Where should physicians invest their money in 2019?

Where’s the smart money going in 2019? What will be the hottest stocks, and how can you get on board now to make a killing in the market next year?

Most physicians don’t know this, but there is a surefire way to make a small fortune in the stock market. How? Start out with a large fortune and play the stocks, suggests W. Ben Utley, a Certified Financial Planner with Physician Family Financial Advisors, Eugene, OR, a firm that specializes in investing for doctors.

Financial advisors, just like physicians, have best practices. Buying the latest tech IPO that’s predicted to skyrocket, for example, is not your best bet.

“Buying ‘hot stocks’ is not a best practice,” Utley told MDLinx. “It’s a sure ticket to lose your shirt.”

Healthy living, healthy investing

Another way to look at it: Investing in a hot stock is like jumping on the latest fad diet. (Maybe it’s worse, because your body can recover from a fad diet. Your bank account might not be so lucky.) But fad diets never work in the long run. What does? Eating healthy and staying active.

“When you go to the doctor, they’ll tell you to stop smoking, drink more water, get exercise daily, eat a balanced diet, and floss—and you don't want to hear that,” Utley says. “But it’s the right advice because it works.”

Same thing goes for financial planning, he adds. It may sound as boring as doing low-impact aerobics and eating enough fiber, but diversified investing for the long haul—with an eye toward retirement and paying for college—is the closest thing to a sure bet in the stock market.

Once physicians understand this fundamental concept, they can get to know some of the finer points:

• Don’t invest for 2019. “There's a perception that just because the New Year comes around, we should make new investments,” Utley says. “Well, there's no way to know what the economy is going to do next year. So, to invest for a 1-year time period is folly. People should be investing for a much longer time horizon—at least a decade.”

• Take risks, get rewards. “Risk and return go hand in hand,” Utley says. In other words, there’s really no such thing as a totally safe investment. And that’s a good thing, “because if you were not exposed to risk, you would not be exposed to the potential for return,” he says.

For instance, stocks tend to have higher returns over a longer period of time, but they also tend to be more volatile. Bonds tend to be more stable, but they also generally have lower rates of return. “So, if you're a person with a low tolerance for risk and a short time horizon to invest, you’d want to have more bonds in your portfolio. If you have a higher tolerance for risk and a longer time horizon, then you want to have more stocks,” Utley explains.

Get on the glide path

But enough generalizations and guidelines—let’s get down to brass tacks.

“Physicians should be investing in mutual funds,” Utley says.

A mutual fund includes hundreds, if not thousands, of stocks. If you were to buy these stocks individually, you’d be paying an enormous amount in asset managers’ fees. But a mutual fund will give you access to hundreds of stocks, all for one low fee.

“If you buy one stock and that stock goes bankrupt, then you've lost everything. If you buy two stocks and one goes bankrupt, then you’ve lost half of everything,” Utley explains. “But if you buy 500 stocks [as in a mutual fund] and one goes bankrupt, then you've lost so little that it's not really worth talking about.”

Plus, with a good mutual fund, you could own stock in the nation’s most successful companies—Apple, Microsoft, Facebook, J.P. Morgan Chase, Google, Berkshire Hathaway, Johnson & Johnson, and hundreds of others. So, if Johnson & Johnson has a bad day, you haven’t lost your shirt—you barely lose anything. Even so, your mutual fund may balance out such risk by also investing in bonds and international stocks. Utley calls this “owning the market.”

Even better, you can invest in a target-date mutual fund that gradually shifts the balance from riskier to safer investments (eg, from stocks to bonds) as you get closer to your investment goal—retirement, for example. (Financial gurus call this the “glide path” from aggressive to conservative investments.) This way, you reduce the risk of losing your “nest egg” as you get closer to reaching your goal.

Does this sound familiar? It might because it’s the default investment option for a lot of 401(k) and 403(b) plans. Naturally, some physicians want nothing to do with it simply because it’s the default—that it must have training wheels on it, or it’s the equivalent of the bunny slope. “But this is actually a very powerful concept that’s been years and years in the making,” Utley emphasizes. “It's just about as close to perfect as you can get with an investment that still has risk.”

Still, we haven’t exactly answered the question: Where should physicians invest their money in 2019?

“The one thing to know about next year is that it’s a huge opportunity for physicians to start making money in the long term by saving it in mutual funds now. But you could say that about any year,” Utley summarizes. “The problem doctors have isn’t finding things to invest in—those things find the doctor, whether they're good or bad. The problem doctors have is putting money away.”

“But now is the perfect time to do that,” he says. “Now is always the right time to start saving.”