Lots of doctors I meet have no or little understanding of investment which is not surprising given your focus and time is spent in obtaining your qualifications, treating patients and keeping up with your education. I would encourage you to make it your business to learn about investments. The main aspects of determining your risk profile centre around the following:
- Your time horizon
- Your investment experience/knowledge
- Your job security
- Your comfort level with market volatility
1. Time Horizon
If you have a long time horizon which typically you do for retirement savings (assuming you start in either your 20’s 30’s or 40’s) you can choose riskier (and also higher returning) investments such as shares and property. The reason for this is that even though share and property markets experience losses from time to time they always recover and move higher over time. If you have shorter time horizons such as 1-3 years you need to opt for safer investments such as cash and bonds. These investments experience low volatility however also no (cash) and low growth (bonds).
2. Your investment experience/knowledge
It would be fair to say that if you have had experience in owning shares or managed funds for example that have suffered historical losses you are more likely to be comfortable owning these in the future. Also knowledge of investment markets can prepare you for losses or give you insight as to when you may sell or switch to cash.
3. Job security
You are pretty fortunate that you have excellent job security. This means that you can take more risk with your investments than people whose job security is not that great such as some senior management roles in listed companies.
4. Your comfort level with market volatility
Some people are naturally conservative and are risk adverse which means they should only be opting for low risk investments such as conservative, cash or bond funds. If you are more of a risk taker and prepared to accept volatility, on the premise that your longer term gains will be greater you need to be including a reasonable percentage of shares and property in your portfolios. As long as you stay invested when markets lose ground you will be rewarded as they always recover (even though it can be a fairly long wait at times).