William Bernstein

Three secrets schemers use to exploit physician investors

As a financial planner for physicians, it seems to me that doctors must hate systems. Healthcare systems with their layers of bureaucracy. Data management systems like the new EMRs. Even the political system draws disdain from physicians, liberal and conservative. But physicians like you depend on systems. In fact, without the school system, you would not be a doctor today.

As an advisor who helps physicians navigate the financial system, I know you have concerns and suspicions about the financial world and the people in it,  and rightfully so.

One group of financial people deserves your suspicion: macroeconomists. Certain macroeconomists use big news and big trends to turn your hopes and fears into a fortune for themselves. And if you follow their advice, you may make a small fortune… out of what used to be a large one!

Some macroeconomists—schemers actually—are making big money off of doctors who pay to get into their seminars and buy their books, with titles like:

  • The Roaring 2000s Investor, Strategies for the Life You Want: published October 2000, right before the tech bubble burst and one of the crappiest periods in the financial markets ensued.
  • The Great Depression Ahead, published January 2009, just before one of the greatest financial recoveries in history.
  • Aftershock: Protect Yourself  and Profit, authored by two failed dot-commers (one with an MBA in marketing) and a co-conspirator whose previous job was to ghostwrite a sex manual.

Physicians: Protect your family from the next big macroeconomic book ahead…

Having read a few prognosticating publications myself (and having fallen for their schemes once, early in my career), I have noticed a pattern to their prattle. I want to share it with you here so that you can spot the schemer’s siren song yourself.

  1. Schemers tell you something you already know. For example, you already know that the United States is one of the world’s greatest debtors because every American knows this. The schemers use your fear of our national debt as a hook to lure you in. When times are good, they use hope and greed to hook people instead of fear.
  2. Schemers show you a pattern. From the time you were old enough to watch Sesame Street, you have been able to spot patterns and trends. Uneducated investors sometimes believe that patterns of the past will present themselves again in the future. The schemers know this, and they use patterns to feed on your emotions, amplify your attention, and reel you in.
  3. Schemers make projections into the future. Now, with the facts established and the pattern in place, they cause you to believe that this phenomenon will go on forever. If it’s a beneficial pattern, like the stock market going up, they’ll tell you it’s going to be Dow 36,000. Or if it’s a detrimental pattern, like our ballooning national debt, they’ll try to sell you their warnings about The Great Bust Ahead. Either way, this is how they finish you off.

The schemers will tell you everything you need to know except three things.

  1. We live in a non-linear world. Just because things have gone one way in the past does not mean they will go that way in the future.
  2. Timing is everything. If they’re right, they might not be right for years or even decades. In the meantime, they might be wrong for so long that you lose faith in their predictions before the predictions come true (if ever).
  3. When they’re wrong, they’re REALLY wrong. In a study examining the performance results of 236 strategies from 132 investment newsletters, the National Bureau of Economic Research found that more than 65 percent of investment newsletters led readers to achieve results worse than they might have achieved by investing in a stock index mutual fund. In fact, some newsletter authors delivered advice so bad that it would have caused investors to earn 10% to 40% less than the market index. Ouch.

The financial system we all depend on is not perfect but it's quite useful  if you know how it works. To begin educating yourself, check out The Investor's Manifesto: Preparing for Prosperity, Armageddon, and Everything in Between by William Bernstein, MD. It will help you put your concerns and suspicions to work u as you navigate the financial system and build financial security for yourself and your family.

Have you read this book? What did you think?

Top Strategies for Physician Wealth Building | Physician's Practice interviews W. Ben Utley CFP®

Healthcare author and financial columnist Janet Kidd-Stewart interviews Certified Financial Planner™ W. Ben Utley, several physicians and other financial planners to reveal the Top Strategies for Physician Wealth Building in this feature-length article for Physician's Practice. Discover tips and advice about saving for retirement, paying for college, buying disability insurance, saving on taxes and planning for a secure financial future.