We love encouraging financial literacy for physicians, and truly feel most members are capable of DIY investing. The fundamentals of physician finance are pretty straightforward - they’re not med school hard. That said, we recognize that actively managing an investment portfolio is not for everyone, even for those who enjoy personal finance.
With busy lives, many physicians are looking for options for “lazy” investing that balance the opportunity cost of time associated with investing versus the rewards gained in accumulating wealth. Others may feel comfortable with core financial concepts, but just want another set of eyes to confirm their choices and make suggestions, or want to have someone to run things by from time to time. These are all completely valid approaches.
The most important thing is not to let money sit around not invested and actually losing spending power to inflation, instead of growing your net worth over time. Depending on how hands off you want to be, there are several options available for so called “lazy investing,” including target date funds, the three-fund portfolio, robo-advisors, and hiring a financial advisor. We cover the pros and cons of each below to help you assess the best fit for your current situation.
Disclaimers/Disclosures: This page contains information about our sponsors, as well as affiliate links, which support the group at no cost to you. These should be viewed as introductions rather than formal recommendations. We do not provide individualized advice and are not formal financial, legal, or otherwise licensed professionals. You should consult these parties as appropriate and do your own due diligence before making decisions based on this page.
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Introduction to Lazy Investing Options
If you are a physician who’s been keeping all of their money in cash or in a safe short term investment such as an HYSA, it’s important to note that these are not good long term options for what to do with your hard earned money. Particularly now, with inflation being as high as it is, if you had $100,000 in cash last year in one of those options, the spending power of that money has gone down, instead of growing your net worth and putting you in a position of financial independence. Your goal should be to put your money to work for you in the background, steadily growing your net worth and eventually getting to a point where invested assets can allow you to work as much or as little as you choose. To repeat - sitting in cash long term is the worst thing that you can do for your financial future and your ability to live life in medicine on your own terms.
While each of the following options requires some initial investment of time and research, they are much less involved than picking individual stocks, day trading, options trading, or any other fancy techniques you may have run across on TikTok or YouTube as an investment option.
The great news for “lazy” investors is that successful investing is often pretty boring, hands off, and based on historical data. Though “boring,” these are tried and true methods have proven to result in portfolio growth over time. Unlike the more complicated options, you can learn about each of these options fairly quickly (hours, not years).
As a note, even if you pick a “lazy” investing model, you should also check in on your portfolio at least every six months to a year to make sure you’re still on track for your financial independence goals and that you don’t need to change your asset allocation or adjust future contributions (don’t get scared off by these words, we’ll explain below - it’s easy!). If you haven’t already, consider adding it to part of your year-end financial checklist.
Target Date Funds
Target date funds allow you to auto assign an investment strategy based on the date that you intend to retire (generally in five year increments). These may also be called life cycle funds. Depending on the years to retirement, it will automatically pick a variety of diversified investments and periodically adjust your asset allocations, which is what it chose to invest in and in what distribution of aggressive versus conservative. If you’re far from retirement and have more time to recover from losses if things go down, it will weight your portfolio towards more aggressive investments targeting growth, whereas as you get closer to that set retirement date, the fund will adjust what you are investing in to decrease the risk and put a higher percentage into conservative assets.
While we think this is a reasonable approach and one that’s easy to check off when you first sign up for a retirement account at work and haven’t yet learned how to invest, we believe many physicians likely leave some money on the table over time by going this route. As most physicians are fortunate to be in a position where their savings may exceed what they have in their retirement accounts, often times significantly, most physicians can afford to take on some more risk in their accounts than somebody who really needs to begin withdrawing money from the account once they stop retire. Going along with the concept of risk-adjusted returns, more risk, more rewards.
One approach to easily adjust for this if you have a higher risk threshold, you may pick a target retirement fund set for a date after your planned actual retirement to help account for your risk tolerance. For example, if you plan to retire in 2035 but have a high risk tolerance and know you’ll have enough in retirement to weather market volatility, you could select a target date fund for 2045 instead to keep the asset allocation more aggressive for a longer period of time.
An important thing to note is that these are very tax inefficient as they are constantly shifting allocations and buying and selling, so you ideally don’t want to use this strategy for your taxable accounts.
Target date funds can be either passively managed, such as a target date index fund that follows an index of the stock market, or actively managed. There are different fees associated with each type, with actively managed funds typically costing more but with the hope of providing higher returns than their passively managed counterpart. Additionally since the target date fund is made up of individual funds (“fund of funds”), each fund within the target fund may have fees, and therefore fees can add up quickly.
When picking a target fund, depending on the platform you’re using, there may be different options even with a particular target retirement date, that have different proportions of equity and fixed income, as well as different distributions of US based versus international equities in the equity and fixed income portions.
Again, a target date fund is one of the simplest ways to invest for the true lazy investor who wants to save for retirement but doesn’t know where to start.
Advantages of Target Date Funds
Offers an entry point for early investors without much knowledge of the stock market
Prevents analysis paralysis and over complicating investing
Provides a simple way to save for retirement for the true “lazy” investor
Allows for asset allocation to spread risk management
Disadvantages of Target Date Funds
Still has upfront research of which target date fund to use
No flexibility or personalization, apart from a few options for risk tolerance
More expensive than buying the same internal funds yourself
Does not provide optimal tax strategy or planning while saving for or during retirement
Warning: While these are a good easy option for your non-taxable accounts like your retirement accounts, these are much less optimal for your taxable accounts as the shifting allocations can trigger taxes as things are bought and sold during the asset allocation adjustment process
Resources for the Target Date Fund Investor
As you get started as a target date fund investor, we recommend reading up on investing basics, as the goal would be to eventually shift your strategy into one you can personalize more, is more tax efficient, and has less fees. Visit our recommended reading page for investing books we like.
The Three-Fund Portfolio
The three-fund portfolio was inspired by Jack Bogle’s investing strategy and is very popular with his Boglehead followers (and Physician Side Gigs followers!). At its core, the three-fund portfolio is a simple, proven investing method with a better track record than timing the market or building a portfolio of single stocks.
The three-fund portfolio takes the idea of lazy investing from a target date fund and adds flexibility and customization by focusing on three types of funds:
a domestic total market fund
an international total market fund
a bond total market fund
The allocation for how you distribute your portfolio across the three funds depends on your financial situation and goals, as well as your risk tolerance level. Young investors or physicians with a lot of real estate investments producing alternative income may opt for a 80/20 aggressive three-fund portfolio such as 65% domestic market, 15% international market, and 20% bonds. A doctor looking for a more balanced, conservative portfolio might consider an even split between all three types.
The three-fund portfolio requires more upfront research into the different funds than a single target date fund. It also requires more attention to your asset allocation and rebalancing your portfolio over time as the three different funds grow at different rates. For this extra work, however, you can save on management fees built into target date funds, especially if you focus on passively managed index funds for your three-fund portfolio.
Four-fund portfolios become more complex but offer further customization with the addition of options such as a REIT fund for passive real estate investing or an international bond fund.
Advantages of the Three-Fund Portfolio
Built on a tried and true method of investing to maximize growth over time
Typically provides cheaper alternatives to target date fund investing
Close to a set it and forget it method with low management requirements
Provides diversification to weather market volatility
Provides flexibility and customization in allocation
Disadvantages of the Three-Fund Portfolio
Requires a little bit of research to understand which funds to select
Requires understanding which asset allocation fits your situation and goals best
Needs to be monitored and rebalanced occasionally (ideally at least 2x a year)
Will follow market trends, so it won’t beat the market
Resources for the Three-Fund Portfolio
We’ve covered this strategy more in depth on our three-fund portfolio page, including sample asset allocation options. If you want to dive even deeper, check out The Bogleheads' Guide to the Three-Fund Portfolio: How a Simple Portfolio of Three Total Market Index Funds Outperforms Most Investors with Less Risk.
Robo-Advisors
As AI and machine learning grow, robo-advisors (or digital advisors) have become increasingly popular as a middle ground between the DIY approach and hiring a financial advisor. Robo-advisors are built on algorithms trained by companies like our partner Wealthfront to help optimize potential returns on your investments.
Like target date funds, they offer a way to help early investors get started. Many robo-advisor companies offer low account minimums, which can be a great fit for graduating residents and early attendings who are just starting out may not need the additional services a financial advisor offers as their complexity is minimal.
Some robo-advisors offer options for interactions with human assistance, but depending on the technology, flexibility and customization with robo-advisor investing may be minimal. Their software typically allows you to get some financial goals to guide your portfolio, which offers some customization. The more complicated your financial situation becomes and the more you want to maximize your investing strategy for estate and tax planning, the more constrained you’re likely to feel with a robo-advisor.
Robo-advisors can help with the financial side of investing, but don’t assist with the emotional or personal sides of money. If market volatility may cause you to want to sell and hold cash instead, a robo-advisor won’t talk you out of this decision, which can put a large dent in your retirement planning.
Advantages of Robo-Advisors
Lower management fees than human advisors
Have low account minimums to help early investors get started
Programmed to create the highest returns for the smallest risk
Allows for asset allocation and rebalancing with less effort, and can have features to minimize the tax burden seen with target date funds in non-retirement accounts
Disadvantages of Robo-Advisors
Charge monthly fees or a percentage of your investments, which over time decrease your returns relative to the three fund portfolio
Cannot take a holistic view to help integrate your estate planning, taxes, etc.
No human point of contact if you have specific questions
Don’t offer all investment asset types
Learn more about using a robo-advisor to invest.
Resources for Robo-Advisors
We have partnered with Wealthfront to offer a robo-advisor option for our members. They have a quick and easy setup process, so you can start investing in just a few minutes.
If you want to dig in a little more as you build your portfolio, visit the personal finance tab on our recommended reading page for books on investing.
Financial Advisors
Hiring a financial advisor offers the most flexibility and customization of our lazy investing options, though they can be the most expensive option when it comes to the upfront and ongoing costs. In return for this cost, however, a good financial advisor will be able to leverage their years of experience and experience with other clients to help you navigate your options and take some stress off of your plate .
Financial advisors are a great option for lazy investors who want a white glove experience tailoring their investing plan for their entire financial situation. A good financial advisor can help you strategize your investing among your tax-advantaged retirement accounts, as well as other options. They can help walk you through not only optimizing taxes as you save for retirement, but how to minimize your tax bill as you withdraw your funds in retirement. Many can work with your accountant and/or attorney to coordinate decisions or strategies that are best for you based on respective considerations.
Unlike robo-advisors, they can also help you handle the emotional side of investing. If the market takes a 20% dip like we’ve seen in previous years, a financial advisor can coach you through your best options, including holding your investments until the market rebounds so you don’t sell low and have to buy high later.
It’s important to note that not all financial advisors are equal. We’ve covered previously what physicians should look for when choosing a financial advisor, including what things should trigger red flags. One thing we recommend is using a fee-only advisor. This can help protect you from a financial advisor who may be incentivized to sell you a product that isn’t the best fit for you but earns them a hefty commission.
Advantages of Financial Advisors
Can help you stay disciplined and on target with your financial plan
Able to provide a holistic approach for your specific situation and goals to optimize tax and estate planning, etc.
Educates you on investing opportunities and options
Handles asset allocation and rebalancing for you
Disadvantages of Financial Advisors
Higher cost than the other lazy investing options
May have few or no qualifications, so requires research up front
Is a personal relationship, so may take time to find someone who is a good fit for you
Requires the most amount of trust since it’s the least hands on
Resources for Financial Advisors
Visit our database of financial advisors for physicians to view fee-only advisors who help physicians with their investing and financial planning. Your financial advisor will be someone you work with closely, so take the time to interview and make sure they are someone you can trust. Each partner includes what type of client they are likely a good fit for to help you narrow down your selection process. Our database also provides insight on working with financial advisors and what to look for.
Conclusion
There is no single right or wrong way among the lazy investing options covered above. The only wrong option is to never start investing. Assess your needs and limitations, especially your time, and make the best decision for you. Choosing one option now doesn’t mean you have to use that strategy forever, though make the decision with intention, as there can be tax implications of moving a large taxable brokerage account later on.
Still not sure what option is the right one for you? Reach out to the hive mind in our physician Facebook groups to see what others in similar situations have done.