As a physician, making sound financial decisions to secure your future is essential. One area where you should exercise caution is when people approach you asking for an investment in a deal. While some investment opportunities may seem attractive, there are several reasons why physicians should steer clear of such proposals. Below are the top seven reasons physicians should be wary of deals.
Assessing the Risks
When someone approaches you with an investment opportunity, it can be challenging to assess the risks involved. Investing is risky, and there is no way to guarantee you will get your money back, let alone make a profit. Usually, the investment sounds promising with little to no drawbacks.
Ask yourself, why are they coming to other physicians and me for investments instead of a bank or a venture capital company to fund the project? Without proper due diligence, you may end up investing in a venture that is doomed to fail.
Expertise in Evaluating Investment Opportunities
Evaluating investment opportunities requires a different set of skills and knowledge. You have expertise in medicine, not in finance. Without the proper expertise, you may be unable to make informed investment decisions.
Can you properly evaluate a business idea? Of course. However, putting in the time to research the investment with all the different variables can seem daunting. Also, knowing what to evaluate and what not to evaluate can send your mind into analysis paralysis.
It is better to have someone examine the investment from an outside point of view while looking out for your self-interest.
Reputation at Stake
Your reputation is one of your most valuable assets. People or your patients may question your judgment and ability to make sound decisions. It may suffer if you invest in a fraudulent scheme or a failed venture.
Poor Use of Money
Physicians spend a long time in school perfecting their craft in medicine. They likely have or had high student loan debt which was an investment in themselves. Those same physicians work hard for their money, which is crucial to use wisely. Investing in a new venture may not be the best use of your money. There may be better investment opportunities that are more aligned with your financial goals.
Investing in a single project might cause you to invest a substantial portion of your investable assets. Doing so is not much different than investing a large portion of money into a single stock. It will be risky and volatile. If the investment is a small percentage of your total portfolio, it becomes a better deal for both parties.
Investment Scams are Prevalent
Investment scams are rampant, and they often target professionals such as physicians who are perceived to have more money to invest. These scams trick you into investing in fraudulent schemes, promising high returns that are too good to be true. Unfortunately, you may never see it again once you invest your money.
Your profession as a physician is your number one asset. Do not do anything that would jeopardize or marginalize what you do for a living.
Distractions from your Practice
Investing in a new venture can be time-consuming and distracting. As a physician, you already have a demanding career that requires your full attention. Investing in a new venture can take away from the time and energy you need to devote to your patients and your practice.
In addition, it can take precious time away from family and friends. Ultimately, it would be best to consider how much of your time would be involved in the new investment.
Conflicts of Interest
Investing in a venture related to your medical practice can create conflicts of interest. For example, if you invest in a medical device company, you may be tempted to use their products in your practice, even if they are not the best option for your patients.
It’s vital to be cautious when investing your money. Investment scams are prevalent, and it can be hard to assess the risks involved in new ventures. Investing in a new venture can distract you from your practice and may not use your money well. By being aware of the risks and potential downsides of investing, you can make informed decisions that align with your financial goals and protect your reputation as a trusted healthcare professional.
Not all investments are poor ones. They can be lucrative and profitable. You will be approached many times throughout your career to invest in the next bright, shiny object. However, having a financial advisor evaluate them with no interest in whether they are good or bad is something each physician should have in their corner.
About The Author
Jordan Benold, CFP® provides fee-only financial planning and investment management services in Frisco, TX. Benold Financial Planning serves clients as fiduciaries and never earns a commission or sells a product.