Developing an Investment Strategy

By Michael Doran

As a busy physician in today’s world, it’s not enough to just work and save more of what you make than you spend. Wise investing is the key to making your money grow and work for you.

Ask yourself if you can devote the time needed to build a good stock portfolio. If you are building a practice, a good deal of your time will be spent in the office with patients, attending a variety of meetings and handling committee tasks. Then you will have civic responsibilities, required continuation education classes, and more. Just as you had to learn complex body systems, the intricacy of investing also requires study.

Today, your task has become easier, thanks to the Internet, which is full of information—so much information that it can become confusing to the novice. In the past, to be really up to date, you could plow through as many as twenty newspapers, scouring for articles on “your” companies. Now, quarterly reports can be downloaded from the SEC’s website, and there are volumes of data available on the Internet entered on a daily basis by companies on their websites or through Multex, which is owned by Reuters. Today, Google, Yahoo and Factiva carry daily company news. So the information is there for you to use. No more excuses!

Now that you’ve gathered the data, are you able to analyze it in order to make intelligent investment decisions? Can you figure out what the risks versus rewards are of a particular stock? Market expert William J. O’Neil says “the first step in learning to pick big stock market winners is to examine leading winners of the past to identify certain characteristics they have in common.”

You will learn what type of price patterns these stocks developed just before their spectacular price advances. Other key factors include evaluating past earnings, the amount of trading volume at the time of a company’s spectacular rise, and the number of common stock shares that were outstanding in the capitalization of the company. As you read more, you will learn that each stock market expert has his own theories on selecting winning equities.

Just as earning your medical degree required countless hours of study and hard work, mastering the skill of investing requires persistence and diligence. With time and effort, you can become a successful investor. You can also get a lot of help from your financial specialist, your investment broker. In the same manner that you refer your patients to carefully selected specialists, your money manager should be hand-picked with just as much care. It is critical to choose an expert with a proven track record in the market. Ask what books they’ve read, what services they follow, what their investment philosophy is. Try to learn as much as you can about your broker, as this person will be your investment guide.

As a physician, you know anything worth succeeding at requires learning time. A skilled physician is not made in 3 months, and neither is a flourishing investor. It takes determination and purpose plus learning from past mistakes. Remember, experience is a great teacher!

Michael Doran is Managing Director of the long/short equity fund, Emerald Bay Partners LP.

Mr. Doran can be reached at (530) 677-1635 or sierracap@directcon.net.

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