Like most investors, doctors can have a hit-or-miss track record when it comes to everything from stocks to real estate to putting money into startup companies.
However, there are some common mistakes that resulted in bad investments, according to Medscape (sub. req.), which asked doctors to share their worst investments as part of its 2017 compensation report.
Many physicians start out with debt and financial stress coming out of medical school and residencies, which can lead to burnout and depression. Bad investments, made hastily, can only increase that stress. Instead of financing a new car or rushing off to secure a mortgage, for young doctors it's better to live the lifestyle of a resident for two to five years into your career, James H. Dahle, M.D., a Utah emergency medicine doctor and author of "The White Coat Investor."
With investing, go with your head and not your heart, as FiercePracticeManagement previously advised. Consult a financial adviser to develop a long-term investment plan that incorporates your goals, risk tolerance and time horizon.
Here are three tips from the Medscape report:
- Do your homework before investing in real estate. Before buying property, be sure you understand the local market and purchase at favorable prices for buyers. Have an accountant or financial planner review the purchase or you could be stuck with a vacation home that quickly loses its value or see an investment property drop with a downturn in the market.
- Look at the finances and track record of principals before investing in startups. You want to be sure the project can get off the ground and is not a half-developed idea with little chance for success. Be cautious about lending money to friends and family members for their startup projects, including investments in new restaurants.
- When it comes to stocks, have a diversified portfolio and be ready to sell. Like many others, physicians invested in dot.com companies and got burned when the tech bubble burst, or purchased high-yield stocks that started to do poorly.