5 Investing Tips For Physicians And Other Professionals

Physicians, you are in a unique situation when investing and planning for your financial futures.

Because of the long road to becoming physicians – with all the years involved with medical school, residencies, and in some cases, fellowships – doctors start behind the eight ball when it comes to investing. That’s because before starting your careers, you were too pre-occupied with qualifying to practice medicine as your first order of business.

Although starting late is unique to doctors, what is also notable is that doctors also make more money than the average worker, and with the right strategies, you can make up a lot of ground. The key is not to waste any more time and to get started right away.

With that in mind, here are my investing tips specific to doctors:

1 – Take Advantage Of Your Accredited Investor Status. 

Because of your late start, you cannot afford to gamble with your investment capital, nor can you afford to have it eaten up by broker fees and commissions. The right private investments offer the best opportunities to earn above-average returns uncorrelated to stock market volatility – without wealth-depleting fees and public products commissions.

The ability to make above-market returns through private investments was admitted as much by an SEC director at an investment conference last summer.

Private investments – typically offered under one of the SEC exemptions from public registration – are almost always exclusive to Accredited Investors who the SEC deems to have the ability to withstand investment losses.

According to the SEC, an individual qualifying as an Accredited Investor is a person who either has a net worth of $1 million (together with their spouse) or has an annual income exceeding $200,000 ($300,000 for joint income) for the last two years with the expectation of earning the same or a higher income in the current year.

Being an Accredited Investor means you can participate in specific securities offerings that Non-Accredited Investors cannot, including angel investing, private placements, and private equity, among others.

Take advantage of these exclusive investment opportunities reserved only for Accredited Investors.

2 – Preserve Capital.

With more ground to make up than the rest of the investing public, doctors cannot afford to go backward. Investments in tangible assets offering an alternative to Wall Street with potentially higher risk-adjusted returns offer an additional benefit by providing a safety net when an investment goes south.

Unlike speculative assets like stocks and crypto, where you can lose your entire investment, assets backed by hard assets ensure you can never lose your total investment.

3 – Take Advantage Of Tax Savings Strategies.

The ultra-wealthy have always understood that saving a penny through tax savings is just as valuable as earning a penny. The effect on the bottom line is the same. If your employer offers 401(k) matching, take full advantage by taking free money and growing that money tax-free.

At some point in the future, you can roll the balance of your 401(k) over into a self-directed IRA that allows you to invest in alternative investments not available through your employer plan.

For the self-employed solo-practitioner or physicians with a side hustle, consider setting up a solo 401(k). It’s a single-member entity that allows you to take advantage of a retirement plan’s tax benefits to make your own investment choices compared to employer plans strictly limited to mutual funds.

Finally, consider investments in private partnerships that allow you to take advantage of passive income tax rules that treat long-term (more than one year) income and appreciation gains as capital gains taxed at lower rates than ordinary income.

4 – Invest With The Right Team.

​Private investments offer another distinct advantage over public equities – access to the management team.  The transparency and access of private investments allow investors to interview and vet potential companies’ management teams.

​​This practice will enable you to invest in people you can trust with a track record of success instead of rolling the dice with inexperienced, nameless, faceless managers with no history of success. Moreover, finding and investing in the right team eliminates the need to learn an industry and business on your own.

5 – Diversify Through Private Investments.

​Time is precious for physicians, and few have the time to absorb the knowledge to become experts across multiple asset classes and geographic markets. Spend your precious time vetting opportunities across multiple asset classes and geographic locations to achieve diversification that would be impossible to accomplish on your own.

Why is diversification a big deal for physicians?

2020 was the perfect case study for the importance of diversified income streams – with many physicians suffering financially from reduced patient flow because of the pandemic.

​​Physicians with multiple diversified streams of passive income were able to weather the storm better than most. Even if one asset class or market experiences a downturn, the other assets of a diversified portfolio pick up the slack.

It’s not how you start but how you end the race.

With urgency and the right investment strategies, physicians can make up significantly lost ground and achieve and maintain the wealth they seek and with time left to enjoy it.