Investing vs. Side Hustles

 In Blog

With more and more physicians growing more frustrated and burdened with the medical profession, insurance companies, and hefty educational debt, many are seeking extra income by turning to side hustles (gigs).

COVID-19-related income loss inspired many doctors to pick up side gigs to supplement their income, but even before the pandemic, side gigs were already a growing trend.

​​According to a recent survey of 2,500 investors by medscape.com, nearly 4 in 10 doctors currently have a side gig. Most are taking clinical moonlighting jobs, with some taking non-clinical (file review) work and day trading stocks and crypto.

I was recently asked about my views on side hustles at least a few different times, and here’s why I prefer passive investing over starting a side hustle.

PASSIVE.

When it comes to investing, you can either be an active or passive investor. Active investing takes time, knowledge, and effort. In addition, if you’re starting a business or buying an income property, you will also need to invest significant amounts of your capital.

Unfortunately for most doctors, there isn’t enough time in the day to invest actively. This is why I prefer passive investments. If your goal is to replace your income to be in a position to walk away from your job, it’s gonna take much more than ONE additional income stream to do so.

Often that extra income stream will be merely replacing one job for another. To achieve financial independence, it will take generating MULTIPLE income streams that can only be accomplished through passive investments.

INCOME.

The problem with side gigs is that they don’t even pay as much as your current day jobs, so any hope of replacing your current income to cut the cord is dim. Passive investments in private income-generating businesses (private equity) and cash-flowing commercial real estate (CRE) have the potential to not only generate returns higher than any other class of assets but to do so 24-7, so you can make money in your sleep.

Generating multiple streams of this type of income will put you on the road to financial freedom and the ability to walk away from your job or cut down your hours if you choose.

KNOWLEDGE ACQUISITION.

Do you need programming experience to invest in fintech or expertise in commercial real estate (CRE) to invest in industrial property? You do if you try to do it independently, but acquiring new knowledge about a new business or industry is only the start. There’s the whole other matter of knowing how to run a business as well. In medicine, many of us are good at wearing the one hat we’re required to wear but have limited experience with the business side of things.

In the world of start-ups and CRE investing, most physicians have limited knowledge and experience not only with the particular asset in which we’re interested but also with business operations, sales, marketing, human resources, finances, and administration. It’s simply not what we focused on in school or our careers.

The steep learning curve is less of a concern with passive investments. With passive investments, the one skill required in assessing the qualifications of the promoters and sponsors of a particular passive investment opportunity. Suppose you can identify competent, experienced, and knowledgeable managers. In that case, the need to be an expert in a particular field or to be an expert in running a business is eliminated when you invest passively.

TIME.

Knowledge isn’t the only hurdle physicians face when contemplating starting a new company or acquiring a CRE property. There’s the whole other matter of finding the time to do it.

After spending years in school, residency, and our practices, many physicians are behind the eight ball in terms of time. We have less time to ramp up investment income than, say, a recent college grad. The time hurdle to acquire knowledge and to become an expert in a particular asset or field is simply insurmountable for many of us unless we’re willing to quit our jobs and dedicate our full time to a new endeavor, which many of us are not in a position to do.

REALITY.

Those who buy online education or mentorships on starting side hustles from so-called experts quickly get a big dose of reality. When they realize those teaching or selling us information derive almost all of their income from selling us their ideas rather than applying them.

In the famous words of George Bernard Shaw, “Those who can, do; those who can’t, teach.” Do these gurus ever invest any of their own money to ensure your success? No.

When you invest in the right passive investments, the promoters have skin in the game and prioritize their investors such that they don’t get paid unless and until their investors do.

TEAMS.

Going alone on a side hustle where you’re expected to wear multiple hats bears much more risk than a situation where there’s a division of labor like when you invest with the right team with experts in their fields and who possess particular operational expertise.

PASSION.

The driving force behind successful side hustles is passion, and if you’re willing to explore a side hustle knowing the above risks, you must have a passion for it. Maybe that passion is its own reward, but I have a passion for financial independence and will defend it with a burning zeal. I have found that the quickest and most sure way of achieving and maintaining this financial freedom is through passive investments.

So many physicians are seeking additional income, with many looking to side hustles for relief. Unfortunately, many find that these side hustles are taking up time and energy they can barely afford to give up in return for inadequate compensation.

Instead of looking to side hustles to merely pay the bills, consider passive investments to do more than meet your basic needs.

Instead, look to passive investments to create multiple streams of income to not only pay your bills but to walk away from your jobs if you ever choose to.

 

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