The Ultimate Financial Planning Guide For Doctors

By BankBazaar | April 3, 2018

If you are a well-earning doctor, we want to tell you that your income alone does not determine your financial well-being. How high you rank financially is determined by your investment portfolio. Here are some tips.

The Ultimate Financial Planning Guide For Doctors

It’s widely believed that what doctors earn is more than just good. This notion is also one of the reasons the country sees a mad rush of students vying for seats in medical colleges every year. But is it true that all doctors make a copious amount of money?

It all boils down to the skill and knowledge of the doctor. Doctors who are rich often show good use of their skills and knowledge in treating patients.  But is earning a good monthly income enough, even for a successful doctor?

If you are a well-earning doctor, we want to tell you that your income alone does not determine your financial well-being. How high you rank financially is determined by your investment portfolio. Surprisingly, many doctors, rich and not-so-rich alike, are oblivious to the idea of financial planning.

People who are wealthy often have a massive investment portfolio working its magic quietly but efficiently in the background. With time, investments support the lifestyle of the rich and give them that much-needed financial independence.

Now the investment portfolio has to be tailored to each person’s needs and risk appetite. Here are a few things doctors can keep in mind while creating their investment portfolio.

Additional Reading: Investment Options For Everyone

Start By Evaluating Your Income & Liabilities

When we begin making investments, it is important to invest wisely in profitable avenues. A complete financial portfolio is one that has a fully-funded retirement savings plan, has at least a 6-month emergency fund and investments in a well-diversified portfolio with intelligent asset allocation.

The first thing you need to do is make a list. Get an idea of all the assets you own – cars, stocks, Mutual Funds, cash reserves, Savings Accounts, etc. You should take stock of your liabilities as well. This exercise will help you understand your net worth. It will serve as the foundation on which you can build your financial future.

Having a diversified portfolio of investments is very important to gain positive, inflation-adjusted and risk-adjusted returns on your investments. Have you ever heard of the old adage, “Don’t put all your eggs in one basket?” This ideally underlines the importance of portfolio diversification when you begin investing money.

For many investors, the reason for their investments is long-term wealth creation or to build a retirement corpus. Some investors may be investing to have a source of regular income. They could be exploring monthly income plans. Other investors are more conservative and wish to preserve their money, opting for capital safety over growth or risk to their investments.

Once you set your investment goals, you will be able to decide on a suitable asset-allocation plan for your investments.

Play To Your Core Strengths

The stock markets have a reputation for making or breaking futures. But it is true that markets favour those who make trades armed with knowledge and insight. And who would have better insights about the pharmaceutical industry than doctors?

Doctors, who by the virtue of their job understand the importance of calculated risk, are quite suited to the trading business.

They can start by exploring the pharmaceutical vertical and gradually move on to other verticals.

But it’s important to research and conduct a detailed study on stocks before investing.

Invest In Mutual Funds

The popularity of Mutual Funds is on the rise. More and more people are keen to invest in them and for good reason. Even though Mutual Funds carry with them a factor of risk, the fact remains that the risk is actually mitigated as a result of the age-old saying, “don’t put all your eggs in the same basket.”

Investors also don’t need to be experts on the markets since these investments are made with the help of an army of experts who take the best call possible on where to invest. But these are just a few of the advantages of Mutual Funds.

Shortlisting and zeroing in on the right funds represents the most important part of investing in Mutual Funds. Once you are done with the asset allocation that best reflects your needs, the next step is to look for and compare different Mutual Funds on the basis of their past performance and investment philosophy.

Though not necessary, Doctors can explore Mutual Funds with a big chunk of the capital invested in the pharmaceutical and healthcare industry. Two popular funds in the category are SBI Pharma Fund and Reliance Pharma Fund.

Start Thinking Of Retirement

As a doctor, you might be working in a hospital but wouldn’t you like to have your own clinic someday? Though doctors are always on duty, having a private clinic gives you better flexibility with work hours and personal time. With your own clinic, you can also consider opting for an early retirement. With good money in your account and a good clinic, you can consider moving into the role of a consultant.

Retirement may be the end of a regular job but it doesn’t have to mean the end of a regular income.

Here are a few investment options to ensure that you get a regular flow of income in your twilight years:

Don’t Forget About Real Estate

Investing in real estate has grown to become one of the most popular investment avenues for people to park their surplus funds.

If you are thinking of investing in a property primarily for investment purposes, investing early is a good strategy. It’s a good idea to invest at the commencement of the project. On the completion of the project, there are good chances that the value of the property will increase. The basic rule of the property market is that the price is lower at the commencement of the project and appreciates on completion. However, in the event that there is a delay in the completion of the project, your investment will be affected. In the property market, it’s all about timing.

The heart of any investment planning is execution. You can make great plans but if you don’t execute them, your wealth won’t grow. So don’t put out tasks for tomorrow and start exploring investment options now. We have a host of them on offer.

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