Financeology - The Diversified Doctor: By Sanjah Sharma M.D.

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Financeology - The Diversified Doctor
with Sanjay Sharma, MD
medskl.com/module/diversified...
I recently spoke to a medical student who asked me for career advice. She was an excellent student and she had a dream to become an ophthalmologist.
I looked at her CV, she had written 10 or more research papers, most of which were in ophthalmology, she also had near perfect grades. And after spending 2 weeks in clinic with me, I was duly impressed; she was already functioning at the level of a junior resident.
The question my student asked me was, “Ophthalmology is a competitive residency, what should I do as a backup?”
Now here is how I look at things. There are times in life that you want to manage your risk. And there are times when you need to go all in. I think for CARMS - while I understand that here are Queen’s we only accept 2 residents from a pool of nearly 100 applicants - that you really have to go for it and show 100% commitment to realize your dream.
Now there are other times when I certainly would say this “all in approach” is not what you want to do. Like when you are investing. Because going all in could mean losing it all.
For instance, I remember going to school with a colleague who was obsessed with the tech market in the late 1990s. He was so convinced in the dotcom era that he was trading options; to boot it he was using leverage to compound his games. Within a 3month period, his mid 7 figure portfolio imploded and because he couldnt make his margin calls, he lost his house. At least he still has his medical degree to put food on the table.
Unlike CARMS, I believe in hedging your bets when it comes to finances: I believe in the sanctity of spreading risk amongst many small bets: In short the goal is to be a Diversified Doctor.
What exactly is diversification and how does it work? Let’s say that we have saved $10,000. We could take that entire sum and put it in 1 stock. Perhaps the stock we choose in a biotech company that we think is going to have spectacular phase 3 results. If the trial fails the stock could drop significantly. If however, instead of choosing 1 stock, we chose to put $1000 in 10 companies, we are spreading out the risk significantly. Or we can choose a fund which spreads the risk over a basket of companies including those in agriculture, technology, finance, and consumer goods.
Perhaps diversity even further? As interest rates risk, the stock market may fall, and we might be interested in further spreading our risk in non-correlative asset that frequently rise when the stock market drops.
To remember this non-correlative concept and one that champions diversification, I would like to introduce you to my BLOG model.
Here - the:
B stands for Bonds. These can be corporate, government or municipal bonds. Here you are essentially loaning your money, getting a rate of return and will be paid back the principle down the road.
The L is for location, because real estate agents live by the mantra of “Location, location, location.” Here, of course, I am talking about real estate, which over the past 30 years has outperformed the stock market in many locations.
The O is for other. Here I mean other places you can purchase stocks like emerging markets in other indices like Europe and Asia. Or alternative currencies like Bitcoin and Etherium.
Lastly, the G is for Gold. Good ol’ steady gold which was the “gold standard” currency for many of centuries on many continents. Holding even just a little bit of it, is always a solid hedge against bubbles and inflation.
So my advice to my budding ophthalmologist is to certainly go all in on CARMS. But when it comes to your portfolio the key is to diversify. And just remember to BLOG your way to growing your nest-egg.
Disclaimer
All expressions of opinion reflect the judgment of Dr. Sanjay Sharma as of the date of publication and not Royal Bank of Canada.
The strategies, advice and technical content in this presentation are provided only for general guidance and are not intended to provide specific financial, investment, tax, legal, accounting or other advice, and should not be relied upon in that regard. You should consult your own professional advisor when planning to implement a strategy to ensure that individual circumstances have been considered properly and it is based on the latest available information.