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Why Doctors Make Bad Investment Decisions (and What You Can Do About It)


If we’re serious about long-term financial planning we must first understand the emotional drivers—overconfidence, unconscious bias, even jealousy and envy—that may be getting in our way. By Cobin Soelberg, MD, JD, FASA

When many physicians think about saving for retirement, they focus on picking stocks, beating the market, and achieving outsize returns. It doesn’t take too much effort to find several recent examples, including GameStop or Bitcoin. How many people did you hear talking about Gamestop this past year in the OR?

Constantly chasing alpha, the ability to have an edge in the market, sounds nice, but how does this strategy work out in the long term? Let me cut to the chase— it doesn’t end well for doesn’t end well for investors. Why is that? And what can we do to achieve our long-term financial goals?


We are the problem… and the solution

I’ll start with some tough love. The biggest impediment to our long-term financial success is… ourselves! We think we are better investors than we are. We claim we want long-term success, yet our actions focus on short-term gains.

One of the most striking features of investor behavior and poor outcomes is how consistent the underperformance is. Dalbar Consultancy performs an annual study of investing behavior and market indices. Not surprisingly, at least to those who study this field, investors who try to beat the market perform significantly worse, resulting in substantial decreases in savings. The underperformance is 2-3% per year, leading to hundreds of thousands less in retirement savings over 20 years!

I can quickly think of many stories illustrating this point. Several years ago, I was in the OR discussing personal finance with a resident. After I sent the resident to lunch, the surgical attending looked over the drape and confidently told me, “I’m glad you are teaching your residents about money. During the 2008 crash, I got out of the market before it dropped further.” “Interesting,” I said, “And when did you know to get back in?” “Oh, I never did. We’ve stayed in cash since then,” the surgeon proudly declared.

I didn’t have the heart to tell her the market was up over 250% since that time. How many of us saw colleagues or friends panic selling in March 2020 during the beginning of the COVID-19 pandemic? What is more memorable are the people bragging about getting into Tesla when it was less than $100/share? But how many people do you think share when they get it wrong and lose big?


How to get out of our own way?

What are some common behaviors that lead us down this path, especially physicians? Perhaps the biggest driver of our investing behavior is overconfidence, followed closely by envy, jealousy, and anchoring biases.

We all know how much time, hard work, and intelligence it takes to succeed in medical school and residency training. However, our intelligence in science and medicine does not translate to investing. Whether you work with an advisor or not, creating a financial plan you can stick with whatever the short-term oscillations in the stock or real estate market are essential to long-term success.

Another common behavioral error is attributing our success to our own skill and hard work, whereas we blame our challenges and failures on bad luck or poor market conditions. So when the stock market goes up and our portfolio gains, we think we are geniuses! This attribution bias leads to overconfidence in our decision-making, where we unknowingly take on even more risk.

Instead of evaluating the data unemotionally, we tie our self-respect to the outcome. For physicians, much of our professional reputation is linked to our knowledge, even if we aren’t experts in those fields, such as investing.

Furthermore, we overestimate the amount of control we have of situations— and while I don’t have hard evidence, I believe this is especially true of those in anesthesia. In the OR, we control the patient’s ventilation, vital signs, and depth of anesthesia. That sense of control becomes problematic when extended to other facets of our life. We assume the fate that befalls others won’t happen to us, whether financial, health-related, career-related, and so on.

There are a few other behaviors to keep in mind that impact everyone but routinely show up for physicians. Envy and jealousy are difficult emotions to admit to feeling, but they drive much of our financial behavior. I find envy is a corollary to comparison. Even if we are doing well financially and making progress on our plan, seeing others do “better,” especially if they are close to us, can cause us to suffer or change our plans.

“There is nothing so disturbing to one’s well-being as to see a friend get rich,” Charles P. Kindleberger. As an advisor, one of the most common questions I am asked is, “Am I saving enough? Am I doing enough? I see my friends investing in real estate or buying individual stocks, and I wonder what else I could be doing…”

Without knowing our friend's financial goals and their path to achieving them, we don’t need to get jealous of their success or assume we are not making the best financial decisions. So long as you have a plan and are working to achieve it, seeing someone else do better (or worse— we tend not to hear as much about these stories) should not bother us.


Consistency is the key

A few key takeaways. Comparison is one of the deadliest behaviors in finance. Remember, we are all running our own race. We have different dreams and aspirations. The question is not, “How am I doing compared to Dr. Smith?” but rather, “How am I doing compared to yesterday, last week, or last year?”

Saving for retirement is not meant to be exciting. As we saw above, constantly trading leads to worse outcomes and less money at retirement. A key to financial success is consistency. Having a savings plan and sticking to it. Paying yourself first, saving each paycheck, or paying down that student loan debt. Does saving $1,000 one time in your 401(k) make you rich? Of course not, but steady saving over the years will.

I’ve come to believe small, steady action is the key to success in many worthwhile realms— finances, of course, but health, relationships, learning a new skill or starting a new business. As physicians, we can achieve financial abundance and security by crafting a solid financial plan and staying out of our own way!

Cobin Soelberg, MD, JD, FASA, is a board-certified anesthesiologist and partner at Bend Anesthesiology Group. He is also owner of Greeley Wealth Management, a financial planning firm geared toward healthcare professionals.

The ASA Committee on Young Physicians is pleased to present this monthly article series on personal finance. These articles are not written by hedge fund managers or real estate tycoons but by practicing physicians. Some have business degrees and some do not – but every contributor is an anesthesiologist who has some guidance to offer the rising generation of attending physicians. It is not the intention of the committee to offer definitive financial advice, but rather some pearls of wisdom to consider while developing a personal fiscal plan. 


ASA Community Blog is published as a benefit for ASA members. The views expressed on this blog are those of the individual contributing writers only and do not necessarily represent the opinions of ASA.