Invest According to the Phases of Life

Physician's Money Digest, August31 2003, Volume 10, Issue 16

Every physician-investor's lifegoes through phases. And foreach phase, there's an appropriateportfolio strategy. Thus, whendesigning your portfolio, you shouldfollow 4 broad investor categories thatrepresent the different stages of yourlife: singles, young married couples,mature families, and retirees.

Young doctors can afford greaterrisks to obtain higher profits. Time ison their side. If an investment goessour, they can still recoup on otherinvestments. Older physicians shouldfocus more on stable, conservativeinvestment choices. As retirementapproaches, their holdings should bewell established and have lower volatilitywith better yielding stocks andfixed-income securities.

You should expect to change yourinvestment objectives over time toreflect rises in income and declines infamily obligations. Mix your portfolio'sinvestments carefully. Fixedincomeinvestments help boost thecurrent yield and keep earnings stablein a slowing economy. On the downside,fixed-income instruments don'tprovide as strong a hedge againstinflation as stocks provide.

Following is an overview of the 4investor categories and a list of stocksto consider adding to your portfolio:

Singles. The preference in thiscategory is to concentrate on stocksfor a long-term plan. Depending oneligibility, this group should quicklyset up or participate in an IRA, RothIRA, or 401(k) plan. Consider supplementingthis plan with these solid,yet aggressive, growth-stock choices:Accredo Health, Cisco Systems, FoxEntertainment, Landstar System,and Varian Medical Systems.

Young Married Couples. Despitethe responsibilities of fundingcollege and home ownership, physiciansin this category should strive forsome price volatility to achieve gains.The following companies have aboveaverageearnings growth prospects butexpose investors to less risk thanstocks in the previous group: Alberto-Culver, Capital One Financial, HovnanianEnterprises, Jacobs Engineering,and Wendy's International.

Mature Families. In this phase,physicians are enjoying peak earningyears. In addition, most major expenseshave been paid.The goal nowis to build a retirement nest egg. Allof the stocks in this list have a strongrecord of earnings and dividendgrowth for at least a decade, and eachprovides a modest yield: AmericanInternational Group, Citigroup,General Mills, Johnson & Johnson,and Lancaster Colony.

Retirees. In this final life phase,the physicians' goal is to protecttheir assets. To achieve this goal,physicians should replace some oftheir equities with short- to intermediate-term, fixed-income securities.It's also vital to maintain someinvestments that will keep up withinflation. Thus, investing for capitalappreciation is essential.


Stocks in this category should providesafety of principal, dividendgrowth, and moderate appreciationpotential. The following stocks carryabove-average yields and have gooddividend growth prospects: DominionResources, ExxonMobil, First EnergyCorp, National City Corp, and VornadoRealty Trust. Thoroughlyresearch a stock before making aninvestment.