Setu Mazumdar, MD

When patients see physicians, they want advice from a trusted expert because they know that a doctor's knowledge and experience is far greater than their own. Similarly, when they go to a financial advisor, they trust that he or she will be able to pick the winning stocks, mutual funds, or money managers, and beat the market. After all, they are pros, right? Not so fast.

I guess it's natural for me to think about disasters since I trained in emergency medicine. I've seen so many examples of people who've suffered tragic, and expensive, events for which they weren't prepared. So it got me thinking about how to go about creating your own financial disaster plan.

A landmark study, and numerous subsequent studies, of pension funds found that timing the stock market and selecting individual stocks contributed very little to portfolio performance. Instead, asset allocation accounted for more than 90% of a fund's performance over time. So why are you still trying to game the market?

Last week, I introduced the most important step in building a portfolio: asset allocation. Now let's take a look at how that idea came about and why it should matter to you: Studies show that by mixing aggressive investments together, you may reduce your portfolio's overall risk.

With every patient encounter we address the ABCs first. There's a good reason for it -- the ABCs provide us with a framework for managing even the most complex patients and organize our thoughts to focus on the most important aspects of the patient's condition first. So let's discuss the framework you should build to have a successful investment experience.

Last week I introduced a simple saving strategy to build wealth by focusing on saving early in your career. But let's say you didn't save much early on and now you're worried that you won't have enough for retirement. There is still hope, because you can use these two powerful savings strategies.

I've met many physicians who think "save" is a dirty four-letter word. They spend everything they earn and live paycheck-to-paycheck. So in this two-part series, let's explore what some of the few simple principles of saving can do for you. First, we'll tackle the three "S's": Save early, save often, save more.

Physician pay has not kept up with inflation, resulting in a decline in our purchasing power. Strategies to offset inflation include boosting gross income by increasing workload, reducing expenses, or investing in inflation-beating investments. This week, I'll look at investments that have a history of outpacing inflation.

The rate of inflation in the U.S. is usually measured by the Consumer Price Index, but your own personal rate of inflation may be drastically different. Understanding your personal inflation rate, and how to control it, is crucial because it's a real threat to your purchasing power and your lifestyle.

Physicians who manage their own investments -- and financial advisors who manage investments for physicians -- overwhelmingly focus on investment return rather than the one thing that will guarantee your portfolio will increase in value: Saving. Here's why saving more now is more important than earning more later.

Each year, investment-research giant picks three mutual-fund "managers of the year" to pats them on the back for their investing skills. The truth is, "hot" money managers have no better chance of beating the financial markets over the long haul than a bunch of blindfolded monkeys.

Everywhere I go I see unhappy doctors -- all they do is complain about rising malpractice premiums, more paperwork, declining pay, and 60-hour workweeks. This includes doctors who've been practicing medicine for several decades. My question is: "Why are you still practicing medicine full-time?"

Now that it's a new year, you'll soon receive your fourth-quarter investment reports from your investment company. You'll probably also get some sort of outlook statement for 2011 and a review of the significant events of the last three months. What exactly do you do with all that information? How about this: Ignore it -- it's a complete waste of your time. Here's why.

In the third in a series of posts on the special considerations physicians have when choosing disability insurance, we'll look at three areas that insurance salesmen tend to overlook: Whether the policy is renewable, whether there are cost-of-living adjustments; and whether there is residual disability coverage.

I've discussed why it's important for physicians to know the definition of "disability" when it comes to choosing the right insurance policy. Too many have too little coverage. This week, I'll tackle two more factors crucial to buying the right disability policy: How much you spend, and how much you have saved.

Disability insurance is one of the foundations of a solid financial plan for physicians. Yet I've seen numerous mistakes financial advisors (read "insurance salesman") have made when it comes to recommending disability insurance for doctors. Do you know what your disability policy covers? Here's what you need to know.

In recent weeks, we've talked about the three major areas of financial planning: goal-setting, asset protection and building wealth. This week, we'll cover the fourth: Wealth transfer, the efficient redistribution of your wealth after death and during your life. That's right, I said, "During your life." Wealth transfer involves a whole lot more more than simply creating a will.

One of the things that irks me about most financial advisors is that they dump their clients' into a mishmash of investments without a sense of purpose. And some look at investments in isolation, without considering their clients' overall financial picture. Here are some questions to ask to make sure yours isn't one of them.

While most physicians think of financial planning strictly in terms of investing, the reality is that investing is only one component of a comprehensive financial plan. In fact, capital appreciation is low on the list of priorities and should not be addressed at all until you've protected what you already have.

I'm often asked, "How do I begin to get my financial affairs in order?" That's a great question. The problem I see with most physicians -- and most financial advisors -- is that they focus on the products too much and not on the purpose those products are serving. Before you pick the next stock, or buy the next annuity, or hire a financial advisor, you need to define your goals.

Are you ready to learn the truth about investing and financial planning? In my new blog, I'll expose the outright myths and lies most financial advisors feed doctors like you and me. Here you'll find simple, straight talk about investing and financial planning from a financial planner who is also a physician just like you.