HELPING PHYSICIANS ATTAIN FINANCIAL SECURITY
By Robert M. Doroghazi, M.D., F.A.C.C.
I receive many emails from subscribers. I encourage this, and do my best to answer them. They also of provide ideas for topics of discussion, as today.
But before continuing, I must note I am not a registered financial advisor; I can answer general questions, but not things specific to you or your personal investments. Example: 1) I can say I like Apple (AAPL), Microsoft (MSFT) and Exxon-Mobil (XOM). You ask “Should I buy AAPL, MSFT or XOM”? I cannot answer that. 2) “I have a variable-rate mortgage, should I re-finance now”? Answer; In general, I do not like variable-rate mortgages, but I cannot tell you whether you should re-finance now.
This is from a new subscriber, who also has both editions of my book The Physician’s Guide to Investing: A Practical Approach to Building Wealth.
“We cannot thank you enough for all your great advice in your book and newsletters. Unfortunately, too often we experience being “The Mark”. Our turning point was during my husband’s residency. So-called investment advisors urged the residents “never to pay off their mortgage”. Then they said “we take your money and take care of it. You just sign on the dotted line. We consistently have 16% returns”. When I asked for proof, the answer was “each client’s tolerance to risk is different, and we cannot offer you concrete documents”. Also, they neglected to mention their incredibly high fees”.
I.E, NY
RMD comment: I believe the best chapter in my book is “The Mark and the Doctor Discount”, from which I quote. “I can give no better example of a physician being considered “The Mark” than a story I heard in the doctor’s lounge. One physician was teasing another (actually one of his partners). Bob said to Bill “Remember when you bought your first SUV. It had snowed the day before, you were in your scrubs and you walked into the dealer’s showroom with your wife and small children. You said you needed to buy a four-wheel drive vehicle and you needed to buy it today. It was dreary and the salesman probably thought he was going to have a bad day. Then he saw you walk in, the sun suddenly began to shine and he thought it might not be such a bad day after all”. Bill was clearly up to the task and replied “I probably made his month”.
Physicians must accept the fact that many people, especially salesmen, consider them to naïve, to be their’s for the fleecing, to have a big bull’s eye on their chest that says “I’m the Mark”. By the way, the “Doctor Discount” is when someone finds out you are a physician and raises the price! I assure you this happens.
“So called investment advisors urged the residents never to pay off the mortgage”
RMD comment: Such advice is irresponsible, that person should be spanked. We have all seen the ravages to our economy of debt.
“We take your money and take care of it. Just sign on the dotted line. We consistently have 16% returns”.
RMD comment: The most basic goal of my book is to instill in physicians, in all investors, a healthy sense of skepticism. Physicians are far too trusting. You must learn how to question what people say, and don’t believe it if it does not sound correct. To quote the grandfather on the TV show “Pawn Stars” “I don’t believe nothing nobody (sic) tells me, especially when they want to sell me something”. Sage advice from a man whose’ family has been in business three generations.
“So-called investment advisor”.
RMD comment: Some people, such as bank trust officers, have a fiduciary responsibility, i.e., they must do what is prudent for you. Stock brokers and salesman do not have such a responsibility; their primary responsibility is to make money for their company and themselves. Never forget that; their primary responsibility is not to you, it is to make money for them and their firm. Of course, the best ones do what is best for you, because in the long run, it is best for them, but it is not their legal responsibility.
“They failed to mention their incredibly high fees”.
RMD comment: fees are a financial 4-letter word. Fees are either money in your pocket or someone else’s. Example: You could generate a 10% return, but after fees it is 9%. The person charging the fee will say the fee is 1%. That is a specious (having a false look of truth or genuineness-Webster’s) argument. Compare the fee to the return, not to the principal. A 9% return vs. a 10% return is a 10% difference in your profit.
From another new subscriber:
“I can’t thank you enough for your book. I was in the dark when it came to planning my financial future. Your book has been very helpful (to say the least) now that I’m getting ready to start my practice and I’m faced with serious financial decisions
I took note of your strong discouragement (in my book) of whole life insurance and wondered about your thoughts on Variable Universal Life Insurance. I met with a CFP who works for a big, respectable firm and comes highly recommended. He is recommending VUL (I know his commission is BIG) but his main selling point is that it is a protected asset (he also mentions tax advantages)…it sounds complex and I still don’t quite understand it”. G.G.
RMD comment:
1) Very smart, very bright, honest, hard-working physicians have made terrible decisions that have caused them to live a life of never-ending debt or bankruptcy. This sounds terribly corny, but when I first had the idea for my book I told myself that if I can prevent just one such personal catastrophe, my work has been worthwhile and I have done my good deed for the day.
2) I congratulate GG, he is already ahead of 90+% of physicians; he can think for himself and questions things that don’t sound right.
3) Ninety-nine percent of your life insurance needs can be met with term insurance. Agents always mention whole life first because it is so profitable for them and their company. Eighty to ninety percent of your first premiums go to commissions. In my opinion, that’s pretty obscene. The only time ever to consider whole life or an annuity is when recommended by an estate lawyer (be sure the lawyer is not receiving a commission from the sale), or as a charitable gift. Otherwise: TERMITE: term for everything, invest the rest.
4) If you don’t understand something, don’t do it. It really is that easy. This advice alone will save you enough money to pay for this newsletter for the rest of your life. To quote Peter Lynch “Don’t invest in anything you can’t illustrate in 5 minutes with a crayon”. In the end, if you have enough gumption to admit “I don’t understand this”, you are probably the smartest physician in the room.
RMD
High school graduation is approaching. I suggest a dictionary as a present. When I graduated HS in 1969, my employer, Mr. W. Carl Graham, gave me the 7th edition of Webster’s Collegiate Dictionary. To be truthful, I was disappointed. I wanted money.
Mr. Graham was in business from 1918 until his death in 1971. He was the Scoutmaster for Boy Scout Troop 1 in Granite City, IL. His Troop sold the most War Bonds—$1.1M in 1918—of any Boy Scout Troop in the United States.
I use the dictionary almost every day. The dust cover is more Scotch Tape than paper. And forty-one years later, every time I use it, I think of Mr. Graham.
My book and a subscription to this newsletter have also been given as gifts.
With spring here, I would be remiss if I did not make a medically-related suggestion.
1) I believe you, or someone in your immediate family, should mow the lawn. It is good exercise, and a little manual labor that is hot, smelly and boring, will remind a professional what the vast majority of the rest of humanity must do to make a living.
2) Take it from someone who has had tinnitus since September, 1971, who has difficulty hearing regular speech when there is any background noise, who cannot hear the person in the back seat, or when someone is not looking at you, and who has already had one basal cell cancer removed; wear ear plugs and sun tan lotion.
Looking for some nice ground-cover? How about strawberry plants?
In 1999, Uncle Steve Doroghazi gave me 5 small strawberry plants (Uncle Steve was awarded the Silver Star, Bronze Star, and Purple Heart in France in 1944). I put the plants underneath some evergreens right outside the kitchen window so I could watch them. As the evergreens died off, the strawberries spread. Now they encircle the patio. I should get 15-20 quarts this year.
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