After years of schooling, residencies, and accumulating student debt, physicians enter the workforce. They begin their careers with large salaries and tremendous upside potential; however, late entry into the workforce leaves medical professionals roughly a decade behind their peers when it comes to saving and investing for retirement.
Finding a healthy balance between paying off student loans, making up for lost time, and managing large amounts of income can be overwhelming. Thus, it is critical for doctors in Canyon County to understand wealth management. Here are three simple principles that all physicians should keep in mind as they invest:
Risk Tolerance
When it comes to risk, one thing is certain: the more risk you are willing to take, the higher your potential for return. However, an individual’s life circumstances, investment timeline, and personal preferences should determine how much risk to take in their investment portfolio. It is important to remember that risk tolerance is not a one size fits all approach, but rather should be uniquely tailored for each individual investor’s needs.
Luckily, your position as a medical professional comes with lower average financial volatility. In the medical field, unemployment rates are low, and salaries are high. This can give you an edge in investing if your specific situation allows you to take advantage of it.
Essentially, your low-risk, high-wage position may allow you the opportunity to take on more risk in your portfolio, assuming that fits with your personal risk tolerance. When paired with a well-diversified, low-cost approach, this can increase your potential for return.
Buy and Hold Investing
In the financial world, individuals who manage their own investments are notorious for buying at peak prices and selling at the bottom of a crash — the opposite of what is best for their portfolio returns. This is because the stock market can be quite volatile, and large swings often cause the average individual investor to make rash decisions. We saw this play out during the market plunge last December, where individual investors lost billions of dollars after they pulled out of the stock market.
Instead of running for the exit when a bear market seems near, you can ensure that downward swings work in your favor by sticking to a diversified, long-term investment plan that includes periodic and strict protocols for rebalancing your portfolio. This approach will naturally cause you to sell assets when prices are high, and buy them when rates are low, which is the most fundamental recipe for investing success.
Work with a Financial Planning Professional
Anyone who has even dabbled in the stock market has heard to “buy and hold” or to “stick to an investment strategy.” However, this is much easier said than done, especially if you are going at it alone.
Working with a trusted financial planner can save you valuable time and money in the long-run. In fact, financial losses caused by bad-timing mistakes often end up costing you more than any fees associated with hiring a financial planner. Additionally, a financial planner serves as an objective, third-party voice of reason that can help you stick to your investment plan. Their experience and expertise can guide you to make wise investment decisions and keep a level head, especially when the market looks grim.
At IMAFS, we offer fee-only wealth management for doctors Canyon County and the surrounding areas. We will assist you in determining your personal risk tolerance, and making investments that will help you prepare for your family’s current and future financial needs.
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