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Numbers That Can Make You Money


Family-controlled companies report better returns than the S&P 500 average; if you missed the 10 best trading days of the year it could cost you 50% of your returns; and why you should rethink leasing two luxury cars in retirement.

Physicians Money Digest is a digest of many sources boiled down to what you need to know to smartly manage your financial affairs in a short, easily digested form. Our crack team of boilers and compilers has outdone themselves this week in bringing up some useful and important numbers related to your financial health. Use them to your profit with our complements. To wit:

— Stock gains often come in short bursts. That's why it pays to remain invested over time. In one 10-year period, research showed that being invested for all 262 trading days yielded an annual return 50% higher than one might have had if you had missed only the 10 best trading days. If you missed the best 20 days, the difference was 100% in your return. The problem is that no one knows in advance which days those are going to be.

— A Harris Poll of 2,100 patients found that only 13% had tried to haggle their medical bill down. Yet of those who tried, 54% succeeded. Americans are not acculturated to haggling, and fewer doctors are self-employed to do something about an adjustment, but rising costs will certainly force some increased patient efforts. Be ready.

— As many doctors have found, thanks to the recent recession, delaying your retirement by even one year can increase your nest egg by 10%. This happens because of compounding, one more year of contribution and one less year of withdrawal. And so on if you can, or want, to delay retirement further.

— As more and more doctors are selling their practices to large organizations, the question of how to value goodwill, if any, comes up. There are many formulas but one reasonable one is useful if you are making more money than your average colleague in the same specialty. Take the difference in excess earnings and multiply by three or four and go from there. Hey, it's worth a try.

— A recent study of 132 companies where the founding family controls more than 10% of the shares showed that their average annual return over the prior 20 years was 14%. That compares with the S&P average during the same period of 11%. There are some mutual funds that follow these family-controlled companies, so ask your advisor about them if your interest is piqued. I guess if it is your store, you watch more carefully than a hired hand. And along the way, remember that advice when you are picking that advisor.

— Before 1990, only about 1% of doctors changed jobs annually. Recently, it has soared to over 10%. A Kaiser of Colorado study done a decade ago showed that the cost of replacing a primary care doctor even then was over $250,000. But why so much, you ask? You have the direct costs of recruitment and you have potentially lost revenues.

But the elephant in the room is the sharp increase in ER usage until the former panel of patients settles in with a new primary. It's a cautionary tale for those hiring and firing and one that needs to be appreciated by the doctors negotiating their value to a large organization, particularly one with ER exposure, when deciding whether to stay or to find a new gig.

— When you retire, if you and your spouse contemplate leasing two luxury cars, consider this. If the leases total roughly $1,000 per month, at current low interest rates of, say, 2%, it will take about $600,000, before taxes, of your nest egg just to support the cars. Or that is $300,000 of your equity committed to your cars if you are drawing it down at the typical 4% rate. And that doesn't include higher maintenance and insurance costs. Yet, those new shiny models do look attractive…

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Victor J. Dzau, MD, gives expert advice
Victor J. Dzau, MD, gives expert advice