I decided to write about investment opportunities for physicians because the economy is looming on everyone’s mind. There’s a contraction in progress, bubbles are fragile and it’s quite obvious taxes are going to rise.
So I’m not sharing any investment advice. The basic rules are the same: don’t go on a spending spree with your first job, spend less than you earn, don’t get into debt, invest wisely, and start early to get the benefits of compounding. Also, don’t invest in stuff you don’t understand. You need to know how a company/stock/fund works before you decide to do it.
So here are some investment opportunities for physicians. Now I understand the risk appetite is less for people with debt. If you’re debt-free, then like me you can freely invest in a portfolio that is varied. For basic terms and definitions, read this first: The Physician’s Guide to Investing: A Practical Approach to Building Wealth.
10 Investment Opportunities for Physicians
Fixed Deposits
I personally love this because you set fix em, you leave em. It’s as simple as that. There was a time where inflation allowed us to have a 9% interest. And since FD’s get auto-renewed, you continue to enjoy the same rate despite changing rates. Here you can decide to allot a sum and then fix them at an interest rate. The rule is the longer you leave them, the higher your returns.
Pros: There’s no risk involved. There’s no managing once you fix the deposit.
Cons: The money is fixed and immovable.
Index Funds
The difference between an index fund and a mutual fund is the fund allocation and management. In an index fund, your money is invested passively in pre-selected companies. There is little involvement or supervision by a fund manager. The expense ratio is minimal. Comparatively, over time, the amount you lose in fees is very little. Index funds are an easier bet.
Pros: Less expense ratio and management costs.
Cons: The returns are less profitable compared to other types of funds.
Mutual Funds
I was initially reluctant but got involved with MF’s by chance and it has high returns. With mutual funds, you have a fund manager that is researching the stocks, picking them and then allocating the fund. So paying the fund manager and the fees involved with this can accumulate over time. However, I like this because yes, you get double digit returns ie you can beat the investment returns of a benchmark index.
A good fund manager is always watching and studying the growth of medium and small cap companies. There’s more growth here but more risk. In certain MF’s, the fund manager may even allow you to pick and move the stock if you’re a savvy investor. However, I don’t have the time or the intelligence to micro-manage all this and just leave it to the fund manager. You can start with a SIP. (Small Investment Plan). An alternative or something similar is the Unit Linked Insurance Plan or ULIP.
Pros: You can achieve double digit returns.
Cons: More risk, more expense ratios
Gold
The Indian mindset of me always prompts me to invest in gold. When the price is high or low, this is a good place to invest. Because Gold is a great investment. The returns are always on the up. I remember for my 30th birthday, I decided to gift myself diamond earrings and my whole family was so disappointed in my purchase. Because the resale value of 18k gold and diamonds is not really all that much. It’s a sentimental purchase not an investment one. When you’re buying gold, it’s easier if its jewelry rather than biscuits. You can just wear your gold and travel across countries. And buying electronic gold stock? Absolutely not. I would suggest starting small.
Pros: Gold always appreciates. Resale value is high.
Cons: Storage is a problem and it’s always expensive to buy.
Real estate
Now I’m not a fan of real estate. I know lots of people take out mortgages to buy a house. I don’t believe in going into debt to buy real estate. I’ll probably never purchase a home with a loan. It makes no sense to keep working to build a home I can’t afford. However, if you’re flush with cash, by all means invest in real estate. It appreciates handsomely.
My personal reasons probably affect this because having a real estate portfolio has only translated into paying more taxes for me. Sure you can rent, but its a hassle. Besides said properties need to be maintained. A house also grounds you in a particular place. You tend to make a lot of decisions because you have a house. Otherwise, you need to have a reliable manager who will look after all said properties.
Pros: Depending on the area appreciates well.
Cons: Gets you into debt. Requires upkeep, keeps you local.
Cryptocurreny & Bitcoin
I think I dropped the ball on bitcoin. When it first arrived, a decade ago I was skeptical but I’ve watched few of my peers do it and they did really well. Bitcoin is grey area to me. I don’t like stuff that isn’t transparent. As Warren Buffett says, “Don’t invest in what you don’t understand.” I guess this is an investment opportunity. It just depends on your risk appetite. Plenty of authors are now accepting payments in bitcoin and NFT’s. I’m on the fence.
Pros: Digital curency, non taxable.
Cons: Online theft, lack of transparency, government crackdown
Owning a Business
With extra money to spare, you can easily invest in a business. A pharmacy, a pizzeria, a franchisee that doesn’t require your presence. A medicine related business, may be more your alley. Either way, if you can manage to keep it profitable, its a good investment.
Pros: Businesses especially small ones are eligible for lots of tax breaks.
Cons: Requires initial down payment and labor intensive.
Stocks or Direct Equity
You can do stocks. However, if you’re someone who’s going to watch the stocks every ten minutes. This is not for you. Research the stock, pick the stock and then invest for 10 years. Leave it there without fiddling. If you’re a speculator, sure, go ahead and play the stocks. There are so many profitable IPO’s in the last few years alone. An example, Tesla, enough said.
Pros: Can yield good long-term results
Cons: Long term investment, no immediate returns
Intellectual Property
With incremental returns you will see an incremental return over time. Intellectual property could really be a lot of things. Books, movies, dramas, paintings, sculptures, crafts, an app, a course. The sky is the limit. You can create something of value and it will provide you with returns for generations to come. Personally, intellectual property is a significant portion of my portfolio. And it does require time and investment.
Pros: You have complete ownership, eternal returns
Cons: Requires effort and investment
Angel Investing
You can become an angel investor or a venture capitalist if you’re really swimming in money. This is a huge risk. You can fund a start-up or a business idea. This requires a lot of courage. And a big risk appetite. But if you’re someone who wants to find the next Google or Apple, then go for it. Remember angel investors do invest in exchange for equity so its not all charity.
Pros: If you backed the right idea, it can make you a millionaire in no time.
Cons: Big risk appetite, plenty of due diligence and follow up.
Impact Investing/Charity
Finally, if you’ve been blessed, you may want to consider impact investing in charities or charitable organizations without really considering the returns. This could be your favorite charity or a goal that you love. For example, I’m a keen supporter of training Salesian priests, evangelism through the Divine mercy, tree plantation and the support of widows and orphans. Find a charity that you like and support. And no I’m not suggesting starting your own charity as a tax haven or offshore accounts. I’m talking about being generous with what you have, especially if you’re a Christian.
Its Not All About The Money
While you’re considering investment opportunities for physicians, don’t forget its not all about the money. You’re going to leave all this behind someday. Don’t be myopic and get yourself on a hamster wheel where you’re working yourself to death, to meet all your investments. Life is not about the things but the people and the experiences.
One more thing be patient. Keep a level head. This quote sums it up.
“A lot of people with high IQs are terrible investors because they’ve got terrible temperaments. And that is why we say that having a certain kind of temperament is more important than brains. You need to keep raw irrational emotion under control. You need patience and discipline and an ability to take losses and adversity without going crazy. You need an ability to not be driven crazy by extreme success.”
Charles T. Munger, Value Investing: A Value Investor’s Journey Through the Unknown…