How not to overthink your investments

I cringe every time patients pull out the non-traditional medicine card, and use their experience as proof that they have discovered a natural elixir that modern medicine has selfishly kept under wraps. If you deal with direct patient care, then you’ve seen it.

“Your misaligned vertebral body is causing that searing back pain, paresthesias, and borderline paralysis. Let’s fix it by realigning that bone. Never mind the metastatic disease that’s going on.”

“Sure, those thirty nutritional supplements aren’t really medicines, and your primary care physician has personally approved every single one of them. “

Doctors, unfortunately aren’t immune to lapses in our judgment either. When ideas catch on, whether they are right or wrong, it is difficult to be convinced that there is an alternative. When these judgment errors involve financial decisions, the consequences can be be devastating.

One of the doctors who I work with really has his head in the right place. He knows that the most common money issue that doctors struggle with is spending. He is a single doctor within the first five years of his career, and has a frugal mindset. As a single-person family, he gets to call all of the shots. Expenditures, earnings, and savings. Financially this might be the second best scenario, aside from having a partner who can also contribute to the family net worth.

This guy rents a flat in a modest part of the city, drives a beater car, and has no educational debt. He has limited living expenses otherwise, and even wishes to become financially independent early in his career! He saves a remarkable 80% of his income! I wished that I had as much insight back then that he has now!

The alternative investment bug

For some reason, he is suspicious of the government, the stock market, and common real estate dynamics. It is always good to have a degree of skepticism in big brother, but we also aren’t necessarily living in a completely lawless society [yet]. He contributes to his 403b account, but that is the extent he utilizes tax-advantaged savings. Fair enough, as most employed doctors aren’t going to have that much tax-advantaged space anyway.

Where does he invest his earnings? It was fascinating to actually learn about what non-traditional options we have to keep our hard-earned cash.

Gold and precious metals

Precious metals can be traded directly on the stock exchange. The ticker symbol for gold is GLD.  I suppose that precious metals are generally a stable commodity, although I don’t foresee anyone truly hitting pay dirt on these investments. He tells me that he keeps some precious metal investments in the form of jewelry, and the rest in various secondary exchange markets.

Diversifying in the wrong options can be harmful to your health
Speculative land investments

Land is plenty, and you will always be able to find someone who is willing to sell you a part of their land. Some of this land could theoretically be used to develop housing. More rural parcels can also be rented out for hunting grounds as a means to generate revenue. The true speculators are looking for land that might have valuable resources that could be harvested. Maybe your plot of land has unknown shale reserves for natural gas. Think big.

Cryptocurrency

Yes, let’s find the hottest unregulated currency and bet big. Think Bitcoin. We all wished that we had started mining Bitcoins when the concept was first discovered. Wouldn’t it have been great to have had a lot of Bitcoins when each was trading for $1000?

Local Business

Local businesses helping each other out can help communities thrive. We see this in local banks offering loans to small businesses as a way to stimulate the local economy. You can actually be the bank for local businesses by investing in their success.  Perhaps one of your friends is building the next brewery in town, and needs a backer. That backer could be you.

Can you be too clever with your financial future?

My financially conscientious colleague actually invests in all of the aforementioned categories. It is very impressive that he has had the energy to research the options and pull the trigger to make the purchases.  All of the investments were made using all-cash offers. Nothing is leveraged, but he also keeps a relatively narrow emergency fund which he justifies by having a stable job.

I have a difficult time reasoning through this logic.  There is little liquidity or cash flow in his investments.  The investments themselves are working passively through appreciation. Aside from cryptocurrency, there is a low but real chance that any of the alternative investments will result in complete loss. However, it is also possible that none of investments will amount to much. Appreciation of property, land, or even stable currencies like precious metals may never materialize. Land is only worth as much as what someone else is interested in paying.

I asked him about bonds, CD’s, T-bills and other fixed rate investments that require essentially no legwork. “Too boring, and too risky, ” he says.

Clearly there is a disconnect.  Fortunately he is early in his career, and he is yet to accrue the bulk of his net worth. My take? If you’ve put in the effort to enter a stable career in medicine, you’ve won the game. There are always opportunities to be creative but it would be prudent to make sure you don’t flush your potential down the drain with diversifying too much.

Do you have coworkers who invest heavily in alternative investments?

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