An Investment Lesson For Doctors

I just got back from the Grand Canyon.

It’s the first time I’ve been.

To say that it was amazing is a huge understatement.

The photos I’ve seen and even videos on TV or the internet simply cannot replicate being there.

The problem with looking at photos and watching videos is that they just don’t give you the sense of depth that you get when you’re standing right there on the edge of it.

One of the best parts of the trip was to see how walking just a few yards in any direction can change your perspective of the canyon or reveal structures you didn’t even know were there when you looked at it from your original spot.

What looked like one massive column of rock turned out to be multiple overlapping hills with steep edges.

Bright reds in one spot would change to orange or yellow later in the day as the sun’s rays hit the walls at different angles.

But I would have never known unless I took the time to explore those areas.

It’s pretty similar to what good financial, investment, and retirement advice should be.

Many physicians I meet get fixated on just one aspect of their finances but ignore other aspects.

For example you may think that investment returns are the only important piece of your personal finances but then fail to address the other areas that are equally important -- such as insurance planning or education planning.

Or you may form biases and think that you know everything about investment management even though you haven’t considered other possibilities.

Here’s an example.

A physician I recently spoke to claimed that for the past 12 years since he graduated from residency, he’s generated an average annual investment rate of return of about +15%.

So I told him “Congratulations! You should be retired by now. What are you doing with all that time?’
He responded that he’s still working full time and can’t retire yet even though working full time in medicine has become increasingly painful.

The guy is making good income -- around $400,000 per year.

So I did some quick calculations. I figured if he really got 15% average annual returns, then he’s probably smart enough to save a decent amount of money. I’ll assume he saves $75,000 annually.

If that’s the case, then if he started with $0, he’d have about $2.2 million today.

“Surely you’ve cut down to half time right?” I asked.

He said no.

“You’re killing me! What is the value of your portfolio then?” I asked.

“About $500,000.”

It turns out he was looking at only ONE of his investment accounts and ignored all the others when he calculated his investment returns.

Factoring in his other accounts -- and his wife’s accounts -- his return was nowhere near what he thought.

And he wasn’t saving nearly as much as I thought he should with the income he was making.

But in his mind he was fixated on that one number -- 15% average annual returns.

He had failed to look at all angles of his investment portfolio, including the other accounts which he conveniently ignored and his savings rate which was lower than what he thought.

I can give you numerous other examples of how physicians who manage their investments and finances on their own tend to ignore or don’t think about fresh new perspectives about their situation.

And that’s one big benefit a good investment advisor and financial planner can bring -- assuming you find someone who acts in your best interests, has a sound academic investment philosophy, and who resonates with you.

A good advisor should show you different angles and perspectives that you missed or hadn’t thought of -- just like walking alongside the rim of the Grand Canyon and noticing things you didn’t know were there.

So think about your situation.

Are you SURE you’ve considered all the angles of your personal finances and investments?

Is it POSSIBLE that you’ve missed something big and that could be costing you a lot more than paying a fee to a financial planner to point it out and then help you achieve your goals?

If you’re working with a financial advisor already, is he sitting down with you and discussing the pros and cons of various decisions?

Or is he providing canned advice?

Or worse yet just selling you commission based products?

If you want to explore the Grand Canyon of your personal finances and investments and have me help you look at your situation in a fresh way, then just send me your contact info by replying to this email or going here:

Financial Strategy Consultation

We’ll set up a time to talk and see if we’re a good fit to work together.

It’s a pretty laid back conversation, and it’ll likely help you quite a bit.

I might even send you a photo of my recent trip.

Just let me know.

Talk soon.