Dr. Jashin J. Wu discusses personal finance and stock investing for dermatologists who want to strategically manage their money.
Jashin J. Wu, MD, FAAD, is Founder and Course Director of the San Diego Dermatology Symposium and Voluntary Associate Professor, Department of Dermatology, University of Miami Miller School of Medicine.
“A lot of dermatologists do not know much about personal finance. In college, we don’t learn much about it. In medical school and dermatology residency, we definitely don’t learn about it. So, it’s important that it is taught from early on,” said Jashin J. Wu, MD, FAAD, who presented “Financial Tips for the Dermatology Practice” at the 3rd Annual San Diego Dermatology Symposium, San Diego, California.
These personal finance and investment tips might be most valuable to dermatologists early in their careers, including residents and young attendings who have not yet figured out their financial plans, said Dr. Wu.
Tip 1. If you have children, talk with them about long-term financial goals, he said.
“It would be difficult if they went to college knowing nothing about finances and then opened up a bunch of credit cards and got into a lot of credit card debt right from the start. They start behind the eight ball early in life.”
Tip 2. Consider managing your own finances, said Dr. Wu.
“Certainly, if you’re so busy that you cannot handle your personal finances [hiring a financial planner] might be helpful. But it’s important to know your sources of income and how to invest the money, rather than necessarily hiring someone to do that for you because maybe they have their own interests at heart and not so much yours.”
Tip 3. Stash three to six months of cash, said Dr. Wu.
“Cash is important in times of emergency, so usually people should have three to six months of cash on hand to cover expenses in case of emergencies. You could put the cash in a checking or savings account but the interest rates for those are very low or zero, so I would not necessarily recommend having more than those three to six months of cash in the bank.”
Tip 4. Hedge against inflation, he said.
“In January of this year, inflation was 7.5%, which is very high historically. Usually, inflation is 2% to 3%. Inflation eats away at the buying power of your cash, so the goal is to hedge against inflation.”
Buying gold is one approach, according to Dr. Wu.
“It’s difficult to buy gold bars. You can’t store them easily. So, I suggest buying [stock in] gold miners or gold miner exchange traded funds (ETFs), which tend to go up when gold prices go up.”
Tip 5. Consider real estate investment, said Dr. Wu.
“It’s especially important to own your primary home right from the beginning. If you can afford it, it’s much better to do that rather than paying rent.”
Whether to invest more in real estate is a personal decision, according to Dr. Wu, who said he prefers stocks but pointed out the benefits of real estate investing.
“… there’s only a finite amount of land in the world. And real estate generally goes up over time. There are only a few times it hasn’t. I think the last time the real estate market really crashed was when I was a resident around 2008 …. With real estate you can have tax write offs; you can have leverage. For example, if you have $100,000 to invest, you can buy up to a $500,000 house (usually you have to put down 20% down). However, if you want to invest in stocks, you can only buy $100,000 worth of stocks.”
But there are added costs to consider when buying real estate, including property taxes, homeowner’s association fees, and maintenance, said Dr. Wu.
“And it’s more difficult to buy real estate—it usually takes time, effort and inspections to buy a property.”
“I think stocks in general beat real estate over time,” he said.
Tip 6. If you invest in stocks, determine whether to invest in mutual funds, ETFs, or individual stocks, said Dr. Wu.
“Mutual funds are really better for long-term investing. They have a lower expense ratio, meaning that if you hold that mutual fund, they’ll take out less from your principal over time compared to an ETF, for example.”
“Mutual funds can be further broken down into actively managed mutual funds or index funds. Actively managed funds have an active manager and a team that is actively researching which stocks to buy for the mutual fund. So those expense ratios tend to be higher compared to an index fund, which tends to follow indexes like the S&P 500, for example. Warren Buffett said this as well, [that] index funds usually beat actively managed funds over time. That’s because the fees are lower, so that in itself helps a lot.”
The pandemic might have helped actively managed funds in recent years to outdo index funds simply because the managed funds were better able to avoid certain sectors, like airline and mall stocks, during the shutdowns, according to Dr. Wu.
“But say you want to do more day trading or want to focus on a certain sector like biotech or retail or China, mutual funds aren’t that targeted, so EFTs or individual stocks might be better.”
Tip 7. Don’t panic and sell during market crashes and downswings, said Dr. Wu.
“It’s a volatile time right now. COVID happened a couple of years ago and then Russia invaded Ukraine. After both times, the stock markets crashed. But whenever stocks start crashing, that is not the time to sell. That is the time to hold because historically the stock market comes back quickly, and it might be a good buying time. For example, Microsoft, Apple, Alphabet (Google)—all these strong companies are not going to be hurt in the long-term, and those are the stocks to buy when there is panic selling.”
Disclosures: Dr. Wu reports no relevant conflicts of interest other than holding individual stocks such as Microsoft, Apple, and Alphabet.
