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As I have grown in years, somelessons have been hard toignore, try as I might. One isthat life rewards delayed gratification.This goes hand-in-hand withpatience, a virtue that usually paysoff in the end. There is no truerexample of this than in the ownershipof tiny bits of publicly traded companies,the stock market.

It's easy to get excited about fastrun-ups, as we've all seen recently withGoogle. You know, get rich quick. As acautionary tale on impulsive speculationof a volatile stock, years ago Iknew someone who bought stock inDenny's restaurants when he was anintern, strictly on a tip.

Now what is it about a whispered"tip"on the stock market that inducescredibility? Beats me. Anyway, myfriend took a lot of grief for his impulsivebuy, and the stock immediatelyplunged in value. But contrary to alladvice and common sense, he decidednot to immediately sell his devaluedstock as a way of teaching himself alesson. As luck would have it, monthslater there was a brief rally in the shareprice and he quickly sold for a 50%profit, minus transaction costs andtaxes, of course.

Many folks in this situation wouldtake this windfall as a divine communicationthat they have the Midastouch and would feel compelled torepeat this behavior. But my friend waschastened by the whole adventure andlearned that acting on a hot tip was noway to run one's affairs. He wouldwait until he was better prepared toventure into the stock market.

After patience, the next mostimportant thing I have also painfullylearned about stocks is that ourinability to predict developments inthe market benefits from diversificationto minimize loss and maximizethe chance of gain over a long period.By diversification I mean buyingstock shares in two dimensions, spaceand time. For instance, large Americancompany value cycles don't usuallymatch foreign company cycles,small American company cycles, andso on. We've learned to buy some ofeach as a hedge against being in thewrong place even at the right time.These areas, plus real estate andbonds, are most commonly used todiversify holdings.

My friend has learned this lesson,too, and has humbly asked me topass on his recommendation to youall—diversify your stock purchases indifferent areas as well as on a regularbasis. Enjoy this issue's featured articleon stock investing, and have aHappy New Year from all of us at

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Lessons Learned about Stock Ownership

There is simply no denying it: Tucked in the bag of your local mail carrier is that early harbinger of spring, the W-2. But since I am always trying to make lemonade out of lemons, I make myself focus on the only interesting thing about this tax seasonâ€”the mild suspense over the slim chance of a refund vs having to pay even more money to Uncle Sam. And, of course, speed is of the essence. If a refund is in the picture, I want to get my end of the process done in order to get that money back as quickly as possible. 

Now it may be generational, but I still think that a blackberry is a bit of fruit before I remember its high-tech namesake. This handicap of being high-tech challenged (for that's what it really is nowadaysâ€”a handicap) makes the whole exercise of amassing and organizing tax records for my annual return both slower and less accurate. How's that for a nice daily double? I'm slower and less accurate just because I am not up to date with online bill-paying, record-keeping, and tax programs. And I have a feeling I'm not the only one. 

In an effort to get up to speed and make my life a little easier, I recently took a tour through the mind-numbing world of tax-planning software programs. I was impressed at how they have evolved and at their potential for easing the work of the tax process, if you are willing to invest the time and effort to master one of them. That is the rub for the avalanching rush of technological advances in general. How do you find the time to keep up? Is learning these wonderful tools worth denying or delaying other well-deserved leisure activities? 

In my case, after a few false starts, I am back with my number-2 pencil and my box of receipts. Hope does spring eternal though, and maybe this will be the year to get in touch with my ever-elusive technical side, if only to stop the gentle abuse I receive from my family and friends. 

For those of you poised at the starting gate of tax-planning season, we offer you this month's cover story on taxes (found on page 11) to help get you off and running. It's packed with insights from a range of tax-planning experts. It may be cold comfort, but remember what my CPA told me a long time ago: The only thing worse than having to pay income taxes is not having to pay income taxes. 

A Technophobic Doctor's Musings on Taxes

Way back in the 1920s, someonefigured out that agroup of small investorscould be pooled to hire an advisor toknowledgeably manage their stocksfull time. And thus an industry wasborn—the mutual fund industry.These funds have proven so popularthat they have proliferated to actuallyoutnumber the individual stocksavailable to be analyzed and owned.And every portfolio combinationimaginable is available: large companies,small companies, foreign companies,and sector companies like oil orretail. You get the idea.

Because there is such a confusingwelter of voices clamoring for yourattention with wild claims of highreturns, another whole industry hassprung up: advisors in print and in personwho do nothing but sort throughthe possibilities of mutual funds tohelp individuals make appropriatechoices. That is what this month's featureis all about.

And as with all things financial,there are the usual caveats, such as thefact that in any given year 75% ofthese funds do not even make variousmarket averages. The mutual fundsthat do better than the Dow, S&P500, and so on almost always cannotsustain that record of success formore than a few years. They alwayssay, "Past performance cannot be aguarantee of future results." But theevidence is that many of us have thatold herd mentality and chase past performanceby buying last year's winnerseven if we know better.

So why don't we just stick with theso-called index and exchange-tradedfunds? Many of us should. It's easy,you don't have to worry about who isactually doing the stock analyzingand picking because there isn't anyone.It's a basket of all the companiesin that particular index. For youdoubters, it's been proven time andagain that the market as a whole outperformsindividuals over the longrun. And there isn't the usual mutualfund 100% annual turnover of stockcontents with their attendant hightransaction costs. Indexes have abouta 0.3% annual cost vs 1.36% formutual funds. But don't kid yourself.If you do the math, over your investinglifetime, transaction costs add upto be a huge, silent difference in howmuch you end up with for collegetuition or for your retirement.

I recently stepped into these deepwaters with my financial advisor andcame to these same grudging conclusions.It isn't glamorous, and you giveup the faint hope of the big score, butat the end of the day, a diversifiedbasket of index funds will not onlyallow you to sleep better, but win theday over performance-chasing mutualfunds. Read on, see what you think,and let me know. 

Always Keep an Eye on Our Mutual Friends

As I get older, I find that out ofnecessity, I am getting moreand more comfortable visitingcemeteries. So it becomes easier to takepersonally the need for what iseuphemistically referred to as "preneed"or estate planning and all of itsramifications. I suppose it's natural forpeople to feel uncomfortable aboutplanning ahead for our natural ends.But it continues to surprise me thatsurveys repeatedly tell us that physiciansare late in settling affairs concerninginsurance, wills, and the like.Unfortunately, approaching this planninglate will reduce your options,your control, and your comfort level.

This procrastination may seemcounterintuitive since we doctors,more than almost any other profession,are forced to deal with end-of-lifeissues and mortality on an almost dailybasis. Because the fastest growing sectorof the population is persons overage 85, we are increasingly doling outend-of-life counseling, health carepower of attorney forms, and do-notresuscitatecontracts. As a result, livingin personal denial is getting tougher forphysicians. We don't professionallydeal with our patients' financial affairs,but we are certainly aware of the intertwinedrelationship of health issuesand estate planning decisions.Personally, I think the superstitiousfactor we all publicly disavow plays avery real part in our aversion to estateplanning. To help overcome this inertia,you ought to at least give a wrynod to the phobias that urge us to keepan acceptance of our mortality at bay.The daunting prospect of tackling thehard decisions inherent in estate planningis not just legal and financial, butemotional. So, to paraphrase JoanRivers, let's "grow up!" As my daughtersaid to me, "Here's a brick, build abridge, get over it."

is on thejob with this month's feature on estateplanning. The good news is that youcan come away from finally confrontingthe inevitable with relief andincreased confidence. You still may nothave any great desire to visit cemeteriesof course, but you may have agreater desire to get your estate inorder before it's too late. You owe it toyourself, your children, and yourgrandchildren to have a solid plan inplace for when you're no longeraround. Those who are happiest intheir later years are so because theyhave a plan and a sense of control. Andhaving control in your twilight years issomething to cherish. See, sometimesthe best is saved for last. Read on andgood luck. 

Editor-in-Chief

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