Surgeon's Bulletin Board

Surgical Rounds®, December 2007, Volume 0, Issue 0

Gain insights on environmentally friendly investing, credit card rewards, tracking investment performance, and more.

The 50-doctor poll: Fair pay, flirting, and other fun topics

By Christine Menapace

New York Magazine

Are you paid fairly? Are you sure of your answer? In a recent survey of 50 physicians from the New York region by , exactly half (n=25) felt that physicians are paid fairly. Yet when the same physicians were asked if they personally are paid fairly, 40 answered "no." That's just one of the more amusing and interesting findings of this poll.

A physician's bottom line

Approximate physician annual salaries ran across the board: 4 made less than $50,000; 15 made between $50,000 and $99,000; 4 made between $100,000 and $149,000; 10 made between $150,000 and $249,000; 8 made between $250,000 and $499,000; 2 made between $500,000 and $999,000; and 2 made more than $2 million. Reasons given for undercompensation were listed as "HMO policies," "I work 100 hours a week," "Residents equal slave labor," and "The money goes to insurance companies, lawyers, and pharmaceutical companies with good lobbyists."

While most physicians felt the worst parts of being a physician were the hours (n=30) and hospital politics (n=22), they felt the best parts were the intellectual challenges (n=40) and helping people (n=33); more than one answer could be chosen for this question. Money also was included as a choice for these questions, and 9 physicians included it under the "worst part of being a physician" compared with 2 including it under the "best part." Clearly, money is not a large motivating factor in the profession! In fact, the number-one choice to "Why did you become a doctor?" revealed the essentially altruistic side of medicine, with the majority (n=44) answering, "Wanted to help people."

It's not you, it's me

Other questions, like the fair pay issue, revealed "everyone but me" mindsets. For instance, while more than half (n=29) felt physicians in general don't spend enough time with patients, the great majority (n=35) said they personally spend enough time; only 12 physicians admitted they didn't.

The greatest contrast was observed when the physicians were asked if those in their profession have "God complexes." While more than half of those surveyed (n=28) said "Yes, physicians fall prey to this ego condition," only 2 physicians admitted to having such a complex.

Other questions in the survey covered taboo topics. When asked if physicians ever get turned on by patients, 26 responded "never," yet 22 admitted "sometimes." Another 35 confessed that doctors and nurses "sometimes" flirt in the operating room. And when asked, "Do you ever get grossed out?" 15 of the 50 physicians answered "yes." Reasons cited were: "Bad smells," "Autopsies," "Had to remove someone's eyes because of cancer."

For the full survey, go to nymag.com/health/bestdoctors/2007/33164/.

Time for environment-friendly investing

The surge to "go green" has begun, and some investors may feel it's not enough to just turn off lights or recycle. Wall Street has heard the environmental call and has taken steps to cash in on the growing trend. Responding to the fact that assets in US green mutual funds have risen by 695% in 6 years, some investment companies are starting to promote their environment-friendly investments. Investment banks have issued global-warming reports that look at stocks and industries that are likely to be affected by the changes. Some larger brokerage firms have put together teams specifically to address the need for green investing. Newsweek suggests the following green opportunities.

Two types of mutual funds are available; those that feature clean companies such as health care and software and those that stay away from companies involved in any type of "sinful" products or behavior. Green funds include Portfolio 21 (PORTX), Winslow Green Growth Fund (WGGFX), New Alternatives (NALFX), and Sierra Club funds (SCFLX; SCFSX; FSUSX). Green exchange-traded funds include PowerShares WilderHill Progressive Energy Portfolio (PUW), PowerShares WilderHill Clean Energy Portfolio (PBW), and Claymore/LGA Green (GRN). The Forward Progressive Real Estate Fund (FFREX) features green real estate management companies.

Protect yourself from financial fleecing

Mass marketing has become a relatively cheap endeavor for those wishing to cash in on na?ve consumers. This is especially true regarding financial fraud. Marketers are taking advantage of consumers by promoting investments and products with catchy copywriting and by opening new lines of communication. The National Association of Online Investors (NAOI) offers the following tips for protecting yourself from investing scams:

  1. Never buy a stock or investment based on an unsolicited call or mailing.
  2. Learn to identify and analyze stocks on your own.
  3. Only consider buying stocks on a major exchange and avoid those listed in the over-the-counter exchange.
  4. Avoid trading system seminars and be wary of any vendor not willing to tell the audience the cost during the presentation.
  5. Most important, educate yourself about finance and investing before you invest any of your money.

NAOI offers free basic investment courses. For more information, visit their Website at www.naoi.org.

Family shared vacation homes

So an elder family member has left their estate to you and your two siblings. Sounds great, right? But what happens when your little brother refuses to help pay the upkeep or your older sister wants to sell the property when you want to keep it as a vacation spot? Jointly-owned family property can cause havoc if a system for running and maintaining the property is not established. To avoid conflict, experts suggest setting up an agreement in advance to allocate usage of the home, payment of upkeep and improvement, and buyout strategies. Establish a voting system for big and small decisions regarding the property. Consider choosing one family member as primary caretaker with other members contributing through fees.

If you're planning to leave a property to multiple heirs, consider leaving the property to a trust or limited liability company and giving your heirs shares in the enterprise, instead of turning it over to them in name, to make it simple for those inheriting. Another option is to leave the property to the estate but give family members first option to buy.

Surf your way through real estate

Looking to buy a new home or sell your current one? You may want to go online to save yourself a lot of time and money. All of the following services may help you in your real estate research.

If you're looking to buy, log on to www.bankrate.com or www.mortgagecalc.com to determine your price range. Access home listings by visiting www.realtor.com, which has 3 million listings, or your local agent's Website. To compare prices, go to www.zillow.com for estimated home valuations. You can check out a specific location with sites like www.trulia.com and www.bestplaces.net. A variety of services are available at www.homeagain.com, where you can get values, mortgage information, view listings, and compare agents. Want a newly-built house? Check out www.newhomeguide.com. Mortgage rates can be evaluated at www.e-loan.com and www.hsh.com.

Have a house to sell? Visit www.owners.com to list your home or www.zillow.com to advertise your home at no cost, get users to offer a "Make Me Move" price that might catch your interest, and add information about your home to give it an owner's value estimate. Cyberhomes.com and RealEstateABC.com also allow owners to add information on renovations that may adjust the value of their home.

The hype surrounding spin-offs

Historically, companies that have been spun off from larger parent companies have had strong returns. BusinessWeek reports that from 1990 to 2005, spin-offs beat the S&P 500 by 18% on average in their first 2 years and an index of spun-off companies beat the S&P 500 by almost 11% over the previous 5 years.

But don't rush out and buy just any spin-off stock. Investors should research their spin-off choice by taking a look at why the company is being spun off, if any executives from the larger company will be joining the new company, and what kind of fanfare is being used to promote the new company. The timing of the buy is important. Don't jump on the new stock right away because spin-offs generally trade down in their first few weeks and months. It's best to wait till the initial selling subsides. A few spin-offs to keep an eye out for include Tyco International's plan to split into three parts, American Standard's selling of their Wabco unit, Temple-Inland's restructuring, and Morgan Stanley's plan to spin off Discover Financial Services.

Get by with a little help from your friends?

Surgeons are often targets of investment-friendly fire. Because your friends may assume your cash flow is endless, you may often be presented with ideas on how to invest all that extra money. Entrepreneur magazine suggests caution and getting it all in writing before investing in a friend's business.

The two most important things a surgeon should aim to accomplish when investing in a friend's business is to make a good profit and, most importantly, to keep the friendship intact. The first step should be to know your role in the business. Do you want to be an active member or just a silent partner? Will you be making decisions regarding the business? Make sure your role is defined before you invest. The next step is to do your homework. Review your friend's business plan and check the market and competition to ensure that the business has a future. The number of other investors and bank loans involved also may help you gauge how safe the investment is. Last, put all terms in writing. The National Venture Capital Association (www.nvca.org) offers free samples of legal documents. Make sure to have a lawyer review the deal before you sign. It may seem unfriendly, but keeping things strictly business will help keep your friendship as profitable as your investment.

The value of surgeon's best friend

It's often said that having a pet provides health and emotional benefits. Pets enhance our lives, teach our children responsibility, offer unconditional love, and provide companionship; however, the law does not yet recognize the important impact pets have on our lives.

Sparked by the wave of pet illness and death due to contaminated pet food in early 2007, lawmakers are examining what rights pet owners have when it comes to legal compensation. Pet advocates insist that the laws regarding pets are outdated and don't represent the roles companion animals play in modern-day society. According to the American Pet Products Manufacturers Association, Americans spent nearly $39 billion on food, supplies, veterinary care, and other services for their pets. The cry from animal advocates demands that the law recognize the growing importance of pets and be amended to award owner's compensation when negligence causes the death of a cherished animal. Although the process of change is slow, some states have already heard the call. Cruelty to animals is a felony in 42 states and a Tennessee statute allows for compensation for loss of a pet's companionship.

Using options to minimize risk in stock investing

Stocks are tricky. There's always the possibility that an event in the market can cause prices to fall. Typically, risk is managed by investing according to your risk tolerance and by diversifying investments. Along this vein, investors can hedge their risk exposure by purchasing options.

An option is the right to buy or sell a stock for a fee from an option writer at an agreed on sum within a period of time. Option traders evaluate risk by using charting tools and by measuring the delta (ie, the degree to which an option's price is affected by changes in the underlying asset's price) and by the theta (ie, the level of certainty of the timing of an option's expiration value). If you do not buy or sell the stock within the time period, you only lose the writer's fee.

Should you be enticed by credit card rewards?

Credit card companies have invested in pitching the "benefits" of their rewards and consumers have bought it, using their credit cards to make purchases in the hopes of saving big. But are these savings all an illusion?

The problem with credit card rewards programs is the benefit is often canceled out by annual fees and higher interest rates. U.S. News & World Report cautions that people are likely to purchase more when their credit card offers a rewards program, because their sense of guilt is lessoned by the notion that they are receiving something for free. It appears that consumers tend to spend before they get their reward as well as after receiving it.

Credit card companies traditionally target their rewards programs at consumers who carry debt, but they also target higher-income consumers by offering expensive exclusive programs like special concert tickets, meetings with celebrities, and even space flights.

Experts suggest that consumers are better off keeping balance-free credit cards with lower interest rates and no annual fees, which will leave them with extra cash to buy whatever they want free from the limitations of so-called rewards.

How to track investment performance

By Elindoro S. Rodriguez II

Surgeons, like all investors, want to get the most out of their savings. To assess your current portfolio, make better investment decisions, and predict the potential value of future investments, calculate the rate of return to get a perspective on your future wealth.

There are basically two methods used to calculate the investment's rate of return. The first is the time value of money (TVM) method, which states that a dollar invested today is worth more than a dollar in the future as a result of interest earned. TVM is applied to lump sum investments—amounts held in an investment account, which increase in value without making additional payments within the time frame of the calculation. For example, assume $50,000 was invested in stock A. Without adding any additional amounts, after 11 months its value grew to $53,338. The TVM method would calculate an investment interest rate of 7.07%. To achieve this sum, use a financial calculator, because it is not a simple percentage calculation.

The second is the discounted cash flow (DCF) method. It is one of the investment decision-making tools used by large corporations to justify million-dollar projects. This method is appropriate to apply when additional amounts are added to the original investment amount. As an example, consider $30,000 invested in stock B. This time, additional amounts of $500 were added to the original investment at the end of the second and third months. After 14 months, the investment grew to $33,618. The DCF method would calculate an investment interest rate of 7.01%. Again, this is not a simple mathematical equation and would best be achieved through an online financial calculator, such as one found on bankrate.com, agedwards.com, and fool.com.

The calculated rate serves as a yardstick to measure the effectiveness of the investment strategy. By tracking the calculated rate on a regular basis (ie, annually or semiannually), surgeons would be able to ascertain if their investment is growing at the desired rate, if it is stagnant, or if it is declining. Depending on how the calculated values have been tracking, it may be necessary to review and modify the investment strategy to improve the investment performance. If a modification was already made, the calculated value could indicate whether or not there was an improvement. Thus, the ability to calculate the rate of interest is crucial in ensuring that the investment is growing steadily.

A surgeon does not need to be an expert in personal finance to perform the interest rate calculations. Investing in an inexpensive financial calculator or financial software package and taking the time to learn how to effectively use these tools is paramount. Sources of information include the Web, learning centers, financial institutions, and financial advisors, especially in cases where tax implications are involved.

Elindoro S. Rodriguez II is a writer, presenter, and a seminar leader whose goal is to empower people to make informed financial decisions. An expert in the mathematics of personal finance, he published the book, Control Your Personal Finances (Finance Solutions; 1999) and developed the PFS Software. Mr. Rodriguez welcomes questions or comments at .

Money quiz for your marital partner

According to a USA TODAY/CNN/Gallup Poll, spending too much and saving too little are two common financial issues that cause strife among couples. The study also found that nearly two-thirds of married couples said they talked little or not at all before the wedding about how to combine their finances.

The following questions should be addressed before the wedding:

What are your debts? If one or both partners has significant student, credit, business, mortgage, or other debt, discuss how those debts will be repaid, by whom, and by what time. Before you sit down, both of you should agree to pull your latest credit report and share it with the other.

What about the kids? If one or the both of you are bringing children into the relationship, cover all the emotional, logistical, and money issues associated with blended families. Discuss current child support arrangements, how ex-spouses or partners will fit into the picture, and where money for that child's everyday expenses and education will come from.

Where should we live? If one partner wants to live in a mansion and the other is content with a three-bedroom ranch, that's a critical difference in financial goals. Where and how you and your partner want to live is a major issue that needs to be discussed before you move in together.

Do you like to spend or save? Have a discussion about money behavior. Own up to your money habits and make a plan so you can live a good life together without too much frugality or irresponsible spending.

Have you ever filed bankruptcy? You may trust your partner with your life, but you really need to ask this question. If they filed more than 7 to 10 years ago, a bankruptcy may not show up on their credit report, depending on their agreement. If they filed earlier, you really need to know when, and most important, why.

How will we pay the bills? Two-income or single-income couples need to decide how the checkbook will be controlled. There's no single correct way to do this, but establishing a joint checking account to funnel money toward bills, retirement, and investment accounts might be a good way to start. It requires both parties to step up to the plate on a monthly basis with whatever funds they've agreed to put forth.

What about retirement? At whatever point in life you're entering a relationship, you need to discuss how set you are for retirement. Talk about assets in your 401(k), IRA, and other investment accounts. If one or the both of you haven't taken any steps to plan for retirement, you're going to need to change that. If you vary widely in age, it's wise to ask for advice because one spouse will be retired long before the other.

What is your estate plan? Once you marry, make sure you both have wills and health and durable powers of attorney in place. Domestic partners should consult an attorney or financial planner with expertise in their state's estate and child welfare laws to ensure that the surviving partner's financial and parental rights are protected.

Do we need a prenup? Generally they're done when one or both partners have assets or a business they want to protect in case of legal separation or divorce. Prenups are becoming more common in this day and age, and don't be afraid to discuss one with your future spouse.

This article has been reprinted with permission from the Financial Planning Association (www.fpanet.org), the membership organization for the financial planning community.