PRN: The Grab Bag

Physician's Money Digest, April15 2004, Volume 11, Issue 7

Okay, I admit it, sometimes I just don't know what to do with allthese odd facts and observations other than make a list. Maybe there is notenough to make a column based on each bit or it might be too tough to categorize.In any event, I hope you can make use of this unrelated mélange of financialloose ends and tidbits.

Gauging Risk

An economic study shows that if you had a lump sum to invest since 1926, youwould have achieved better results 64.5% of the time by investing it at onceinstead of dollar-cost averaging. Most of us don't have a choice, investing our savingsas we earn them, but heirs and lottery winners should pay attention.

There are four kinds of investment risk: company-specific risk, industryrisk, market risk, and quirky investor behavior, which is where consistencypays off in the long run. Physician-investors would do best to diversifywithin each category.

Uncritical enthusiasm often portends the end of something good. The initialpublic offering (IPO) mania was a prime example of this. Real estate, anyone?

If you have a sizable equity in your home, as many do in this inflated era,diversifying into real estate investments may be unnecessary if the amount representsmore than 10% of your net worth.

Rule of thumb:

Annual rent for a house should be about 8% to matchlong-term stock market results. If you can obtain more, good for you. If you have topay more, welcome to San Francisco.

Random Observations

"Character is how we live our lives when there is no one around to notice."Take notice, tax filers and golfers.

In reality, ninety percent of anything isn't very good.

Why is it that store managers always seem to have a pebble in their shoes?

Physician's Money Digest

When you're reading , did you ever notice thatyou don't get to pick your epiphanies?

Don't blame the storm on the ship.

Don't predict; prepare.

Career Consideration

In 1995, CEOs earned 26 times more than the average worker. In 2000, thefigure was 30 times the salary of the average worker. Are they becomingsmarter or are we voting shareholders growing dumber?

In spite of many unresolved corporate scandals, the fact that the IPO and stockmarkets have not yet fully recovered from a $3-trillion hole has not held Wall Streetback from its most profitable year ever. That's $22 billion of profit—after thebloated salaries are paid. Reading this, my daughter said, "And you had to go tomedical school."

Jeff Brown, MD, CPE, a partner on the Stanford UniversityGraduate School of Business Alumni Consulting Team, is apracticing primary care physician. He welcomes questions andcomments at jeffebrownmd@aol.com.