Why Physicians Prefer Private Investments

Physicians may have upper-class incomes, but they’ll never be financially independent if they have middle-class money habits. They’ll always rely on their jobs to maintain their lifestyles.

Now, most physicians encounter the same financial and workplace challenges, but how they deal with these challenges will define their careers and lives. One group has trouble coping and eventually burns out, with some even suffering from one or more mental health issues. Then another group can rise above it all and carve out a rewarding life for themselves and their families.

What’s the difference between the one group of physicians who are trudging through their careers vs. the other group who aren’t defined by their careers and can walk away from their jobs if they choose?

In my opinion, physicians who burn out do so because they don’t have their financial ducks in a row to be able to dictate their schedules. They’re a slave to the grind and handcuffed to the time clock. They depend entirely on their jobs to pay their bills and meet their expenses. The problem is debt and spending. The more money they made, the more they spent and the more debt they incurred. So, while they made upper-class salaries, they still lived paycheck-to-paycheck like the middle and poor classes.

According to the graphic below, it doesn’t matter how much money you make if it gets wiped out by all your expenses and liabilities. You may have upper-class physician income, but your financial habits are those of the middle class, and as long as you have middle-class financial habits, you will never be wealthy.

The difference between the wealthy and everyone else is that they’ve figured out the key to financial independence: acquiring assets that generate income – income independent of their jobs.

Instead of buying toys and acquiring other money-draining assets like the middle class and the poor, the wealthy invest in productive assets. And this is how financially independent physicians invest as well. They allocate to assets that generate passive income – income that can be made in their sleep. They put their money to work for them until one day; they no longer depend on their jobs to maintain their lifestyles.

So, what assets do financially independent physicians allocate?

See the chart below:

This chart represents the latest asset allocation report of TIGER 21, an exclusive peer-to-peer investing club of ultra-high-net-worth individuals consisting of successful entrepreneurs, professionals, and executives. Interested members are required to show a minimum of $50M in investable assets to join.

Each quarter, the members of TIGER 21 publish an asset allocation report showing where they placed their money for that quarter. According to this latest report, the members of TIGER 21, as they have consistently done, allocated more than 50% of their assets to private equity and real estate.

Why a fondness for these two assets?

The ultra-wealthy, as well as financially independent physicians, gravitate towards private equity (i.e., the ownership of private companies) and commercial real estate because they offer the one thing other assets do not offer, the one thing that sets the wealthy apart from everyone else – passive income.

Cash-flowing commercial real estate and income-producing businesses offer a variety of benefits ideal for building wealth, but the one benefit that stands above the rest is cash flow.

Passive income can be generated in a physician’s sleep and reinvested to compound wealth.