Searching for That Winning Investment
Physicians have long tried to maximize their earnings by making investments. Although many doctors have done well, others have ended up with huge losses.
Some money-losing investments were truly due to bad luck. Even financial professionals failed to predict some real estate crashes or a market plunge at a particular time. And many investments that looked good on paper turned out to be losers owing to unforeseen events.
In the survey fielded for Medscape's 2015 Compensation Report, we asked physicians to describe their worst investing mistakes. Thousands of respondents described how they lost money, and what went wrong. Here are the eight most common categories of mistakes.
1. Making Poor Stock Choices
Some physicians chose companies that had bad management, or whose products were eclipsed by better products or more high-powered marketing; other stocks were from companies that did well at one time, but then took a nosedive and never recovered.
"I bought WorldCom stock and it went to zero," said one respondent.
"I bought penny stock that went belly up. It wasn't a lot of money, but it was a good learning experience."
"I bought Apple stock at $45, sold it at $15."
"I lost $1 million in the Internet bubble."
"My financial adviser convinced me to invest in hedge funds; I lost $300,000."
"I tried investing on my own and was not able to keep up with it on a day-to-day basis."
"The market crashes wiped me out."
"Every stock I've chosen has gone down to almost nothing."
Still, those who lost a bundle in stocks were not in the minority.
Realistically, almost no one—not even professional mutual fund managers—will always choose a winning stock. The difference, though, is that mutual fund managers have hundreds of stocks, and so if a couple are duds, these professionals can get rid of them, and hopefully their decline will be overcompensated by the winners. If you own only one or two stocks, you have a lot riding on that particular stock.
Another problem is that nonprofessional investors tend to buy "hot" stocks that are getting publicity and are the center of "buzz." The problem with that approach is that their prices have already increased. Investors often purchase that stock at a high price, hoping that it will go still higher. But if the value is already elevated, the share price is more likely to either plateau or decline. "I always buy high and sell low," grimaced one physician respondent.
Still, some tales of woe involved unfortunate timing rather than poor choice. "I am a very conservative investor, and just before the tech bubble (also called the 'dot-com bubble') burst in 2000, I moved assets into tech stocks and lost $40,000," said one physician.
Medscape Business of Medicine © 2015 WebMD, LLC
Any views expressed above are the author's own and do not necessarily reflect the views of WebMD or Medscape.
Cite this: Leslie Kane. Doctors' 8 Worst Investing Mistakes - Medscape - Jul 09, 2015.
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