The Physician's Guide to Investing (eBook)

The Physician’s Guide to Investing 2
Dedication 5
Foreword 7
Introduction 8
Acknowledgments 10
Contents 11
The Problem: Lack of Financial Instruction 16
References 21
Goals for Your Financial Return 22
Your Minimum Investment Goal 22
A Reasonable Investment Goal 25
An Unreasonable Investment Goal 26
Reference 27
The Magnificence of Compound Interest 28
Part 2: Avoid Being Diverted from Your Financial Goals 34
Arrogance, Ego, Greed and Envy 35
References 43
The Mark and the Doctor Discount 44
Accept The Fact 44
Seek Help From A Pro 46
It’s Not Much, I Can Afford to Lose It: The Concept of Risk 50
References 55
Part 3: Principles for Achieving Your Financial Goals 56
Define Specific Goals 57
Thrift 60
Thrift is the Most Crucial Process in the Accumulation of Wealth. 60
This Is Too Expensive, I Cannot Afford This 62
I Married a Gold Mine. My Spouse is Thrifty. 64
Turn Out The Lights 68
Reference 71
Invest in What You Know 72
Reference 80
How to Identify Real Opportunities 81
How Often Do Real Opportunities Arise? 81
How To Recognize Real Opportunities 83
Reference 88
Make Your Own Investment Decisions 89
References 95
Documents Required for Financial Security 96
Budget 96
Record Keeping 98
Will 99
Personal Financial Statement 99
Reference 105
The Importance of Relationships: Goodwill, Friendship and Reciprocity 106
Uncle George’s Rule, or Why Cash is King: The Concept of Liquidity 110
References 115
Part 4: Attaining Specific Goals 116
Paying Daily Bills 117
Your Home 120
Comments from the First Edition 120
Control Ego 121
Live Close to Work 125
Dealing With Real Estate Agents 126
The Mortgage 127
The Early Payoff of A Home Mortgage Can Be the Equivalent of An Entire Lifetime of Successful Investing 130
Other Important Issues 131
References 135
Funding Your Children’s Education 136
Financial Aid 137
specific tax-advantaged options to save for your children’s education 140
Series EE/E Or Series I U.S. Savings Bonds 140
Uniform Gift To Minors (UGMA)/Uniform Transfer To Minors (UTMA) 141
Coverdell Educational Savings Account 142
Roth Ira 142
Student Loan Interest Deduction 143
Repaying Student Loans 143
Student Loan Forgiveness 143
Tax Deduction 144
Hope Scholarship (Tax Credit) And Lifetime Learning Credit 144
Section 529 Plans 145
College Savings Plans 145
Advantages of State-Sponsored 529 Plans 145
My Reservations Regarding 529 Plans 146
Prepaid Tuition Plans 148
Pay From Your Own Funds 149
Reference 150
Insurance 151
Disability Insurance 152
Automobile Insurance 154
Homeowner’s Insurance 155
Life Insurance 156
Long-Term Care Insurance (LTCI) 161
Extended Warranty 163
Medical Insurance 164
Umbrella Policy 165
Funding Retirement 167
How Secure Is Social Security? 167
Anticipated Age of Retirement 169
Have All Major Obligations Funded 171
How Much Money Is Required to Retire And Live Comfortably? 172
Specific Vehicles for Retirement Savings 175
Tax-Favored Retirement Accounts 178
Individual Retirement Accounts (IRA), 401 (k), 404(b), 457 PLAN, Defined Benefit Plan, Defined Contribution Plan, Profit Sharing Plan, Money Purchase Plan, and Keough Plan 179
Roth IRAs 180
Annuities 181
Medical Bills 183
Health Savings Accounts (HSAs) 184
References 185
Part 5: Pitfalls in the Quest for Your Financial Goals 186
Who Can You Trust? How to Spot a Con Man 187
Who Can You Trust? 187
How to Spot A Con Man 191
Reference 194
The Malevolence of Debt 195
General Guidelines for Borrowing 196
Borrow Only for Your Education and Your Home the Less Debt, the Better 196
The Problems With Leverage 200
The Early Repayment of Debt 202
Credit Cards 204
Reference 205
The Perniciousness of Fees 206
Mutual Funds 207
There is Never a Reason to Buy a Mutual Fund with a Load or Extra Fee of Any Kind 208
Stockbrokers 211
Other Fees 213
References 217
Divorce: Beware of Gold-Diggers 219
Get The Best Lawyer Available 223
Tips: Real Opportunities or Useless Information 225
Areas Where Caution is Essential or that Should be Completely Avoided 228
Yes or No 240
Dealing with Bankers 243
The Four ‘‘Cs’’ 248
Part 6: Investing in Specific Assets 251
Asset Allocation, Diversification and Beating the Market 252
The Importance of Diversification: Why You Should Not Try to Beat The Market 253
The Myth of Diversification 261
Beating the Market 262
Reference 265
When to Buy 266
Technical Analysis 270
References 272
When to Sell 273
You Will Never Go Broke Taking a Profit 275
References 283
Stocks, Bonds and Mutual Funds 284
Stocks and the Stock Market 284
Bonds 291
Rising Interest Rates Are Bad for Bonds Falling Interest Rates Are Good for Bonds 292
Mutual Funds and Exchange Traded Funds (ETFs) 294
References 299
Real Estate Other than Your Home 300
General Points 300
Owning A Property Outright 306
Real Estate Investment Trusts (REITs) 313
References 315
The Precious Metals and Commodities 316
Gold and The Precious Metals 316
Commodities 321
References 324
Art and Collectibles 325
Collectibles 325
Art 332
Do not Buy Art at a Charity Auction 335
Reference 336
Other Types of Investments 337
Selling Short 337
The Concept of Hedging and Hedge Funds 343
Venture Capital 345
Derivatives 346
Futures 346
Options 348
Stops 349
Limit Order 350
Variants of Common Stock 351
REFERENCES 353
Part 7: More Tips for Realizing Your Financial Goals 354
Obtaining Investment Information 355
Sources Of Information That Are Not Helpful 359
Suggested Reading 361
On-Line Brokers and the Internet 362
Reference 368
Investment Strategies of the Pros 369
Warren Buffett 369
David Swensen 375
Non-core Asset Classes to Avoid 378
How the Mutual Fund Industry Fails America’s Investors 379
Final Recommendation 381
Peter Lynch 381
Never Invest in any Idea You Can’t Illustrate with a Crayon 382
Burton Malkiel 386
References 389
Some Miscellaneous Bits of Advice 391
A Physician is an Executive 391
Changing Practices 393
Buying a Boat 394
Black Swan Events 395
Vacations 395
Embezzlement 396
Marquis de Talleyrand 396
Investing in for-Profit Facilities 397
Gambling 398
Speaking for Pharmaceutical Companies and Reviewing Malpractice Cases 398
Cut Your Own Grass 399
References 400
The Importance of Charity 401
References 406
Index 407
About the Author 415