As a high income-earning physician, saving all your money in the bank isn’t the wisest decision. As inflation increases, the dollars you save today will be worth less tomorrow. No matter how much or how little you earn, it’s better to put a portion of your earnings into investments that can help you accumulate even more wealth over time.
But with so many investment options to choose from, you’ll have to decide which options to take advantage of and which ones aren’t right for you rolling stone news.
If you’re ready to invest your hard-earned income and build your wealth, here’s our guide for physicians looking to create an investment portfolio.
Determine What Percentage of Your Salary You Can Invest
The first step in investing is knowing how much you can afford to invest. Keep in mind that most investments carry a certain level of risk, so you’ll want to be sure that you continue to save throughout your career as well.
Experts recommend that you invest approximately 10-15% of your pretax income. Weigh your options wisely before sinking 15% into one investment vehicle and ignoring the other opportunities that exist.
Invest in Yourself
With the skyrocketing costs of universities and medical schools, physicians are well aware of what it means to invest in themselves before they’ve ever even earned one dollar. But when we talk about investing in yourself, there’s a bit more to it than that.
Before you start investing in stocks, bonds, or more non-traditional investment vehicles, invest in yourself by paying down your debt. The less you spend in interest on student loan payments and credit card bills, the more money you’ll have to invest in other ways in the future.
You can also invest in yourself by opening your own practice or choosing to grow and expand the medical practice you already have. According to the Medscape Physician Compensation Report 2023, self-employed physicians earn an average of $374k per year, while employed physicians earn just $344k per year.
Invest in Stocks and Bonds
While stocks have a higher rate of return than bonds, most financial advisors will tell you to invest in a combination of both. Bonds are more stable but offer less reward, while stocks offer greater returns but carry a much higher risk.
You might also want to invest in index funds, which are a way to invest in the stock market as a whole rather than in specific sectors or individual companies.
Purchase Real Estate
For many physicians, their primary home is their most valuable asset, and young physicians early in their career have the unique opportunity to buy one without even making a down payment.
Mortgage lenders across the country offer physician mortgage loans with unique terms, including zero or low down payments and no PMI fees. Making a real estate purchase early in your career allows you to start investing with money that you would otherwise waste on rent.
In addition to purchasing a primary home, physicians can also invest in rental properties, commercial properties, and real estate funds that pool the money of multiple investors.
To learn more about the physician mortgage, checkout this article from LeverageRx, a review of Evolve Bank, which offers doctor loans in all fifty states.
Invest in Disability Insurance Protection
All physicians should have the protection of disability insurance. Disability insurance is income replacement insurance, which allows you to collect a portion of your income if you suffer an illness or injury that prevents you from working and earning your regular pay.
Most physicians spend about 2% to 4% of their salary on disability insurance premiums per year, and it’s worth every penny. If you’re making investments but aren’t yet covered with a long-term disability insurance policy, scale back on your investments and buy this essential protection now.
Tips for Choosing Where and How to Invest
Making important financial decisions can be difficult, but there are some things to keep in mind that can make it a bit easier:
- Hire a Financial Advisor: Having a pro to help you decide where to put your money can be invaluable.
- Pay Down Your Debt: The less you spend on interest, the more money you’ll save in the long run.
- Diversify Your Investments: Put money into various vehicles, including stocks, bonds, real estate, and high-yield savings accounts.
It’s also a good rule of thumb to invest in things you like and things that you believe in.
For example, if you’re passionate about real estate, consider buying an additional property or putting your money into a real estate fund. If you’re into technology, consider investing in tech stocks or in a tech start-up where you can own some equity in the company.
In Conclusion
Creating a solid investment portfolio can be challenging, and that’s why most physicians choose to hire a financial advisor to do it for them. Though no investment is a guarantee, a professional can help you make smart investment choices throughout your career that can set you up for a lifetime of long-term wealth, growth, and financial stability.