Expert Recommendations for Financial Success

Physician’s Money Digest

One of the advantages that writing for provides is that I can review what others have gleaned from sweating over financial issues and boil the results to a few down and dirty recommendations. And so this is our fare for today.

Some of it may seem obvious and some may seem obscure. Your reaction depends upon where you are in life's arc financially and whether or not you are "ready" to see through the oyster shell to the pearl within. I’m talking about the serendipitous "aha!" moment.

First of all, are three important rules for financial success from David Young. Number one may seem obvious, but a surprising number of people continually do not follow it: "Spend less than you earn." Any financial program must begin with some level of savings. Yet financial advisers observe a steady stream of clients who need help either grasping this basic tenet or in achieving it.

establishing

Likewise, it is highly unlikely that someone will achieve any meaningful financial goal without number two: "Committing to a strategy." Notice that I did not just say a strategy, but committing to one. Hopefully, a rational, pertinent strategy that is established by working with said adviser. But Young laments that once established, all too many clients fail to follow through.

Iliad

Which leads to number three: "Discipline, patience and more patience." For many doctors, much of the value of a financial adviser is the objective voice they supply simply to help keep us on track. Remember Homer's parable (, not Simpson) that it's the steady-as-she-goes tortoise that wins the race, not the fast, flaky hare.

This last bit also brings to mind a bit of wisdom from Peter Lynch — he of the Magellan Fund's long success — "The two-minute drill." Before you jump off plan to buy a stock that a doctor at the hospital cafeteria touted, try this: Take two minutes to explain to your adviser, your spouse or the mirror exactly why you think you should buy this investment. Focusing like this helps you get past your initial emotional reaction to a more rational analysis.

Mark Adamie writes that 1) it is not past performance that will likely determine your long-term success but low fees. And remember that every basis point (one-tenth of a percent) counts and aggregates hugely over your investing career.

He also emphasizes that 2) where you slot an investment will actually determine the quality of your retirement.

"The question of taxes completely swamps the question of what particular stocks you might hold over the years,” he wrote. “Taxes dominate the long term."

That's why you need to be up close and personal with tax advantaged plans like IRAs, SEPs, 401(k)s and Roths. It will pay you royally to both understand them and use whichever one suits your situation.

The Wall Street Journal

When it comes to real estate, in up or down markets, Jonathan Clements, formerly of , reminds us that ownership is an expensive proposition. "Like a mutual fund that charges 3% annually and has a 6% back-end load (sales charge)." The 3% includes property taxes, insurance and upkeep. It does not include the mortgage or improvements you might make. In spite of some folks cashing out or flipping their homes before the recent crash who might have made a bundle, "living in a house is consumption, not an investment."

You have to live somewhere, but also keep in mind what the late comedian George Carlin said a home is; "It's where you keep your stuff while you are out getting more stuff." Deep.

Investment Advisor

A League of Their Own

Lastly, Dan Wheeler, of fame, counseled some basic truths. Truth number one is "Like crying in baseball (from the movie ), ego has no place in investing." Not for the long term successful folks at least. Notice how these pros all point in their own way at our irrational selves?

Truth number two is "Discipline is half the battle" and "...the only reason that your (strategic) plan changes is that your (financial, life) profile changes." Which is a corollary of Truth number three: "Irrational decisions can seem perfectly rational in the moment." Ok guys, we get it ...I hope.

Lastly, if it doesn't seem too cynical, truth number four is "The financial services industry is designed to work against investors." Wall Street is much more in the sales business than the advice business, as events of the last few years have painfully brought home. This statement is a version of the old plaintive cry "Where are the customers' yachts?" which means the brokers have theirs at our expense.

So go back and read Young's advice to watch those fees. And Wheeler's last advice is worthy of remark, "Seek solutions, not investments."

Smart guys.