3
Saving Money and Investing Money: Advice from a Cardiologist T here are 125 medical schools in the USA, and to my knowledge only 1 of them has a single class having anything to do with saving money and investing money. There has just appeared (2005) a superb book by cardiologist Robert M. Doroghazi entitled The Physicians Guide to Investing. A Practical Approach to Building Wealth (Figure 1), 1 and I strongly recommend it to anyone interested in preserving and growing a dollar bill. But first, something about the author, Bob Doroghazi. His grandparents came to the USA from Hungary and set- tled in Granite City, Illinois, a suburb of St. Louis, Missouri. He paid his own way through college (University of Illinois, Champaign/Urbana), graduating with high honors (Phi Beta Kappa) and through the University of Chicago Pritzker School of Medicine with honors (Alpha Omega Alpha). His internship and residency in internal medicine was at the Massachusetts General Hospital in Boston, and his cardiol- ogy training was at Barnes Hospital in St. Louis. In 1983, 1 year after completing his cardiology fellowship, he and Dr. Eve E. Slater coauthored Aortic Dissection, a book pub- lished by McGraw-Hill. Dr. Doroghazi has been in practice since 1982 with the Missouri Cardiovascular Specialists in Columbia. He has given greatly of his time and his money to his community: past president of the Great Rivers Coun- cil of Boy Scouts of America, past president of the Colum- bia Northwest Rotary, past president of Advent Enterprises, and he has served on the boards of Columbia United Way, Great Rivers Council of the Boy Scouts of America, The Boone Hospital Center Foundation, The Museum of Art and Archeology at the University of Missouri-Columbia, and University of Chicago Medical Alumni Association. He also plays in the first clarinet section in the Columbia Community Band. He and his wife have endowed the Susan Case Doroghazi Faculty Excellence Awards at the College of Nursing of Texas Women’s University and the Robert and Susan Doroghazi Outstanding Clinical Teacher Award at the University of Chicago-Pritzker School of Medicine. His library numbers 700 volumes. Now to his book. His observations are too numerous to summarize here but some of them are as follows. Financial goals: For the long term, physician investors should anticipate a 10% annual return on noncash invest- ments. With some work, common sense, and knowledge of where mistakes may arise, a 15% annual return on annual investments may be realized. Dividends are important. The best investors are the best savers. Being a physician does not make one necessarily smart at investing. Compound interest is the most valuable investment tool. Even seemingly small amounts of money have amazing potential. The younger the person, the more valuable the money. Lost money can never be recouped. The goal should not be to be rich but to have financial security. He suggests that more money is lost in the hospital doctor’s lounge or other similar settings, where physicians tend to congregate and talk, such as at a party or the country club, than anywhere else. It is in such situations, he emphasizes that, ar- rogance, ego, and greed over- whelm sanity. The best investment one can make is not making a stu- pid investment that was motivated by arrogance, ego, greed, desire to impress others, or being concerned about being left out. Financial needs and goals must be identified before ap- propriate plans to achieve them can be made. Investing is a 3-step process: earn money, save money, invest money. Doroghazi states that the most important item to remember from his book is the following: learn to say, “This is too expensive. I cannot afford this.” This is the first step toward a lifetime of financial security. Another important statement: “I married a gold mine. My spouse is thrifty.” The essence of thrift is not to waste any resource. Do not buy things you do not make adequate use of, and use to the fullest things you purchase. A pur- chase at any price is not a bargain if you do not make use of the product. Do not allow your spending to increase more rapidly than your income. Physicians should be able to save 25% to 50% of their after tax income. The mark: He tells of a cartoon showing 2 deer in the woods. One has a huge red symbol on its chest that looks like a bull’s eye. The other deer says, “Bummer of a birth mark, Hal. ” Many business people view physicians as having “The Mark” on their chests. He advises to accept we physicians are considered “The Mark. ” Physicians are no- torious for being poor negotiators, often because of dealing in an area outside of their expertise. He advises hiring someone to negotiate for you. To be referred to as a “rich doctor” is a sign of disrespect. Identifying and managing risk: Avoid long shots. They rarely pay. There is no reason to “risk” any amount of money. Invest in what you know and like: Knowledge equals money. Being a successful investor requires hard work. Great investment ideas frequently come from daily life. Make your own investment decisions: Allowing some- one else to make your investment decisions has the potential for financial devastation and ruin. Never invest in anything just because someone else does. Do not allow your name to be used to induce others to invest. No one else should ever know that you are even interested in any investment. Finan- cial information is as private as medical information. You 0002-9149/05/$ – see front matter © 2005 Elsevier Inc. All rights reserved. www.AJConline.org

Saving Money and Investing Money: Advice from a Cardiologist

Embed Size (px)

Citation preview

Page 1: Saving Money and Investing Money: Advice from a Cardiologist

TahMPsa

HtHCKSiMoyElsCtcbaGBAUaCCoaaH

s

smwibmiapbfi

0

Saving Money and Investing Money: Advice from a Cardiologist

hstatsrwopbi

p3Dfea

Mauctr2

wlmhptisd

Tm

mG

ofjbk

here are 125 medical schools in the USA, and to myknowledge only 1 of them has a single class having

nything to do with saving money and investing money. Thereas just appeared (2005) a superb book by cardiologist Robert. Doroghazi entitled The Physicians Guide to Investing. A

ractical Approach to Building Wealth (Figure 1),1 and Itrongly recommend it to anyone interested in preservingnd growing a dollar bill.

But first, something about the author, Bob Doroghazi.is grandparents came to the USA from Hungary and set-

led in Granite City, Illinois, a suburb of St. Louis, Missouri.e paid his own way through college (University of Illinois,hampaign/Urbana), graduating with high honors (Phi Betaappa) and through the University of Chicago Pritzkerchool of Medicine with honors (Alpha Omega Alpha). His

nternship and residency in internal medicine was at theassachusetts General Hospital in Boston, and his cardiol-

gy training was at Barnes Hospital in St. Louis. In 1983, 1ear after completing his cardiology fellowship, he and Dr.ve E. Slater coauthored Aortic Dissection, a book pub-

ished by McGraw-Hill. Dr. Doroghazi has been in practiceince 1982 with the Missouri Cardiovascular Specialists inolumbia. He has given greatly of his time and his money

o his community: past president of the Great Rivers Coun-il of Boy Scouts of America, past president of the Colum-ia Northwest Rotary, past president of Advent Enterprises,nd he has served on the boards of Columbia United Way,reat Rivers Council of the Boy Scouts of America, Theoone Hospital Center Foundation, The Museum of Art andrcheology at the University of Missouri-Columbia, andniversity of Chicago Medical Alumni Association. He

lso plays in the first clarinet section in the Columbiaommunity Band. He and his wife have endowed the Susanase Doroghazi Faculty Excellence Awards at the Collegef Nursing of Texas Women’s University and the Robertnd Susan Doroghazi Outstanding Clinical Teacher Awardt the University of Chicago-Pritzker School of Medicine.is library numbers �700 volumes.Now to his book. His observations are too numerous to

ummarize here but some of them are as follows.

Financial goals: For the long term, physician investorshould anticipate a 10% annual return on noncash invest-ents. With some work, common sense, and knowledge ofhere mistakes may arise, a 15% annual return on annual

nvestments may be realized. Dividends are important. Theest investors are the best savers. Being a physician does notake one necessarily smart at investing. Compound interest

s the most valuable investment tool. Even seemingly smallmounts of money have amazing potential. The younger theerson, the more valuable the money. Lost money can nevere recouped. The goal should not be to be rich but to have

nancial security. He suggests that more money is lost in the c

002-9149/05/$ – see front matter © 2005 Elsevier Inc. All rights reserved.

ospital doctor’s lounge or otherimilar settings, where physiciansend to congregate and talk, suchs at a party or the country club,han anywhere else. It is in suchituations, he emphasizes that, ar-ogance, ego, and greed over-helm sanity. The best investmentne can make is not making a stu-id investment that was motivatedy arrogance, ego, greed, desire tompress others, or being concerned about being left out.

Financial needs and goals must be identified before ap-ropriate plans to achieve them can be made. Investing is a-step process: earn money, save money, invest money.oroghazi states that the most important item to remember

rom his book is the following: learn to say, “This is tooxpensive. I cannot afford this.” This is the first step towardlifetime of financial security.

Another important statement: “I married a gold mine.y spouse is thrifty.” The essence of thrift is not to waste

ny resource. Do not buy things you do not make adequatese of, and use to the fullest things you purchase. A pur-hase at any price is not a bargain if you do not make use ofhe product. Do not allow your spending to increase moreapidly than your income. Physicians should be able to save5% to 50% of their after tax income.

The mark: He tells of a cartoon showing 2 deer in theoods. One has a huge red symbol on its chest that looks

ike a bull’s eye. The other deer says, “Bummer of a birthark, Hal. ” Many business people view physicians as

aving “The Mark” on their chests. He advises to accept wehysicians are considered “The Mark. ” Physicians are no-orious for being poor negotiators, often because of dealingn an area outside of their expertise. He advises hiringomeone to negotiate for you. To be referred to as a “richoctor” is a sign of disrespect.

Identifying and managing risk: Avoid long shots.hey rarely pay. There is no reason to “risk” any amount ofoney.

Invest in what you know and like: Knowledge equalsoney. Being a successful investor requires hard work.reat investment ideas frequently come from daily life.

Make your own investment decisions: Allowing some-ne else to make your investment decisions has the potentialor financial devastation and ruin. Never invest in anythingust because someone else does. Do not allow your name toe used to induce others to invest. No one else should evernow that you are even interested in any investment. Finan-

ial information is as private as med ical information. You

www.AJConline.org

Page 2: Saving Money and Investing Money: Advice from a Cardiologist

mmi

Kc

ttpadhm4Tla

da

Tu

tvpaadapNmu

occ

istoa

cobifii

fnicfsyctf

FA

1751From the Editor

ay seek the advice of others but, in the end, you mustake your own investment decisions. The goal of investing

s to make money.

Keep a budget: Be a good record keeper. Have a will.eep a personal financial statement and update it yearly. Be

onservative when estimating the value of assets.

Pay your bills in full and on time: Purchase a homehat is financially within your budget at the earliest possibleime. Resist the temptation to buy a home as large as yourarents or your senior associates. Control ego when buyinghome. Real estate is illiquid. If you do not have a 20%

own payment that you have saved, you cannot afford aome. Do not take an interest-only loan. Take a 10 (or atost 15) year mortgage. Have your home paid for by age

5. Insist on no prepayment penalties when buying a home.he early pay off of a home can be the equivalent of a

ifetime of successful investing. Pay cash for remodeling ordditions. Limit the number of times you move.

Funding children’s education: Encourage your chil-ren to pay for as much of their own educational expenses

igure 1. The cover of The Physicians Guide to Investing. A Practicalpproach to Building Wealth (from Doroghazi RM,1 with permission).

s possible. Take complete advantage of all financial aid. t

ake advantage of tax options to fund your children’s ed-cation.

Insurance: Disability insurance is the most importantype of insurance a physician can have. A physician’s mostaluable asset is not their home, car or any other piece ofersonal property. A physician’s most valuable financialsset is his/her capacity to work and produce income. Theverage person is almost 5 times more likely to becomeisabled as to die prematurely. Purchase term life insurance;void whole life insurance. Have a long-term care insuranceolicy, but consult a tax professional before purchasing it.o life insurance should be required after age 60. Getedical insurance. Avoid extended warranties. Consider an

mbrella policy.

Funding retirement: The most expensive part of every-ne’s retirement will be medical bills. The average senioritizen currently pays $175,000 for out of pocket medicalharges. Doroghazi’s advice is:

1. Stay healthy, don’t smoke, exercise regularly, monitoryour blood pressure, watch your diet, maintain ideal weight,keep you LDL �100 (preferably 60 to 70), have a colonos-copy preformed at appropriate intervals, buckle your seat-belt, use sunscreen, obtain appropriate female and male testsand examinations, keep your vaccinations up to date, brushyour teeth and floss as instructed�

2. Save as much money as possible, and intend to spendit on your health.

Have all major obligations funded before retirement. Annvestment that does not match inflation is a loss. Haveufficient savings such that you can live off of 5% of yourotal assets per year. Make full use of every tax advantagedpportunity and contribute the maximum. Do not purchasen annuity.

Debt: The less debt the better. Debt is seductive and itan ruin your life. Do not lease a car. Never purchase stockn margin. The longer the repayment period, the greater theurden of debt. Debt is compound interest in reverse, work-ng to the detriment of the borrower. Use unanticipatednancial windfalls to pay off debt. There are few better

nvestments than the early repayment of debt.

Fees: Fees can drain your financial health. Even smallees can represent large amounts of money over time. Doot invest in any mutual fund that charges a “load.” Corenvestment positions for all physician investors should in-lude index mutual funds and no-load actively managedunds with a long-term record of superior performance. Fullervice brokers rarely justify their higher fees. If you makeour own investment decisions, execute your trades asheaply as possible. All fees are negotiable. Anything addedo the basic cost of an item is a fee. Never buy anythingrom a cold-call telemarketer. Physicians are preferred cus-

omers. Use this advantage to minimize fees and obtain
Page 3: Saving Money and Investing Money: Advice from a Cardiologist

ps

adpwacmm

nRmdy

iaihmspiimisifw

cot

cfs

tis

sssA

cmhcpegahpdCpip

fp5f

m

1

1752 The American Journal of Cardiology (www.AJConline.org)

erks. Fees are either money in your pocket or money inomeone else’s pocket.

Investment areas to avoid: Avoid tax shelters. Forgetbout owning a restaurant or any store front business. Avoidirect foreign investments. Art or any collectible is rarelyrofitable. Avoid hedge funds. Avoid penny stocks. Don’torry about “getting in on the ground floor.” Completely

void anything where all the potential investors are physi-ians. Avoid limited partnerships sold by a broker or sales-an or where the general partner has not invested any of hisoney.

Bankers and loans: Deal with bankers on your terms,ot theirs. Every word in a loan document is important.ead it closely. Do not sign a “callable” loan. Loaningoney to a family member only to “help” them is actually

oing them and you a terrible disservice. Only trust peopleou know well and have earned your trust and respect.

Asset allocation and diversification: The first rule innvesting is suffering no huge loss. A reasonable assetllocation would be 65% stocks, 10% cash, and 25% fixedncome. Doroghazi loves Certificates of Deposit (CD), ande believes that they should represent most or even all of theoney allocated to fixed income investments. Have CDs at

everal banks in town. There is no commission charges tourchase or redeem a CD. CDs are not “callable.” Most arensured by the government for up to $100,000 at eachnstitution. He considers CDs cash and fixed income invest-ent. Doroghazi views diversification with caution because

t mandates investing outside your area of expertise. Heuggests that diversification will increase not decrease yournvestment losses. Doroghazi notes that this advice is dif-erent from almost all standard investment texts. Invest inhat you know and stay with it.

Identifying real investment opportunities: These oc-ur approximately once a year. Keep your eyes open. Realpportunities should be so obvious that you never have toalk yourself into them.

When to buy: Money is made when an asset is pur-hased. It is impossible to make money when overpayingor an asset. Never buy just because the price is down. A

ure way to be wiped out is to add to losing positions. Try

o buy assets for less than they are worth. Buy when theres “blood in the streets,” but this requires tremendous per-onal confidence.

When to sell: Take profits “too early.” An asset must beold to lock in a profit. When you are congratulating your-elf on your investment genius—sell. There are no 1 deci-ion investments. Do not fall in love with an investment.ggressively sell nonperforming assets.

Miscellaneous: Donate at least 3% to 5% of your in-ome to charity each year. Medical schools should imple-ent courses providing instruction to assist physicians in

andling and investing their money. Realize the financialonsequences of changing practices. The most expensiveart of a vacation is not the travel, logging, meals, andntertainment, but the income lost from not working. Avoidambling. The odds of winning are too great, and it can beddictive and destroy one’s life. Doroghazi donates anyonoraria received from speaking for pharmaceutical com-anies and for reviewing malpractice cases (only for theefense) to charity. This avoids being “beholden” to them.ut your own grass. It is illogical to go out jogging whileaying someone else to cut one’s grass. It helps a highncome professional such as a physician maintainerspective.

His concluding advice as to the most important factorsor obtaining financial security are thrift, compound interest,atience, discipline and investing in what you know, and themost important factors that destroy wealth are greed, debt,

ees, trusting everyone, and not making your own decisions.I highly recommend this book! Bob Doroghazi is a wise

an who will retire from practice in 3 months at age 54!

William Clifford Roberts, MDEditor in Chief

Baylor Heart and Vascular InstituteBaylor University Medical Center

Dallas, Texas13 October 2005

. Doroghazi RM, consulting editor French DW. The Physicans’s Guide toInvesting. A Practical Approach to Building Wealth. Humana Press:

New Jersey 2006: 228, $59.50 (hardback), $34.95 (softback).