Does investment planning pave the way to wealth? Yes, but many doctors and dentists feel opportunities to compound their high-income earnings are passing by because they’re time-poor.
Does investment planning pave the way to wealth?
Are you a health professional asking, “Does investment planning pave the way to wealth?” Yes, is the short answer. But throughout Australia, many doctors and dentists feel opportunities to compound their high-income earnings are passing by because they’re time-poor and don’t have a solid plan.
To accumulate wealth and achieve financial freedom, you need to invest. For many health professionals, the most attractive investments are cash, shares, and properties. Yet, many speculate on these without an investment plan in place because they’re time-poor. As a consequence, doctors and dentists routinely pay too much, make poor asset choices or fall victim to sophisticated investment scams.
Investing or speculating
Many believe that the key to successful investing is knowing when to buy and when to sell. Timing the market or speculating, as we call it, isn’t the best strategy—especially if you are time-poor.
History shows most speculators hedging their bets for short-term profits end up missing the market’s best performing days or months over the long-term.
In our experience, professionals with a diversified investment portfolio reap more robust rewards in terms of capital growth over the long-term.
Types of investments
One of the best investment strategies for time-poor professionals is to engage a professional investment planner. The process involves matching your financial goals and objectives with your available funds. One of the many benefits our clients like is how investment planning rolls into our financial planning services. We help clients understand how investments work and how best to use them. Here are some of the investment types and terms we discuss with our clients.
Compounding is wealth creation gold. In its purest form, compounding is generating earnings from previous earnings. So the idea is to purchase assets that generate earnings and then reinvest those earnings to generate more earnings.
- Risk vs return
Different types of investments carry different risk levels. As a result, we consider your appetite for risk, your timeframe and your financial position before beginning an investment plan. No investment is risk-free. However, it’s calculated risks that create wealth.
The point of diversifying investment portfolio assets is to reduce the risk without diminishing returns. We help you spread your investments so your portfolio can withstand market volatility. For example, investors with a mix of cash and term deposits weathered the Global Financial Crisis better than those with portfolios weighted to shareholdings.
- Active Vs passive investment
You’re likely to hear lively debates among your colleagues over which investment strategy is better, active or passive. An actively managed investment is where the people involved are making buying or selling decisions based on speculation and market timing. They aim to procure superior investment returns over the short-term.
Conversely, passive investors rely on the ebb and flow of market movements to receive average returns over the long-term. Which investment type is better? Historically, passive investment outperforms active investment in the long-term. But the decision is always yours. Some clients thrive on the thrill of the share market chase.
With so many affordable online brokering websites, investing in shares is at everyone’s fingertips. But without a strategic investment plan, speculating can result in costly mistakes.
The purpose of shares in your investment portfolio is to generate both income and capital return. Plus, where possible, use franking credits and dividend imputations to reduce tax. Our experienced advisors know which company shares are likely to generate profits, return dividends and provide tax reductions for investors.
Managed funds are receiving a bad rap: the chief complaint being high fees and low performance. However, there are low-cost options. In some instances, pooling your money with other investors enables you to invest in assets not obtainable as a sole investor.
Overloading on rental property assets is a common investment mistake doctors make. While we understand how buying property may feel like a safer option, that is not always the case. In some circumstances, purchasing through a self-managed super fund (SMSF) affords better long-term returns when you retire.
Liquidity refers to how easy your investments convert to cash. Your liquidy factor is an important consideration the closer you get to retirement, or the higher the probability you may need access to your cash fast.
Our investment planning expertise can help you set out clear and measurable investment goals. But we don’t offer out-of-the-box solutions. Instead, we mix and match portfolio assets to your ambition while maximising your wealth creation goals.
On the whole, we recommend doctors and dentists stay in control of their investments and managed funds. By sticking to what you understand, you can avoid poor asset choices or the lure of sophisticated investment scams.
But if you’re time-poor and need help, talk to us. Carbon Medical specialises in investment planning for health professionals at any stage in their career. We can help you achieve your investment goals and wealth creation targets both in the short and long-term.