The Optometrist’s Guide to Investing 101
Chapter 6: How to Monitor Your Investment Performance and Other Wealth-Building Tips
How to Monitor Your Investments and Track your performances?
The final step of any investing game plan is to track your investment and performances. You don’t have to be all crazy about it and check it each day. But it is recommended that you check it at least once a month. It is easy to set an investment plan in motion like choosing a target date retirement or passive stock index fund, and then forget about it.
It is important to keep track of your finances. Also, it is really fun to see your investments grow and your student debt shrink with each passing month! We like to imagine each invested dollar as hundreds of tiny little workers, grinding 24/7 to earn us more income while we sleep.
Personal Capital (Free website + mobile)
Free app that basically links all your bank accounts, investment brokerage accounts, retirement accounts and your student loan account.
Then, it combines them all into an amazing dashboard where you can see all your asset allocations and what your true ratio of stocks to bonds are, total fee paid in funds, and finally your total net worth (don’t be too sad if it is negative due to your massive student debt).
Also, it offers a free retirement planner to let you know if you are on track for retirement or not and actually gives you some insights and advice on whether your financial plan is working for you. Did we also mention that it is free?!
If you want to do it the old-fashioned way, a simple Microsoft excel sheet to track your earnings is fine and dandy.
Common Questions with Investing
When should I start investing?
The best time to start investing is now, regardless of how the market is. While billionaire 89 year old Warren Buffet is an amazing investor, he owes a big chunk of his wealth due to the fact that he started super early, when he purchased his first stock at 11 years old. The compounding effect is most powerful over the longest amount of time. So start now.
What are the best stock market investments?
The best stock investments are low-cost index funds like the S&P 500 Index or Total Stock Market index. By purchasing these funds, instead of individual stocks, you can buy a big chunk of the stock market in one transaction.
This means that you won’t beat the market, but it also means that the market won’t beat you. You are literally betting on the US economy, which is a pretty safe bet. In addition, investors who only trade and pick individual stocks instead of index funds generally under perform the market over the long term.
Is stock trading recommended for beginners?
We do not advocate individual stocks for beginners and for sure, we DO NOT promote trading stocks even for experienced investors. Frequent selling and buying of stocks is not tax-efficient since your gains/profits (less than a year) will be taxed at ordinary income tax. In addition, frequent selling leads to erratic behavior and the innate human nature to try to “time the market”.
We highly recommend a buy-and-hold strategy using simple, low cost index fund & dollar cost averaging every month (investing the same set amount each time) through the high and lows.
"We DO NOT promote trading stocks even for experienced investors. Frequent selling and buying of stocks is not tax-efficient since your gains/profits (less than a year) will be taxed at ordinary income tax. In addition, frequent selling leads to erratic behavior and the innate human nature to try to “time the market”. We highly recommend a buy-and-hold strategy using simple, low cost index fund & dollar cost averaging every month (investing the same set amount each time) through the high and lows."
How do I invest money that I might need in few years; Should I take less risk?
Investing comes down to two things:
- Time Horizon: When do you need the money?
- Risk Tolerance: How much risk are you willing to take?
Let’s chat about the the time horizon first. If you are investing for a far-off goal like retirement, then you should be investing a majority in stocks (close to 90%). This will allow your money to grow and outpace inflation over time. As your goal gets closer then simply dial back your stock allocation and include more bonds.
If you are investing for a short-term goal (less than five years) - like for a home down payment, then you likely don’t need to be invested in stocks at all.
Next is risk tolerance. This really depends on your own personality and will vary regardless of age. I consider myself a fairly risky investor with a 100% stock allocation in my portfolio. Why do I have so much stock?
- (1) I am in my early 30s and therefore have close to a 30+ year investing horizon
- (2) I was behind in retirement savings when I graduated in 2015 at the age of 28 with zero savings, and saddled with $230+ worth of student debt. I can’t risk being “safe” by having more bonds.
- (3) I am mentally prepared. I experienced my first “market crash” during the Coronavirus Crisis of 2020 when the SP 500 Index dropped close to 28%. Did it hurt when I saw all the red? Yes. Did I panic and want to sell? NOPE. This was the true test of my behavior as an investor. Whatever allocation allows you to sleep at night.
The stock market goes up and down, so if you’re prone to panicking, then you’re better off investing slightly more conservatively, with a heavier allocation to bonds.
"If you need the money in 5 years or less, then you likely don’t need to be invested in stocks at all. Consider other short-term vehicles. During the worst market crash, it take around 4-5 years for the market to return to baseline"
Congratulations! You finally made it to the end of this extremely long guide! Take a deep breath. You now understand all the basics of Investing 101. Piece of cake compared to learning all the neural-pathways of the trigeminal nerve, huh?
You probably absorbed all the financial knowledge that most of society takes years to comprehend. Just by getting these basics, you are ready to be a real player in the stock market.
When we were writing this investing guide, we had two goals in mind: (1) Keep it simple and fun to understand, and (2) talk about investing pitfalls for young doctors to avoid.
Building wealth is a slow and boring process and requires time and basic hard work (with hopefully minimal sacrifice) - rather than financial genius. Young doctors often are too impatient when it comes to wealth building, and this can lead to rash decisions like get-rich schemes.
We don’t blame you, you sacrificed and waited through 8 years of undergraduate and optometry school and you want to be rich ASAP. But hey, slow down, relax and take one step at a time. When you are desperate and greedy, there will always be some form of Ponzi scheme, Bitcoin mania, late night infomercial or multi-level marketing scheme to prey on you.
Many doctors ended up broke because they consider themselves too busy or too cocky to learn the basics of finances. This, coupled with no formal education in personal finance and investing, is a perfect storm waiting to happen.
Many financial and insurance salesmen (sometimes masked as advisers) will prey on the trusting nature of doctors. We as doctors, like to believe that any “financial professional” or “specialist” must always be correct and have our best interest at heart, similar to the way we treat our own patients. But the truth is - there is no Hippocratic oath for financial advisers.
Even the so-called “Fiduciary-certified” financial advisers will still have some form of bias, even if it’s unconscious. Our best defense as doctors is to be educated and learn how to take any given financial advice given with a grain of salt.
Heck, I want you to take what you read today and question the hell out of everything we are teaching you. It will make you into a better investor and a better student.
Trust but verify, as you do with everything else in life.
"Many doctors ended up broke because they consider themselves too busy or too cocky to learn the basics of finances. This, coupled with no formal education in personal finance and investing, is a perfect storm waiting to happen and often will be preyed on by a shady financial adviser or insurance salesmen"