given the skyrocketing cost of medical school, doctors now come to the starting line with saddlebags of student debt at a non-trivial rate of interest. The returns on money invested in financial markets are variable and uncertain, but this loan interest is inexorable and certain, making a strong argument for discharging the debt as soon as possible.
There is the unwritten expectation of a “doctor lifestyle,” which includes the doctor house, the doctor car, and the doctor spouse (often sold together). A succession of doctor spouses pretty much will demolish any efforts at wealth management. There is no shortage of anecdotal evidence that doctors are susceptible to goofball investment schemes like extracting gold from sea water off Ratnagiri Coast, etc. Anything that promises sizzling returns with no taxes seems to loom large in their thinking. One successful investor says, “Doctors can go from one dodgy idea to the next without ever alighting on a sensible approach that puts them in the way of making money.”
money-doctor-10137319Did I mention that salaries ramp up rapidly? In addition, there is very low unemployment in medicine, little danger of most specialties being outsourced to China, and most important of all for purposes of this discussion, the fact that demand for medical services is unrelated to the performance of the larger economy and its bewildering cycles of expansion and contraction that bedevil the rest of us. In other words, being a doctor is low-beta and low-volatility. This is gives them an edge, if they would use it. Which they don’t.
Doctors are often predisposed to hear their patients, visiting pharma sales agents and other sundry advise givers who show off how their hard earned money can be doubled in few months. While they easily become scapegoats to the advise often burning huge holes in their Mercedes and Jaguar dreams. Its funny they never bother to understand the law of compounding and getting benefits through long term investments
The doctors’ investment decisions shown in the Purnartha study are not life-threatening but susceptible to improvement through diet, exercise, and a modest adjustment to the stock/bond allocation. With proper follow-through, the physician not only will be healed but well-heeled.