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  • Writer's picturePhysicians Financial Design

Good Riddance 2022

There certainly is something refreshing about the thought of a new year. A fresh start and another chance to re-evaluate where you’d like to be in the next 12 months. Maybe this is the time of year where you plan out your professional objectives and the direction you’d like your practice to be heading. Investors who saw their accounts get thrashed harder this year than any year since the infamous 2008 market collapse are probably looking for a fresh start as well. In fact, there have only been 3 years with a bigger loss in the S&P-500 since 1937 (1974, 2002, 2008)!


While numbers like these can be hard to swallow, I think it’s important to search for the silver lining. There are a few positive takeaways when you look at how this has played out in the past. The first is that every market correction has always given way to new market highs…eventually. Sometimes it takes longer to recover than other times, but when it comes to investments, it’s about the only thing we can say has happened 100% of the time! The other angle here is that in every year listed above (’74, ’02, and ’08), we saw huge returns the following year (31.6% in ’75, 26.4% in ’03, and 23.5% in ’09). Does that guarantee that 2023 will be a gangbuster of a year? Absolutely…NOT! There is nothing that is certain when you enter into the world of asset management, however, long term trends are important to recognize. With that said, being able to tactically avoid loss while being ready to pounce at opportunities is a great way to build wealth.


Another perspective when looking at the S&P-500’s historical performance is that, as mentioned, we just experienced the 4th time in the past 75 years where calendar year losses equated to more than 19%. Even though history suggests a major bounce back is in store, what can be said about the fact that 3 out of the those 4 years have happened in the last 21 years? To me, this is an argument that the markets are becoming more volatile and more susceptible to the proverbial “market bubbles” that can cause these phenomena. While foreboding to some, I tend to look at the upside of being able to sidestep some loss while markets correct and make way for new opportunities for gains. Being nimble is key - not something in which the average DIY investor traditionally excels. Consider this my shameless plug for professional money management using tactical strategies (something that we offer here at Physicians Financial Design as part of the execution of your Plan).


Potential Recession

Placing bets about where the markets are headed over the short term are not something I recommend. Like the woman in the U2 song, the markets also move in mysterious ways. However, regardless of the mystery and complexity, it’s important to know how things could play out and potentially affect your own situation. According to most analysts, we are currently barreling towards the most anticipated recession in the history of our economy. I think a lot of people will be shocked if we manage to avoid any sort of recession (although I doubt those talking heads will be willing to get back in front of a camera and admit they were wrong!) Most conversation revolves around how deep the recession will be and how much of the impending recession is already baked into the markets. But what’s a more important conversation for you is what this might mean for your personal economy.


The biggest fear for most workers is that a recession will lead to layoffs. Fortunately, as a physician, you are and will continue to be working in a high demand labor market. Our country has a physician shortage and there’s not much material out there for anybody who wants to argue otherwise. While areas of need may shift over time, you can rest assured that you will have work available to you. The other aspect that plays into this is that healthcare needs don’t fluctuate as much during recessionary times as other sectors of our economy. Someone might decide to shop at the discount store when times are tough, but if someone’s having a heart attack, they’re probably not going to let their current financial situation determine whether they go to the hospital or not. Where revenues could be affected might be elective procedures or non-essential medical costs that wouldn’t be covered by insurance. If poor economic conditions do tend to affect your RVUs or your practice’s revenue, then building these contingencies into your Plan are essential.


Stay the Course

When it comes to the Plan, it’s important to stick to it. Obviously, things will change, and tweaks should be made, but diverting from the Plan because of an emotional response to stress is a good way to ruin your long-term success. I tell clients all the time, “Short term emotions kill long term plans.” The Plan is more important than your portfolio. A well thought out financial plan should be able to overcome adversity and set you up for success regardless of what life throws at you. As my clients also hear me often say, “We have a plan for a reason and the plan is far more important than the returns in your accounts.” Even though we are proud of how our investment strategies have navigated these challenging times in the market, I always stress to my clients that we have far more important things to accomplish than rates of return. Take the example of a young physician whose student loan strategy would have cost almost $100k more than the strategy I outlined for them! Think about how big your investment account would need to be for a couple percentage points of return to make a $100k difference!


Another example is the clients with a $2.5M portfolio nearing retirement whose current tax strategy could cost them nearly $1M more than necessary in federal income taxes over the course of their retirement. Overcoming these types of challenges can be one of the most beneficial aspects of your financial future and a fiduciary financial planner who understands the career track of a physician can help you work through them. Having a Plan that encompasses all aspects of your financial wellness can keep you from missing out on these opportunities.


Final Points

Regardless of what 2023 brings our way, rest assured that there are people who will seize the opportunities that come their way. Make sure you are one of those people by getting yourself and your financial future on the right track. Don’t be like the patient who waits too long to get professional medical help and lets the health issue grow into something that could have been avoided.


Happy New Year and here’s to seizing your moment and starting your Plan!



Thanks for reading! For more articles geared toward young physicians and their money, click here or check out The Money Malpractice Podcast on any of the major platforms.


Until next time…KEEP SAVING LIVES AND KEEP SAVING MONEY!



Disclosures

• RichMark Private Wealth Management. LLC is registered as an investment adviser with the State of Michigan, and only transacts business in states where it is properly registered, or is excluded or exempted from such requirements.

• Content should not be viewed at personalized investment advice. Market events and other factors may affect the reliability of the potential outcomes. Simulated growth is purely hypothetical and does not represent actual performance.

• Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client's portfolio.

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