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Transitioning from Income Earner to Investor

At some point in our lives we’ll be earning the majority of our income from our investments, not from our jobs. For most this will be in the 6th or 7th decade of life.

You go from earning $140/hour seeing patients to earning nearly $1,000/hour managing your investments.

Hourly Rate of Income

A portfolio which earns you $50,000/year needs at most 50 hours of rebalancing, shuffling between accounts, doing taxes, and transferring dividends.

= $1,000/hr

Isn’t it interesting that there is an actual transition point when we go from earning $150/hr as primary care doctor (or $500/hr as anesthesiologists) to earning more just investing our money?

Investment Capital as Doctor

When you’re working a job, the investment capital is the medical education.

Your medical license is the secondary investment. And you have to guard that closely. An administrative process, such as a medical board investigation, or a malpractice lawsuit could end your medical career.

Investment Capital as Investor

But your investment capital as a financial investor is a little less fickle. There is no lawyer, medical board, QA, HR, or ethics committee to worry about.

Once you transition over to becoming an investor, nobody cares if you’re a woman, man, gay, straight, ugly, beautiful, fat, thin, smart, or dumb. Wall Street is one of the least discriminatory entities we have. All it cares about is profits.

We earn so much money as doctors. It’s a shame to let that go towards a big mortgage or a European car. That money, if invested, can have so much more future potential.

Working for Your Income

If you’re repairing cars for a living, you don’t encounter much risk. But as a medical professional the patient-doctor relationship adds innumerable risk to your life.

It’s not all bad to be an income earner. It offers you a social connection to colleagues and you get to practice a trade which helps human beings.

Risk of Income from Medicine

I just wish the risk wasn’t so high. Which is why my personal plan has been to slowly transition from being an income earner to being an investor.

The plan is to gradually decrease my risk exposure; it doesn’t make sense for me to help people live healthier lives and risk getting sued or investigated over it, while food and alcohol companies are killing more people than I can even see in my lifetime.

Investment Income

Our investments can earn us so much money. Sadly, many physicians are far too conservative with their money.

We are sitting on the kind of cash any entrepreneur would have a chubby over. They would be investing the shit out of that money, making it grow as quickly as possible.

A physician, however, has their money in a checking account, a low-yield savings account, or in some 401k, invested in a shitty bonds.

I suspect the reason for this is that we place much more emphasis on our salaries than the potential future growth of our investment portfolio.

Job Description of an Investor

As an investor, my most important task is to have accumulate money to invest with. Next, I must learn the necessary skills to become a good investor.

Which means, I have to make some mistakes. Rinse, repeat. Master it.

You think some Wall Street dude is smarter than you? You think they some magic formula?

When I transition from income earner to investor I need to:

  • assess my risk tolerance
  • accumulate investment capital
  • rebalance my investment portfolio
  • diversify my investments
  • time the market
  • evaluate new investment opportunities

It all sounds fancy but it’s no different from learning to play tennis, surfing, or ping pong. All depends on how good you want to become and if you’re willing to pay an expert to help you improve.

2 Comments

  1. jimbeem

    Very interesting mindset change dr mo. Any books that you might be able to recommend on this topic?

  2. I’m not sure which investment book(s) helped me develop this mindset. I’ve read a ton of books on the topic from investing to business development to assessing personal risk tolerance. I think in 2020 it’s better to listen to podcasts than read all of the books that are out there. Podcasts tend to distill the ideas down to the simplest concepts and the people creating them often have consumed a ton of material.

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