The Physician's Guide to Investing

“Investing and money management are things that should be taught in medical school, but aren’t,” says Robert M. Doroghazi, MD, FACC. After spending nearly 25 years as a Missouri cardiologist before retiring in 2005, he’s now doing some of that teaching he so advocates. Along the way, Dr. Doroghazi, a graduate of the University of Chicago Pritzker School Medicine, has learned a few things about finance and investing himself.

Fortunately for the rest of us, Dr. Doroghazi has shared his knowledge in a fine book, The Physician’s Guide to Investing: A Practical Approach to Building Wealth (Humana Press, 2006). He also publishes a twice monthly newsletter, The Physician Investor Newsletter. Dr. Doroghazi recently shared his thoughts on physicians and finance with pfnlive.com.

Why did you author your book?I’ve always been careful with my money. And I made some mistakes, although overall I’ve done pretty well. But I saw mistakes that other folks made, too. And I thought that the combination of all those things gave me some insight and I thought I could write something that could help physicians. You know, physicians are the best trained professionals in the world. Yet, the average physician graduates medical school $120,000 in debt. They’re 34 or 35, and they’ve not been given one second of instruction on how to invest their money.

What is your philosophy on saving and having a financial plan?

My basic message is that physicians make enough money; all they need to do is be careful with their money and not do stupid things. I think if a physician can promise that they’re going to put away 20% of all the money they’re going to earn, all of a sudden after they’ve been in practice for 10 or 15 years, they’re going to have a lot of money in the bank. Thrift is the most powerful factor in accumulating wealth. Some physicians make $500,000 and they spend it, so it doesn’t make any difference what you make. All you need to do is be careful with your money.

What are some of the pitfalls physicians fall into when it comes to spending?

At the point that physicians enter practice, it’s an extremely vulnerable time in their financial lives. They’ve worked hard, and they’re 34 or 35, married or just about to get married, have kids and have student loans, and all of a sudden their salary goes from $40,000 to $250,000. They have arrived, and now things that previously were just pie in the sky all of a sudden become requirements to join the country club, and buy a bigger car than you need. But they don’t realize that it took the senior partner 10 or 15 years to get that home, and they want it all at once. I try to impress people with my character and what I do for charity and with my accomplishments. You’re got problems if you try to impress people with your car and your house, because there’s always somebody who’s going to have more.

In your book, you write that more money is lost in the hospital doctor’s lounge and similar settings where physicians congregate. Why?It’s social pressure, and it’s arrogance. What happens is, you’re sitting in the doctor’s lounge and someone starts talking about how they invested in the next race horse that’s going to win the Kentucky Derby, or the next play that’s going to be a big Broadway hit. And it’s all to impress people. Some people invest for glamor; they’d rather invest in the next Kentucky Derby winner and have a one in 10,000 chance of that going off rather than put their money in a ho-hum thing like a CD. To some folks, the glamour part of the investment is more important than the return on the investment.

You’ve also written that physicians should hire someone to negotiate for them. Is that because of their lack of business training in medical school?

Yes, and also because physicians are smart people, so they think that their knowledge in one area makes them an expert in every area. The physician’s time course in making decisions is a day at the longest. By the end of the day, you have to know what you’re going to do the next day with a patient. Sometimes, it’s on the course of hours or minutes. Whereas business people, their time course for making decisions can be weeks or months, and occasionally years. So for that reason doctors are poor negotiators—they just don’t understand the strength of their position.

Why do you have such an affinity for certificates of deposit as investment tools?

Lots of reasons. Number one, everyone understands a CD. You put a thousand dollars in a CD for one year at 5%, at the end of the year you have $1,050. Number two, it’s liquid, although there is an interest penalty if you withdraw the money early. Number three, as you know, there are limits, but all accounts at banks are insured by the FDIC. So, the federal government insures your CD. And lastly, whenever you have a deposit at the bank, you have influence at that bank and physicians don’t realize that. The banks need money to loan money out. I have CDs at every bank except one in Columbia, so I know bankers at all the banks.

What’s the most important financial lesson that you’ve learned?

Trusting my own judgment is probably the most important thing. The defining time when I learned to trust my judgment was when Topps, the baseball card company, went public, around 1988. I collected baseball cards when I was young, and still had collected cards at that time, and I could see that the hobby was taking off. And that’s when I still had a full-service broker. I called him three times over the course of a few months and told him I wanted to buy some of the Topps stock, and he talked me out of it. And of course, it went up five-fold the next two years, and I told myself, I know more than this Wall Street guy. And so, I knew baseball cards, and I should have bought that company. So, it’s just trusting your own judgment with your knowledge.

Ed Rabinowitz is a veteran healthcare reporter and writer. He welcomes comments at edwardr@ptd.net.

“You’ve really done a first-class job of telling your fellow doctors what to do in their financial life. In fact, your book should be required reading at med schools.”—Warren Buffett in a letter to Dr. Doroghazi