Doctors' 7 Most Painful Investment Mistakes


July 29, 2019

Losing money in investments seems to be easy, but sometimes lots of effort and good intentions are involved before taking a big financial hit.

Medscape's 2019 Physician Compensation survey asked doctors if they had made any investment mistakes in the past year. More than a third (36%) said yes. Others lost money but in prior years, such as when the dot-com bubble burst in 2000 or the real estate market sank from 2006 to 2012.

Of the doctors who had investing losses last year, 30% of losses came from stocks, 14% came from real estate, and 19% came from other types of investments. Other doctors said they lost money due to a divorce, legal issues, or financial troubles from declining revenues or taking a less well-paying job.

"The big issue is that many people make investments on a whim or emotional groupthink, and they don't do enough due diligence," says Ram Kolluri, CFP, TEP, financial planner with Global Wealth Management in Princeton, New Jersey. "I know doctors who made large investments based on a brief conversation they had in the doctors' lounge because another physician said he made a lot of money on something."

Medscape's survey respondents described their biggest investing mistakes. Could those losses have been prevented?

1. Stocks: Wrong Stock or Bought High, Sold Low

Many investors get excited when they read about a stock with a value that is soaring. They jump in to capture the action, and then, thud—the stock takes a nose dive and doesn't recover. That's one of the dangers of "chasing the winners."

"Doctors often don't have any game plan for why they are getting into an asset, how long they'll stay with it, and what their exit plan is, and they may not have the patience to stay with it when they should do so," says Kolluri. "Instead of looking to individual stocks, which are speculative, it's better to take advantage of the market as a whole." That means it's wiser to invest in a mutual fund that captures many stocks, rather than just one.

What investors may not know is whether or not a stock has already gone up as much as it's going to go, and if it will now either plateau or drop. Although studying a company's financials and doing due diligence is helpful, even financial professionals don't always get it right.


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