Photo Credit: Andranik Hakobyan
Dr. Taylor provides insights on how physicians can set themselves up for financial success outside of their careers by investing their money wisely.
Many physicians turn to investing money as a means of achieving additional financial success outside the realm of medicine. Unfortunately, as founder of Career Money Moves, LLC, Atelisha “Lisha” Taylor, MD, MPH points out, a fair share of those physicians actually don’t know how to effectively invest their money. Dr. Taylor successfully employs six investment types and recommends that other doctors consider following suit.
For example, Dr. Taylor notes that the prices of individual stocks tend to change a great deal and are therefore accompanied by meaningful risks. As a result, Dr. Taylor chooses instead to invest in index mutual funds—a collection of stocks or bonds characterized by predefined standards that fit into an organized index. With the benefit of investing in all U.S. stocks via a single fund, the total stock market index fund allows physicians to invest their money without requiring the knowledge of how each company might make out at any given point in time. Dr. Taylor appreciates the wide range of U.S. companies involved in this fund, including almost 4,000 entities from the mammoth Amazon to small startups. According to Dr. Taylor, such diversification allows for the largest possible profits coupled with the least possible risk. Whereas only one-fifth of all mutual funds average approximately 10% in annual profits from investments, total stock market index-fund investments average 10% in yearly profits.
Dr. Taylor prefers to also include the total international index fund in her investment portfolio, allowing her to further diversify by taking part in the global economy. Depending on the year, sometimes international companies have brought in bigger profits for Dr. Taylor than have the solely U.S. based total stock market index fund companies. Now, Dr. Taylor has invested one-fifth of her money in the total international index fund.
Another fund that Dr. Taylor recommends investing in is the small cap value index fund. Investing in such funds involves the mindset that smaller companies have more rapidly paced growth potential than some giant companies like Amazon, which are so humongous that they may struggle to continue rapidly growing. In other words, smaller and lesser-known companies might offer investors a faster and bigger capitalization on growth. Dr. Taylor currently invests 10% of her money in the small cap value index fund.
Dr. Taylor also invests 10% of her money in a real-estate investment trust index fund, which automatically places the investor’s money in low-risk various real estate and housing options. In addition, Dr. Taylor invests in real-estate syndications, investing with a large group to buy apartment complexes. However, Dr. Taylor notes that investing in real-estate syndications requires more active participation than investing in a real-estate investment trust fund. The former also requires large minimum investments, as well as having to put faith in investment partners who have the potential to jeopardize the whole group’s personal investments.
According to Dr. Taylor, an excellent strategy for lowering investment risk is to put money in a total bond index fund. Whereas the prices and values of stock-based index funds can change on a yearly basis, a total bond index fund is more stable, automatically placing investor money in various U.S. bonds. With only 5% of her money currently invested in this fund, Dr. Taylor plans to increase that amount decades from now, when she nears retirement. Dr. Taylor plans to do the same with her Treasury Inflation-Protected Securities (TIPs) investments, which also contain 5% of her portfolio. Dr. Taylor notes that inflation’s annual mean is 3%, which means that money stored as cash, as well as money invested in bonds, will decrease in future value. However, investing money in TIPs protects against inflation risk by raising investment value as inflation goes up. With half of her money invested in a total stock market index fund, 20% invested in a total international index fund, 10% invested in a small cap value index fund, 10% invested in a real estate investment trust index fund, and the remaining 10% split between a total bond fund and a TIPs index fund, Dr. Taylor has set herself up for financial success.