Managing investments (DIY Investing) on your own can seem like a good idea, especially if you don’t want to spend money on financial advice from a professional. After all, how difficult could it be? You read a few financial news articles, monitor market prognosis and subscribe to the feed of several reputable analysts and market observers and you should be good to go, right? Unfortunately, it’s not that easy and there are DIY investing pitfalls.
Do-it-yourself investment management is a bad idea for the average individual for a myriad of reasons. Even for some of the smartest individuals, such as residents and doctors, do-it-yourself investment management is ill advised as they generally take a more serious hit to their finances if they decide to try this strategy out. The personality traits necessary to make doctors outstanding in their field—the ability to make snap decisions, taking the responsibility for hard choices, and a well-developed sense of confidence can be counterproductive when handling personal finances. These traits tend to work against residents and doctors as they are too quick to assume that they can figure out their financial picture for themselves when in fact they should be consulting a financial professional.
Due to the specifics of their educational and professional backgrounds, physicians are wise to let a financial advisor handle their complex financial situations. Even if they feel confident enough to manage their investments, doctors often lack the time and industry knowledge to make sound financial decisions in the best interest of their own long-term financial needs. Here are some of the most common financial DIY investing pitfalls for physicians:
• Investing in a promising new drug: Many doctors mistakenly fall for the allure of a new drug currently seeing heavy sales. It may seem that this momentary success may translate into a higher stock price, but in almost all cases – the price of the company’s stock already reflects the new drug that they’re offering. Although doctors are not the only ones getting this pitch from the drug company. Analysts, investment companies, and others are all hearing the same thing: The price is already set.
• Obsessing about cheap debt: The average resident has more than $125,000 in debt and must work long hours for consecutive years to pay off that debt, even to the detriment of saving for retirement. Since student loans tend to be given at an incredibly low rate, usually below 5%, it is considered manageable debt. In other words, you shouldn’t worry about paying it off at the expense of other, more expensive debt piling up. A more financially sound decision would be to focus on your long-term financial plan, pay it down incrementally, and save for retirement instead. Frivolous spending is another poor habit that doctors, especially high-earners, fall into.
• Over complicating matters. Many residents and doctors are approached with offers for complicated investment schemes to keep their money safe from financial difficulties. Almost of these expensive asset protection plans are not even necessary. You would need a serious number of assets for the upkeep costs of offshore monies to be worth the effort. Ultimately malpractice insurance covers most calamities with the exception of cases where gross negligence is involved and so doctors should not fall prey to these schemes.
• Running out of time. Doctors are among the busiest professionals in the American workforce. Therefore, they typically view sitting down with an investment advisor as a waste of time, but it’s a necessity. Their unique financial needs require special attention and approach to make sure their plan is the right one for them. Most doctors are so pressed for time that they put off long-term financial planning for years longer than is advisable.
Investing can seem complicated, both fundamentally and emotionally. It can be difficult to weather economic uncertainty and market volatility when you can’t make decisions objectively. The first step in minimizing risk and making a step in the right direction is considering working with a financial advisor. Managing investments on your own takes time. If you cannot afford to commit to that kind of time investment– it makes financial sense to turn to other resources for help and insight. At the end of the day – would it be advisable for someone to try the do-it-yourself route when they need surgery? No, and the same thought process applies to investing; consult the professional who has spent their lifetime cultivating a career just as you have.