Medscape recently published a report covering five common investing mistakes physicians make.
1. Partnering with colleagues on medical ventures. Physicians may get excited about a project or new technology in the medical field that could improve their practice without realizing that it isn't feasible or would be crushed by competition. For example, physicians have invested in businesses to start an HMO or other insurance organizations run by other physicians and lost their entire investments. Others invested in treatments that insurance companies wouldn't pay for. The article recommends getting a financial advisor involved early and to stay updated on the company once you have invested.
2. Jumping on a hot trend. Physicians reported investing in dot.com companies before the "tech bubble" burst or purchasing high-yield stocks right before they started doing poorly. Physician investors can avoid this fate with a diversified portfolio and setting targets for each allocation.
3. Investing in start-ups that don't get off the ground. Start-up projects might be half-developed ideas, lack financial backing or be a scam. Physicians also lend to friends and families for their projects, with new restaurants being particularly popular. The article suggests doing due diligence on the project's finances and the principles' track records. Make sure there is a business plan and understand the ownership structure.
4. Investing in an easy money scam. The pitch might sound legitimate, but physicians are sometimes scammed into bad investments. Many respondents said they lost money on "low risk" oil and gas partnerships, life insurance policies and funds that ended up being a Ponzi scheme. The article recommends if it seems too good to be true, it probably is; physicians can also lean on financial advisors for guidance.
5. Real estate investments. Real estate investments can decline in value depending on the neighborhood or a downturn in the real estate market. Physicians reported investing in vacation homes, oversized homes and lots that couldn't be built on. To realize a positive return on the investment, real estate investors do their homework to understand the local market and purchase at favorable prices for buyers. Make sure to have an accountant or financial planner review the deal.