Thursday, September 18, 2008

Investing in a turbulent stock market

These are rough, interesting days on the stock market. Up until fairly recently, I was only vaguely aware of what was going on the market but didn't really think it affected me directly. I learned about the history of NYSE when I went to see it in action when I was still in elementary school, and it was still a very busy floor with men in suits running around like chickens with their heads cut off. I hear it's a bit different now with modernized computer systems! Then, as a senior in high school, we "traded" stocks for two weeks in my government class, buying stocks and following them in the newspaper. It was a fun game, or so I thought, again with no real consequences. I also remember Black Monday in 1987, talking about it in government class and seeing adults walking around with furrowed eyebrows. But I was a teenager who was more concerned about college applications and crushes on boys...

Come college, I happily took a variety of classes - there were so many interesting topics to choose from! I took language classes, geography classes, history classes, I even tried music theory, which I absolutely despised. I started off pre-med, so I also enrolled in chemistry and biology classes. I eventually became a French major, having tired of science classes. Did I ever take an economics class? No way. Sounded too boring. Perhaps if the department could have come up with some sexy titles to the courses, I might have, but I'm not even sure then because that was a section of classes in the course guide that I pretty much skipped over.

As you can guess, I eventually ended up in medical school. I attended a school with a very innovative curriculum which included a block at the end of our fourth year with classes relevant to residency, such as medical Spanish, yoga (to help us relax through those grueling intern years), and I honestly don't remember what else. We did have a lecture on paying off our loans which basically gave us the message to pay them off as rapidly as possible, to keep living like a resident after residency in order to make large payments on our loans. Certainly that was sage advice, but that was it for our financial education.

Needless to say, residency was about the same. Our daily noon conferences was excellent medical lectures. Each year we were given a talk on choosing a job which included learning about different types of malpractice, head hunters, and helping involve one's spouse in the decision. Very helpful, but again, not much about how to handle the money we were about to start making. Can you see a theme here?

So, I eventually landed in my first job. I signed on the dotted line to put the maximum amount of money I could into a retirement account because my parents had taught me that saving was a good thing. I chose the default funds to put my money into. For whatever reason, I didn't consult my husband on this choice, I think perhaps because I was overwhelmed by all the paperwork I had to fill out on my first day of work, and I figured that I was being guided in my investment decision by someone who knew more than me. And, as you can gather, I didn't know a whole lot. And my husband would have been an excellent resource.

Happily, the first few years, the economy was still relatively strong, although to an astute observer, there were signs of the current problems. As I started hearing about the stock market losing losing losing, I decided to take a look at my portfolio. Yikes. I had the feeling that this was going to be baptism by fire! The glorious 90s were over. Ignorance was bliss. Since then, I have made the effort to educate myself on the art of investing. I say art, because unless you are completely invested in index funds, there is an art to it. I just finished an informative book my father-in-law sent us called, "The Little Book of Common Sense Investing," by John Bogle, the founder of Vanguard. Although I prefer to read novels in bed after a long day of work, I read this book cover to cover. It was actually pretty interesting and well-written, without too much jargon for a lay person like me. Mr. Bogle focuses on the index fund, his own creation, which has gained many supporters in the financial fields. Basically, this is a fund that owns the entire stock market, thereby minimizing risk, and also, by owning a little bit of everything and not actively buying and selling stocks trying to guess who to invest in, there are low costs associated with it. This is investing for both the non-investor who doesn't have the time and/or skill and/or luck to buy and sell stocks daily, as well as financial wizards like Warren Buffett and John Bogle himself. It is a beautifully simple plan. And the book, although focusing on this particular type of fund, also teaches the reader about other types of investing. I highly recommend it. I obviously still have a long way to go, but I am an active learner now. Honestly, I would still rather read about neurofibromatosis than finances, but I also realize that I would eventually like to retire, preferably before the age of ninety...

The moral of this story is that perhaps some basic classes on investing could be incorporated somewhere into our education. The challenge is that there is just an amazing fount of knowledge we already have to acquire in medical school and residency. Where would this fit in? Maybe we could have quarterly lectures on it during residency or medical school. Many of us become physicians "to do good," not just to make money, and frankly, these days, there are other fields to go into to make money; but there is no reason we shouldn't have the resources to be wise with what we do take home. We work hard for our money, and it should work hard for us.


thecountrydocreport said...

I'd add some classes on running a business too--how to read a month's end report of revenue, expenses, liabilities, and assets. How to understand what your accounts receivable mean. How to know which payers are paying you well.

Alex Cvijanovich said...

i'm with you on that! i work for a chc, so i don't have to worry about the business end, but i will eventually when i start doing private's all pretty overwhelming!

Joel Sherman said...

Beware the 'art of investing.' If all these Wall St. geniuses don't know what they're doing how can a busy physician? My secret is that I recognize my weakness in the subject. I've found the most honest financial adviser I could get and have instructed him to invest very conservatively. During crashes I do very well. During bull markets I fall behind. But my money is relatively safe and I sleep at night. I've been around long enough that it evens out.
I've read Buffet's book. It's great. Very conservative and based on buying sound companies. But he has a team of accountants poring over company reports before he buys them. I couldn't possibly do it. I'm content with safe bonds and have had very few stocks for the last few years.