Top 5 Investing Mistakes Doctors Make and How to Avoid Them

As physicians, we are trained to be meticulous, calculated, and cautious, especially when it comes to making high-stakes decisions. After all, a mistake in the operating room or a misdiagnosis can have serious consequences. But what happens when we bring that same mindset, or worse, when we fail to apply it to investing?

Too often, we feel like we’re behind when it comes to investing. No one taught us this in medical school. While the rest of your friends were out there in the real world buying homes, learning how to invest, and starting to build their portfolio, you were running around the hospital with checklists in your white coats or holding retractors in hours-long cases. (I never want to do this again!)

Like many of you, I started investing without truly understanding what I was doing. I made mistakes that cost me time, money, and opportunities. Over the years, through both my own experiences and those of the thousands of physicians I have worked with, I have identified some of the most common investing pitfalls doctors fall into.

The good news is that these mistakes are avoidable. And when you know what to watch out for, you can begin to invest with clarity and confidence.

Here are the top five investing mistakes doctors make, along with what you can do to avoid them.

1. Investing Without a Clear Why or Strategy

One of the biggest and most foundational mistakes physicians make is investing without understanding why they are doing it in the first place. Many of us get into investing because we hear it is the path to passive income, or because we are tired of trading time for money. But without a clear vision for what success looks like, we end up choosing investments that are not aligned with our actual goals.

For example, you might hear that owning a short-term rental is a great way to generate cash flow, so you buy one. But if your ultimate goal is to spend more time with your kids or step away from clinical work, the day-to-day management of that rental might just create another job. 

A physician I know bought a short-term rental and tried to self-manage it, only to find it far more hands-on than expected. He spent hours each week dealing with bookings, guest issues, and turnovers. You may want to consider hiring a professional management company to help you. Yes, the management fees are higher, but the time and peace of mind you regain might be well worth it.

Before jumping into any investment, ask yourself:

• What do I want my life to look like?
• What is the purpose of building this income stream?
• How much control or time commitment am I comfortable with?

When you are clear about your “why,” it becomes much easier to say yes to the right opportunities and no to the ones that do not serve you.

2. Letting Tax Benefits Drive Investment Decisions

Let’s be real. No one likes paying more taxes than they have to. As high-income professionals, we often find ourselves looking for ways to reduce our taxable income. In fact, it sometimes feels like we get the short end of the stick when it comes to taxes: high tax rates, very little to no ways to shelter these taxes.

However, we’ve learned through our communities that real estate offers some great tax benefits like depreciation, cost segregation, and the 1031 exchange. These tools are incredibly powerful when used well. But problems arise when tax savings become the main reason for doing a deal.

I have seen this happen time and time again, especially near the end of the year. Doctors rush to invest just to offset some taxes. Unfortunately, they may overlook the fundamentals of the deal, the quality of the market, or the track record of the operator.

Tax benefits are great, but they should be the cherry on top, not the reason you are buying the cake.

A simple gut check: Would I still want to be in this investment if there were no tax benefits involved? If the answer is no, it is probably not the right fit.

3. Failing to Diversify or Understand Risk

Another common mistake I see is overconcentration. Doctors often find one asset class they like, whether that is real estate, stocks, crypto, or even a friend’s startup, and go all in. On top of that, we sometimes overlook the true level of risk in what we are investing in.

For example, syndications are popular in our community, but not everyone understands that these are illiquid investments. You are trusting someone else to manage your money for several years, and you cannot pull it out if your situation changes. That is not inherently bad, it just means you need to balance it with more liquid assets elsewhere.

Diversification is not just about owning a mix of stocks and real estate. It also means spreading out your investments across different markets, timeframes, operators, and risk profiles.

Ask yourself:

• What happens if this one deal does not go as planned?
• Do I have other assets that can provide stability or liquidity?
• Am I investing based on excitement or with a clear plan?

Understanding your risk tolerance and balancing your portfolio can protect you from unnecessary volatility.

4. Not Vetting Operators or Sponsors Thoroughly

In private investments like real estate syndications, funds, or private equity, the people behind the deal matter just as much, if not more, than the numbers. Yet I have seen many physicians make large investments based on a pitch deck or a webinar without doing the proper due diligence on the operators.

Here is the truth. A great operator can manage challenges, pivot when needed, and communicate clearly with investors. A poor operator, on the other hand, can sink a deal even in a strong market.

Before handing over your capital, take time to ask:

• What is their track record, and do they have experience in this asset class?
• How did they handle their worst deal or a market downturn?
• Are they transparent with updates, reporting, and communication?
• Who else do you know that has already invested with them?

You are entering into a relationship with this team for several years. Trust, competence, and alignment matter more than projected returns on a slide deck.

5. Analysis Paralysis and Inaction

This last mistake might be the most common of all: analysis paralysis. As physicians, we are trained to gather data, avoid uncertainty, and be sure before we act. In medicine, that is often necessary. In investing, it can be paralyzing.

I have talked to many doctors who have spent years reading books, listening to podcasts, and researching markets, yet still have not made their first investment. They want more information, more assurance, or the perfect deal. Meanwhile, they are missing out on time in the market, compounding growth, and valuable learning.

Perfection is the enemy of progress. There is no such thing as a perfect investment. And most of your learning will come from doing.

So what can you do?

• Start small. Your first investment does not need to be a home run.
• Set a goal to invest by setting a deadline will force you to learn and get to that place of confidence.

Surround yourself with a trusted community or mentor who can help you take the next step with confidence.

Final Thoughts

Investing does not need to be overwhelming. But like anything worth doing, it requires intention, self-awareness, and a willingness to learn. The truth is, most of the mistakes doctors make when investing come from a lack of clarity, not a lack of intelligence.

If you have made one of these mistakes, you are not alone. The good news is, you can course-correct. And if you are just getting started, now you have a roadmap of what to avoid.

To make this even easier, I created a free resource just for you:

🎯 The Physician’s Investing Mistake Checklist: 7 Costly Errors to Avoid

This free guide walks you through the five mistakes we covered in this post, plus two bonus mistakes that most doctors miss—and how to fix them. It’s quick to read, packed with actionable tips, and will help you assess your investing habits right now.

👉 Click here to download the checklist

Your best life does not have to wait until retirement. You can start building it now, one smart decision at a time.
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Click Here to Download “The Physician’s Investing Mistake Checklist: 7 Costly Errors to Avoid“

Peter Kim, MD is the founder of Passive Income MD, the creator of Passive Real Estate Academy, and offers weekly education through his Monday podcast, the Passive Income MD Podcast. Join our community at the Passive Income Doc Facebook Group.

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