Five Questions to Ask Before You Invest

September 18, 2017

When it comes to investing, physicians have unique needs beyond those of the average investor. After long years of training, many physicians start their careers with a high level of student debt. Combined with a delayed entry into the workforce, this means many feel the need to “catch up” financially. When starting to save and invest your money, it’s important to plan for success and avoid common investing mistakes. Here are five questions to think about.

  1. What do I want to achieve with my money?

    Before creating your investment portfolio, decide on your savings goals. Of course, you want your money to grow. But your choice of investments should depend on what the money is intended for. For example, if you have a short-term goal (such as saving for a vacation or a down payment on a house), you may consider guaranteed investment certificates, short-term bonds or money market mutual funds. The money will be there when you need it because it can be quickly converted to cash and the principal is protected.


  2. How comfortable are you with the idea of losing money?

  3. In other words, how comfortable are you with the idea of possibly losing money? Higher risk is generally associated with potentially higher rewards, and lower risk with lower returns. Still, no matter how low-risk an investment is, there’s always the chance that you won’t get back as much as you invested. Make sure you understand how much risk you can afford to take, but also how much risk you’re comfortable taking.


  4. What is the right mix of investments in my portfolio?

    To reduce risk, it’s important to diversify your investments across a range of asset classes, as well as across industry sectors and geographical areas. A well-diversified portfolio is better able to withstand market volatility. Consider using a model portfolio, which is a pre-constructed package of investment funds based on a specific risk profile, to help remove the guesswork from your decisions.


  5. How will I monitor and rebalance my portfolio?

    Once you’ve determined your portfolio’s asset allocation, you’ll want to rebalance it periodically to maintain this mix over time. Movement in the market can cause your allocation to drift from its original weightings. Rebalancing keeps your portfolio aligned with both your investment objectives and your risk tolerance.


  6. How will I react when the market fluctuates?

    Markets inevitably experience periods of growth and periods of correction. When this happens, you may be tempted to jump in or out of the market to avoid losses. Don’t let emotions drive your investment decisions. It’s best to set up a sensible portfolio asset allocation, stick with your long-term plan and revisit it regularly to ensure it still meets your needs.

Whether you prefer to work with an advisor or manage your own portfolio, we offer a range of financial solutions to meet your goals while offering the same expert advice and commitment you’ve come to expect from MD.

For more information about creating an investment strategy or other financial planning topics, contact an MD Advisor. MD offers objective advice at every stage of your career—from medical school through retirement. Find an MD Advisor near you.

 

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