I’m a physician, and this is what my personal investment portfolio looks like
Key Takeaways
Physician and finance expert Lisha Taylor, MD, MPH, shares her personal investment decisions to help other doctors build wealth through savvy investment decisions.
Diversification is an important investment strategy to help minimize risk and maximize potential returns, while avoiding over-reliance on any single investment category.
By including a mix of index funds and bonds, and adjusting the allocation based on factors like age and proximity to retirement, Dr. Taylor’s personal portfolio demonstrates a long-term perspective and a commitment to managing risk as part of an overall wealth-building strategy.
One of the main ways I increase my net worth and build wealth is by investing money. Whether it is contributing to a work retirement account or making investments and letting them grow over time, investing is a key way I set myself up for financial success.
Many doctors flounder when it comes to investing, unsure about where or how to invest their money. While your first step is to talk to a financial professional who can help you personalize a plan, it can also be helpful to hear about how others invest.
In an effort to help other physicians, I’d like to share the six investment types I have in my own portfolio—maybe some of these are right for you.
Total stock market index fund
Instead of buying individual stocks, which can fluctuate heavily in price and come with substantial risk, I opt for index mutual funds instead. An index mutual fund is a group of stocks (or a group of bonds) that follows an established index with predefined criteria. For example, the total stock market index fund tracks every single stock in the US, so investing here means I’m investing in every stock in the US as well.
"Instead of having to pick and choose (or guess) which companies or industries will do well each month or each year, I invest in all of them through this single fund."
— Lisha Taylor, MD, MPH
Large companies like Amazon, Microsoft, and Apple make up a much higher percentage in this fund than smaller, little-known companies or startups. Currently, this fund includes nearly 4,000 stocks from companies nationwide, and this level of diversification helps me maximize profits and minimize risk. Plus, annual profits from investments in this fund average around 10% per year, which beats the performance of 80% of all mutual funds.
Investments in this fund are a staple of my portfolio, and I know some physicians who invest all their money in this fund alone. There’s a good chance a large portion of your money held in your 401k or 403b is invested in this index mutual fund if you did not hand-pick your investment options.
Total international index fund
The US isn’t the only powerhouse nation when it comes to business creation and growth. In an effort to engage in the global economy and add more diversification to my investments, I also invest money in the total international index fund.
Unlike the fund I mentioned above, which only invests in companies based in the United States, the total international index fund invests in companies around the world. In fact, there are some years in which international companies within this fund have gained larger profits than those in the US-specific fund.
As I can’t predict the future and don’t know if it’s safer to make US-based or international investments, I personally invest in both. Currently, I have about 20% of my money invested in the total international index fund.
Small cap value index fund
In full transparency, this is an investment I added to my portfolio only a year ago, but for good reason—I knew it could help me increase profits. Although many people tend to invest in large companies they already know (such as Amazon, Google, Disney, and etc.), there are many physicians and academics who hesitate to put all their money in these businesses.
"The common belief is that you don’t make money from buying a large company, you make money from buying a company that will continue to grow and increase in profits over time."
— Lisha Taylor, MD, MPH
Although large companies have grown substantially in the past, they have grown so large that it may be difficult for them to keep up this pace in the future. In contrast, other companies that you may have never heard of could hit their stride and expand rapidly over the next decade. Thus, many wise investors try to capitalize on this growth.
Although I already invest money in smaller companies by investing in the total stock market index fund, adding a little extra “tilt” toward smaller companies, by adding a dedicated investment, increases my allocation to these companies even more. One of the best ways to do this—and the main way I do this—is by investing money in the small cap value index fund. Currently I have about 10% of my money invested in this fund.
Real estate investment trust index fund
Although I love to invest in various companies (through index mutual funds) another type of investment that has always intrigued me is real estate. Some of my physician colleagues invest in real estate directly by purchasing short term rentals (earning profits through companies like AirBnB), personally renting out homes long-term, or by renovating older homes and “flipping” them for a profit (renovating a home to immediately sell).
While these options have their advantages, they can also require a huge investment of time.
As a busy physician with a full-time schedule, the last thing I want to do is to add another task to my plate. That’s why some doctors, including me, invest in real estate syndications—purchasing apartment buildings with other investors in a large group.
While real estate syndications can be more hands off, they also have high minimum investments and require a substantial amount of trust in the investment partners who are making the key decisions that can grow or sink your personal investment.
Even so, I still want to invest in real estate, but I want to do it in a passive way with limited risk. That’s why I invest in a real estate investment trust. This is a type of investment that automatically invests your money in different types of real estate deals and housing options.
Similar to an index mutual fund full of stocks, this type of index fund doesn’t require any extra work from me. My retirement account at my job does not give me the option to invest in this fund inside of my 403b, so I make this investment through my Roth IRA. Currently, I have about 10% of my investment portfolio in this fund.
Total bond index fund
While investing in stocks and stock-based index funds can be great for profits over time, the prices and values of those investments can fluctuate from year to year.
"One way I stabilize my portfolio and lower my investment risk is by investing in a total bond index fund."
— Lisha Taylor, MD, MPH
This fund automatically invests my money in various types of bonds in the US. (Remember, a bond is when you loan money to the government or to a company, for a certain amount of time, and they pay you back with interest.) Purchasing a total bond index fund means I am loaning money to the government, federal agencies, US states, and a slew of companies. As I’m still a relatively young physician with decades before retirement, about 5% of my portfolio is in this fund. As I get older and closer to retirement, I will increase this percentage.
Related: From residency to retirement: How compensation changes over a physician’s careerTreasury Inflation-Protected Securities
Treasury Inflation-Protected Securities, or TIPs, are a specific type of bond fund that loans money to the government in a way that accounts for inflation. Inflation averages about 3% per year, meaning the value of each individual dollar and the amount of things you can buy with that dollar decrease over time. As a result, any money you have in cash or in bonds will be less valuable to you in the future.
"In order to protect against this inflation risk, I invest in TIPS."
— Lisha Taylor, MD, MPH
With TIPS, the value of my investment increases with the rate of inflation. Currently, I have about 5% of my portfolio in TIPS, but I plan to increase this allocation every few years as I get closer to retirement.
What this means for you
As a physician like me, you may have more money to invest each year through various accounts, but you need to be mindful of the investments you choose inside of those accounts. I’ve shared my own investment portfolio with you to give you an idea of how other doctors are making wise investments. Currently, I have 50% of my total investments in a total stock market index fund, 20% in a total international index fund, 10% in a small cap value index fund, 10% in a real estate investment trust index fund, 5% in a total bond fund, and 5% in a TIPS index fund.