As a physician, you understand the importance of having an effective strategy for managing your finances and investments. And with a portfolio management strategy that is tailored to your individual needs, you can create financial security over the long run, allowing you to focus on other important priorities like your patients, your medical practice, and your family.
What Is ‘Portfolio Management’?
Portfolio management is the process of organizing and maintaining your investments to reach your financial goals. The goal of portfolio management is to effectively balance risk and reward to maximize the return on your investment while minimizing risks.
What Are The Benefits of Implementing a Sound Portfolio Management Strategy?
By implementing a sound portfolio management strategy, you can:
- Develop financial security over the long term.
- Reduce overall risk and minimize setbacks due to market volatility.
- Create an actionable plan for meeting your financial goals and objectives.
- Maintain portfolio diversification to keep your portfolio stable despite market fluctuations.
- Take advantage of market opportunities and investing factors that can drive better investment returns.
Here Are 5 Tips That Can Help Physicians Build A Winning Portfolio Management Strategy:
Tip #1 – Understand Your Goals And Objectives.
The first step in creating a portfolio management strategy is understanding your financial goals and objectives. Ask yourself questions such as:
- What are my short-term financial goals?
- What are my long-term financial objectives?
- How much risk am I willing to take with my investments and how much risk do I actually need to take to achieve my goals?
Answering these questions will help you determine the type of investments that are best suited for your portfolio.
Identifying your short and long-term financial goals is an important part of achieving financial success. Short-term financial goals are usually meant to be achieved in one year or less, while long-term financial goals may take several years or even decades to achieve. To identify your short and long-term financial goals, you should:
- Make a list of both short and long-term goals.
- Prioritize your goals based on importance.
- Assess how much money you need to achieve each goal.
- Set a timeline for when you want to achieve each goal.
- Track your progress towards each goal through budgeting and savings plans.
Attaching a timeframe to your financial goals is essential because it will help you stay motivated and focused on achieving the goals. Having a timeline in place will also help you plan out your next steps and create a timeline of when you need to make progress toward each goal. Additionally, having deadlines will help keep you accountable for your progress and ensure that you don’t become complacent with reaching your financial goals.
Tip #2 – Research Different Investment Vehicles And Strategies.
Second, you should research different investment vehicles and strategies to choose the best ones for your portfolio.
Investing in different types of assets can help reduce risk, give you access to potentially higher returns, and allow you to diversify your portfolio. Consider researching stocks, bonds, mutual funds, ETFs, real estate, and more to determine which type of investment is best suited for your individual needs.
Once you have identified the types of investments you want to include in your portfolio, it’s time to analyze their rate of return and volatility level to determine your asset allocation. Asset allocation is the mixture of investments you plan to hold in your portfolio. For example, younger investors may target a mix of 90% stocks and 10% bonds, while older investors that are closer to retirement age may opt for a more conservative 60% stock to 40% bond portfolio.
Whatever you decide, be sure to do your research and understand the projected returns and volatility you can expect with your portfolio.
Lastly, consider any tax implications when making investment decisions. When building a portfolio, you should always consider the tax implications of your investments, especially as a high-earning physician who may find themselves in the 32% federal tax bracket or higher. Taxes can have a significant impact on your return on investment and should be taken into account when making decisions about which investments to include in your portfolio. There are several tax-advantaged investment accounts available that may provide benefits such as tax deductions and tax-deferred growth. Research these accounts to determine if they are right for your needs. In addition, certain investments will be more tax efficient than others and should be prioritized whenever possible.
Tip #3 – Assess The Risks Associated With Potential Investments.
In addition to researching different investment vehicles and strategies, you should also assess the risks associated with each potential investment. Risk tolerance is an individual preference and will vary from person to person. Your risk tolerance may also change over time based on your financial situation. Consider researching each type of investment to understand its risks before making any decisions.
Generally, stocks are seen as a higher risk but provide the potential for greater returns over time. Bonds are typically considered a safer investment option with lower returns than stocks. Mutual funds, ETFs, and index funds enable you to invest in multiple assets simultaneously while minimizing your exposure to any single stock or bond. Be sure to consider all of these investment options when creating your portfolio.
Tip #4 – Monitor Your Portfolio Performance Regularly.
Once you’ve created a portfolio and invested in various assets, it’s important to monitor your performance regularly. This will help you stay on track with reaching your financial goals and ensure your investments perform as expected. That said, remember that the best investors are those who have the patience and fortitude to stay invested for the long haul. So, don’t be too quick to scrap your investment plan if things don’t work out immediately—your strategy may need some time to pay off.
Tip #5 – Seek Professional Advice From a High-Net Worth Financial Advisor.
Finally, you may want to consider seeking professional advice from a high-net-worth financial advisor when creating and managing your portfolio. A qualified financial professional can help you create a plan tailored to your individual needs and provide advice on how best to allocate your assets. They can also offer insights into new strategies or legislation to consider while helping you capitalize on the unique opportunities and challenges you face as a high-earning physician.
In the end, building an investment portfolio can be complex and intimidating.
However, with the right strategy and research, you can create a portfolio that is tailored to your individual goals. Remember to do your research as you consider different types of investments, analyze rates of returns, determine asset allocations, assess risks associated with each potential investment, monitor performance regularly, and seek professional advice when needed. With careful planning and the right investments, you can create a successful portfolio to help you reach your financial goals.
TrueNorth Wealth is here to help.
If you want to work with a fiduciary CFP® professional to help outline your unique portfolio management strategy, complete with a custom investment portfolio to deliver your financial goals, then TrueNorth Wealth is here to help.
TrueNorth Wealth is among the top Wealth Management firms in Utah and Idaho, with offices in Salt Lake City, Logan, St. George, and Boise. At TrueNorth Wealth, we focus on helping our clients build long-term wealth while maximizing the enjoyment they receive from their money. We do this by pairing our clients with a dedicated CFP® professional backed by an incredible team.
For our team at TrueNorth, it’s about so much more than money. It’s about serving families all across Utah and helping them achieve freedom and flexibility in their lives. To learn more or schedule a no-cost consultation, visit our website at TrueNorth Wealth or call (801) 316-1875.
