When I was an F1, with huge debts to repay, a house deposit to save for and seemingly endless postgraduate exams to pay for, the idea of investing significant amounts seemed a long way off. I did start investing small amounts, which worked out well for me. However, I now have kids futures to plan for and a little more spare cash to invest. So I asked specialist medical independent financial adviser Darren Scott-Guinness from Dental and Medical Financial Services to give us an overview of investment advice for doctors and surgeons. You can contact Darren for a free no obligation consultation via Medics’ Money
Investment planning can seem daunting and complicated as there is so much to take into consideration.
- Do you have the money to invest as a lump sum or would you prefer to invest small amounts regularly over time?
- Are you completely new to investing or do you currently have a few investments working for you that need to be reviewed and incorporated into a larger financial plan?
- What’s the level of risk you’re comfortable with?
- Where are you in your career and can you afford to be a bit more adventurous with your investments?
All these questions (and more) are part of developing a robust investment portfolio.
The process can be overwhelming and involved, so you might prefer to partner with a professional independent financial adviser (IFA), ideally one who specialises in the medical sector.
A financial adviser can help you grow your money while also gaining an income to take home. An IFA that works exclusively with medical professionals is particularly attuned to the circumstances and needs of this group and should have a proven track record of building and protecting their clients’ wealth.
Goals for investing – Income vs Growth
One of the first steps in the process is to ask yourself what your goals for investing are. Your priority might be to generate an income during retirement, or it might be to pursue capital growth. Depending on your preference, your strategy will shift, but inevitably your plan will involve at least some elements of both.
It might sound trite, but the old adage “Don’t put all your eggs in one basket” really does apply when it comes to investing. Individually, each type of investment comes with its own risk, but through diversification, you can mitigate the potential impact of any losses. With this in mind, even if your main goal for investing is to have a steady income throughout retirement, some of the investments in your portfolio will be working toward growth.
One of the reasons to include both is to offset the impact of inflation. If returns on your investments don’t keep up with the increasing prices of goods and services, they won’t be worth as much when it’s finally time to retire.
In an ideal world, asset values will always rise, but there are no guarantees when it comes to investing, and the same strategy that works one day might fall flat the next.
Sometimes, there’s just really no predicting how or why certain investments perform the way they do, no matter how hard the experts try.
When deciding your investment priorities, your level of risk should be taken into account. Generally speaking, the more risk you take, the greater the chances of either a sharp rise or sudden fall. This is the whole idea behind investing for growth.
In it for the long-haul
You should really be thinking about starting an investment plan as early on in your career as you can. And the earlier you do, the more risk you can afford, so you won’t need to miss out on any high performing opportunities due to the risk involved.You’ll also benefit from compounding — wherein an asset’s earnings (from either capital gains or interest) are reinvested to produce further earnings over time.
The reality of the situation is that markets fluctuate at the drop of a hat and short-term volatility is the status quo for investing. In the immediate aftermath, you might experience asset value reductions or drops in sale prices, but it’s important not to “jump ship” at the first sign of trouble because while shake ups can and do happen at any time, the market will always recover. Pay attention to the wider economy and political arena as recovery usually happens after major setbacks like economic downturns or geopolitical events.
When markets drop you should still consider continuing to invest regularly – when prices are low.
When you make fixed regular investments, you’re provided with the opportunity to buy more units when the price is right and fewer when prices are high. Steer clear of any lump sum investments when the market is volatile, hold off until the dust settles and prices return to pre-volatility levels. Even if the market is volatile, you should still be looking for new investment options. Most investors tend to sell in a declining market and buy in an upswing, but this can cause overreactions and overpaying on units that aren’t worth what you’re spending. Historically, the best times to invest have actually been when things seem to be at their lowest because the only way to go is up and those individuals reap the benefits of a careful eye and a bit of foresight.
Assess your risk level
When you start investing, your risk appetite has a huge impact on how aggressive you are going to be with your plans. This should help you keep in mind that investing is really all about playing the long game. You can prioritise growing your pension pot and/or retirement fund and not worry about the minutiae of the day to day market fluctuations. However, a bespoke investment plan should be heavily influenced by how comfortable you are with risk.
A financial adviser will normally have a risk questionnaire they have you complete in order to finalise your investment strategy. In this, you’ll need to know the answers to:
- Will you need access to the original funds in the short, medium or long term?
- How quickly do you need a return on any investment?
- How tax-efficient can we be with the suggested investment?
- What is your personal risk tolerance?
- What is your capacity for loss?
The process can be overwhelming and involved, so the best course of action is to partner with a professional financial adviser, preferably one who specialises in the healthcare sector. An IFA that works exclusively with medical professionals is particularly attuned to the circumstances and needs of this group and should have a proven track record of building and protecting their clients’ wealth.
At Dental & Medical Financial Services, we help you make informed decisions about how to invest your money and provide guidance through each step of the process.
We discuss with you your goals and personal circumstances, provide advice on creating your portfolio, and implement a plan you are happy with. We regularly monitor and review progress against your goals and conduct an annual review of your entire financial plan to recommend any changes based on your circumstances and the ever-changing world of investing.
This does not constitute advice and advice should be sought in all instances before acting on it. The Financial Conduct Authority does not regulate tax advice. Dental and Medical Financial Services is an appointed representative of Best Practice IFA Group Limited, which is authorised and regulated by the Financial Conduct Authority.