Doctors are notorious for bungling their financial decisions.
First, they always start in a hole. They’ve usually got a six-figure pile of student debt. And they don’t start earning much money until their early 30s.
Worse, doctors are overconfident. They’ve spent years in school honing their specialty in medicine. They think good grades and paper intelligence in the medical field translate to success in finance. They don’t.
That’s what happened with an attending physician I trained under. I like to call him “Dr. Internet”…
Once he found out I had previously worked on Wall Street, he pulled me into his office almost daily. “I’ve been doing pretty well in the market,” he told me.
He talked about his positions in technology companies that are still around, like Oracle (ORCL) and Qualcomm (QCOM)…as well as a number of long-gone Internet stocks.
The year was 2000…right before the big tech-stock bust.
He mentioned large dollar figures. Instead of teaching me about medicine – what I was there to learn – he was trying to convince me how smart he was with stock investing.
He had way too much money in these overhyped tech stocks. And he wasn’t worried. That’s usually the sign of a market top. When your dentist, your plumber, and the intern working in your office have hot stock tips for you…it’s time to sell your stocks.
I tried to tell Dr. Internet that he was being reckless. I told him that these stocks could rise, but the economics didn’t make sense. He also needed to consider that they could fall. The companies had no cash flows and no profit margins. They weren’t making money yet…
He didn’t listen. The Internet bubble collapsed. And this smart, successful doctor filed for bankruptcy. He lost his house and his wife.
Dr. Internet’s mistake wasn’t that he invested in tech stocks during a bubble. He was guilty of a far more common error…a blunder that you may be making right now.
You should invest to boost your wealth over the long run. And you can’t be expected to spot every boom and avoid every crash. Even professionals can’t do that.
His mistake was that he didn’t have a plan. He had only one way to win. Tech stocks had to keep going up and not go down. If anything else happened, he’d go bust.
That’s a narrow path. There’s no room to maneuver.
A Yiddish proverb cautions, “Man plans and God laughs.” The real world is a complex and unpredictable place. If you draw a specific timeline for how you expect things to go, there’s little doubt that you’ll be proven wrong.
Did any of your investment plans three years ago include a British exit from the European Union or a potential President Donald Trump?
You don’t know what’s coming around the corner. I don’t either. And that’s the key. Armed with a balanced portfolio, you don’t have to worry about the future.
Had the doctor stuck to his work as a medical teacher…invested the bulk of his portfolio in safe, blue-chip companies or low-cost index funds…and only used a few thousand here and there to speculate on the trendy Internet stocks…he’d have had all the fun of gambling, the bragging rights, and even plenty of money to roll into other investment ideas as his fortune grew.
His life wouldn’t have been destroyed. But instead, he only gave himself a narrow path to victory.
Take a close look at your financial picture. Is your portfolio relying on a big prediction of the future? That’s a warning sign. Major predictions shouldn’t be necessary for your wealth to grow…
Review your entire portfolio this month and figure out how it can stand up to these uncertain times. If you only have one way to win, you need to make some adjustments immediately.
As the markets regularly hit new all-time highs, you want to be sure that the stocks you hold will take you and your retirement wealth to new highs too. With a little bit of planning and knowledge about the businesses you own, you might also get to laugh with God.
What We’re Reading…
- Did you miss it? Ruining your retirement paradise.
- Something different: Winning a Nobel Prize for a revolutionary cancer treatment.
Here’s to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
Las Vegas, Nevada
October 3, 2018