A Beginner’s Guide to Investing for Medical Professionals

As a medical professional, your day is full of decisions.

From navigating illnesses and diagnoses to directing staff and completing paperwork, there’s never a shortage of things on your to-do list — which is why taking time to learn about investing is understandably one thing that gets pushed off.

Still, the sooner you begin strategically building wealth, the faster you’ll reach your financial goals.

With so many investing misconceptions, it can be challenging to weed out the expert advice from the wannabe social media “professionals.” Where should you start?

This beginner’s guide to investing looks at what’s important for medical professionals like yourself, giving you a quick wellness check to guide you into a lifetime of financial health.

Protect Your Assets

You’ve heard that investing is the surest way to build wealth, which can be true — if you start with a firm financial foundation.

As discussed in this blog by OJM Group, it all starts with protecting your assets. 

What kind of insurance coverage do you have standing between a problem and your bank account?

As a healthcare professional, you should have, at a minimum, the following insurance policies:

• Malpractice insurance, required by law in some states, is a wise investment to protect your license and assets from the damage of a lawsuit.

• Health insurance, often employer-sponsored, makes it more likely that you’ll go for your wellness checkups regularly, get care at the early signs of sickness, and have protection from catastrophic doctor bills.

• Auto insurance with as much coverage as possible. If you are responsible for a car accident and the other party finds out you are in the medical field, they may become more aggressive in their claims.

• Life insurance with a death benefit that covers your student loans and other expenses.

• Disability insurance, both short- and long-term, in the event that you can’t work due to illness or injury.

It may sound like a lot of insurance, but as a physician, asset protection is your number two job (behind saving lives). The cost of your policies is worth the peace of mind they provide.

Getting Debt-Free for a Rainy Day

The second key to investing is to ensure your debt interest doesn’t outweigh your investment interest.

This step means that if you have interest-bearing debt, you’ll be wiser to pay it off before you start investing. 

The interest you pay on a $10,000 credit card at 18% APY is likely much higher than the interest you’ll receive on a $10,000 investment into a CD that averages 1.54% APY.

(As a dual advantage, paying off creditors increases the amount of life insurance death benefit your beneficiaries would receive if you pass away.)

Once your debt is paid off, experts suggest stashing 6-12 months of expenses in an FDIC-insured money market or high-yield savings account.

These savings have liquidity, meaning you can access them without penalty. They limit your need to use a credit card, take out a loan, or dig into your investments (with penalties) if emergencies arise.

Learn Your Investment Preferences

Ready to start investing? Take the money you once spent on monthly creditor bills and turn it into passive income through the creation of an investment portfolio.

However, not all investment opportunities are the same. Knowing your risk tolerance, which your financial advisor will help you ascertain, is crucial.

Are you highly motivated to see a high and fast return? You’ll have an Aggressive Risk Tolerance, but these investments are often risky and can cost you your money.

If that doesn’t sound attractive, you may be more of a Conservative Risk Tolerance person, interested in somewhat risky investments if they’re proven, but you’re more cautious. 

There are various levels of risk. When you know your tolerance level, you’ll have a clear path to which types of investments to focus on.

However, your tax liability also plays a strong part in these decisions. As a medical professional, you want to tie in your investments with the best tax deduction strategies to maximize your income.

Common investments popular with those in your profession include:

• Purchasing real estate for passive income growth
• Starting a private practice or investing in one that is already open
• Stocks, mutual funds, index funds, and bonds (a diverse portfolio includes a mix of these as a long-term investment strategy)
• Certificates of deposit (CDs)
• Retirement accounts (examples include a 401(k), traditional IRA, or Roth IRA)

If you aren’t sure which of these avenues is the most effective way to reach your goals, consult with a fiduciary advisor.

Conclusion

Every step of investing, from knowing where you stand financially and setting goals to choosing the right strategy to meet them, matters.

One is just as important as the other. But as a healthcare worker, your opportunities and needs are different from those of most people. 

Research the various types of investments for factors such as maximum contributions and tax efficiency, and create a portfolio you’re comfortable riding out the highs and lows of the market with.