PRN: Truisms to Chew On

Physician's Money Digest, November15 2003, Volume 10, Issue 21

It's that time again. I admit, sometimesI just can't resist laying out some ofmy collected adages, old saws, andfinancial homilies. Maybe I was overdosedwith fortune cookies as a kid. Butplease note on the plus side that I havedrawn the line at not recommendinglottery numbers.

  • The US stock market has managedto decline about 20% every 5 years forthe past 75 years.
  • An inheritance is a privilege, not aright. If Aunt Mary wants to disinherityou in favor of a less deserving alternative,so be it.
  • The inherent appeal of investing isthat the opportunities are continuous,if not obvious.
  • Not investing has a cost; it justisn't predictable and is only obviouswhen looking back.
  • When the market drops, everyonetalks of fear, panic, or profit-taking.Remember: Every 1 of those shares soldis bought by someone else with a differentview.
  • If a market drops, the good newsis that the entry price to that marketbecomes cheaper. Less is more: Isn'tcheaper a good thing?
  • A bit of irony: The young can benefitthe most from investing because oftheir long timeline, but they have theleast money to do it.
  • Doctors are statistically above averagein donating to worthy causes andbelow average in receiving inheritances.
  • Planning and controlling consumptionare far more important inwealth accumulation than any realisticinvestment return.
  • Isn't financial success feeling in control,and freedom of action feeling freefrom personal economic fear?
  • A fun part of owning a broad marketindex like the Wilshire 5000 is thatyou can say "Yeah, I own that too."
  • By the time you finally feel confident in a mutual fund manager, theyhave either retired or crapped out.
  • Investing is simple. Save money regularlyand put it into a manageable varietyof diversified areas. Things get complicatedwhen we grow greedy, fancy, orcute, and then get nailed.
  • Andrew Carnegie said that the wayto get rich is to put all your money into 1basket and watch that basket. The wayto stay rich is to put your money intomany baskets. Easy for him to say.
  • If you're confident about investing,you tend to trade more, which runsup your transaction costs and taxes.Over time, this pattern yields less thanthe nervous investor nets who infrequentlytrades. Apparently it's okay tofret as long as you don't act on it.

Buying a stock position graduallydecreases risk, while selling a stockposition gradually increases risk.

Well, it appears that people love tocommunicate in absolutes. But keep inmind that life and money matters areambiguous, messy, and difficult. Somake what you will of these nuggets.I'm sure they'll mean something tosomebody; I'm just not sure what.

Jeff Brown, MD, CPE, a practicingphysician who is a partner onthe Stanford University GraduateSchool of Business Alumni ConsultingTeam, teaches in the StanfordSchool of Medicine FamilyPractice Program. He welcomes questions orcomments at jeffebrownmd@aol.com.