The stock market is down. Then up. Then down. And up again. But overall, it is mainly down. Most economic markers trend the same way. And, yes, no one has a crystal ball. But there is certainly general concern over the even less predictable nature of the recent market. Leading many doctors to ask the question, “Is now a bad time to retire?”

The current state of the market

Since I started investing, which to be fair is not that long ago, these are the wildest back and forth swings that I have seen in the market by far. There were long periods of time when you wouldn’t see a dip or jump of 2% or more. And now in the past couple of weeks that is becoming a common occurrence. There was even a jump of greater than 10% in the S&P 500 recently that didn’t even bring 6 month returns into the green! That means that bigger cumulative drops still prevailed over that time period.

The reason for the current stock market volatility is not surprising.

It’s political. Whichever side of the aisle you fall in, we can agree that is at the root cause. The market gets jumpy when things are not stable. And vacillating economic and tariff policy as well as global political events are making things feel pretty unstable.

The main culprit however does appear to be tariffs. When Trump imposes larger tariffs, the market goes down. When there is hope that some tariffs will be lifted or that exceptions for items like smartphones will be made, the market goes up some. The problem is that a cohesive policy has not been established. It seems to change on a whim. And so does the market as a result. This is the short term effect.

The long term effect? There is disagreement among politicians. But among economists, the long term impact seems relatively clear. Based on data from The Yale Budget Lab, tariffs will decrease economic output, increase prices, and impact lower income families more. So, even without a functioning crystal ball, there is reason to be bearish on the market. And to wonder if now is a truly bad time to retire.

So, does this mean that it is a bad time for doctors to retire?

Well, not necessarily.

But, it’s a perfectly reasonable thing to wonder. Because doctors save and invest their money in their nest egg with the goal of being able to retire when they want or need to. And this market volatility can threaten that. Imagine if your nest egg decreased in value by 10% in the past few months. Could it still support you to retire?

And what will the market do in the coming months? Will it get worse? The uncertainty is not fun, especially for doctors who have sacrificed and worked hard to get to this point.

Unfortunately, no one, including the experts, has a functioning crystal ball. And it is precisely for that reason that I, now anyone else, can really give you an answer to this question.

But it also points us to the question we really should be asking. Instead of, “Is now a bad time for doctors to retire?”, we need ask “How can I financially prepare myself to retire when I want, even if the market is volatile?”

And the good news is that there is an answer to that question.

How can doctors successfully manage this market volatility?

The key thing to understand here is that there is never truly a bad time for doctors to retire. If you craft your financial plan the right way, you can create an all-weather strategy so that you determine when you can retire, not any external factors no matter how volatile they be. Because we cannot control that. But we can control how we prepare ourselves financially.

1. Match your risk tolerance to your bond allocation

Investing can seem really complicated. But it’s not. And I hope that this helps to demystify things.

When you really break things down, your main investing strategy and risk tolerance comes down to a simple equation – what is your portfolio’s split between stocks and bonds. Yes, there are tons of different types of stocks and bonds that you can invest in – some better and some worse. But overall, I can tell you what your risk tolerance is by asking just one question – what percentage of bonds do you invest in?

The reason is that bonds form the ballast of your investment boat 

I’m not a big boat guy but I think this analogy works. Bonds are more conservative, less risky, but more stable investments compared to stocks. (And if you need a refresher on what exactly stocks and bonds are -because I needed one not that long ago- this post goes into detail.) The bond market also do not correlate directly with the stock market. 

Thus, while bonds may not earn as much as stocks in a bull market, they really can help keep you afloat in a bear market or during a volatile stock market. And if by keeping you afloat in a bear or volatile market, they help keep you from selling stocks at a loss or losing sleep, they are well, well worth it. Especially for those earlier in their investing career.

For those later in their investing career, bonds play a more important role as you get closer to retirement when your investing goal is to maintain, not necessarily grow, your nest egg. Near retirement, your risk tolerance should be very low! You don’t want to go from retirement ready to stuck working just because the stock market had a bad day in a volatile time period.

This is where bonds come into play. Bonds are more conservative investments. Less risk, less growth potential. But also less potential for loss. Thus, as you near retirement, bonds help you maintain your nest egg. Even when the stock market is going crazy like this, if you are near retirement with an appropriate allocation of bonds, you aren’t worried about now being a bad time to retire. It’s just fine!

Your goal is to thread the needle in finding just the right amount of bonds to match your investing risk tolerance

And the best time to figure out your risk tolerance is not during a bear market after you decided to invest in 100% stocks during the preceding bull market. And now you are freaking out, can’t sleep, and are considering selling stocks to catch a falling knife (but really all you’ll do is sell at a loss and miss any subsequent upswing in the market…)

So, during the good times, think about how you would feel and what you would want during the bad times. Because they will come. 

And I don’t say that to be a Debbie Downer. It’s just reality. And in fact, a market downturn – when stocks are cheap – is actually a good time to buy stocks. So I want you to be in a good position to do that and take advantage. I don’t want you to be worried and scared and miss an opportunity.

So, to figure out or confirm your risk tolerance and what your bond allocation should be, use this simple guide!

2. Keep things simple

This is a theme in my investing strategy. But simple is best.

I always use this analogy so I’ll use it again here. It’s like medicine. We all know medical mentors who kept things simple. They could break down complex topics, disease processes, or procedures in a way that you could understand. And then there are medical mentors who could take the same topic and make it seem so complicated that you began to question if you ever understood it in the first place. 

I had both kinds of mentors. And the ones who I think actually understood things the best was always the simplifiers. And the same goes with investing!

It’s always funny to me. Because during a bull market, all of these new, fancy, complicated investment strategies and paradigms will comes out of the woodwork

Things like SPACs, for example.

And it becomes this thing where everyone gets FOMO and feels like they need to invest in them. Even though they don’t understand how they actually work. And honestly, often times people feel they need to invest in them because they don’t understand how they work. As if complexity means they must be good investments. 

But then the inevitable volatility comes. And all of these fancy and complex investment fads fade away and disappear.

Why?

Because they were no good! For an investment to be worthwhile, it needs to hold water in both a bear and a bull market. Anything can look good in a bull market. Heck, even NFTs – which make no sense! – worked as a speculative investment for a bit. But that is not the test an investment must pass.

The problem is that a similar phenomenon happens in a volatile or bear market

In a volatile market, traditional stock investments look really risky. Because they are if you are investing in the short term or trying to time the market (Hint: this is NOT how you should be investing in the stock market because it just does not work.)

So, because the stock market looks risky, all these alternative investments pop up to be touted for their benefits compared to the dangerous, volatile market. I already have seen tons of emails aimed at doctors about shaky investments in real estate, commodities, and other investments as alternatives to the market. I’m not saying that these can’t fit into your investment plan. But you should not abandon your present and well thought out investment plan for an alternative just because the market is volatile.

The key here is to remember that you are investing in the stock market for the long term. Not for today, tomorrow, or next year even. So you need to invest in something that holds true over the long term. And that is a solid investing plan with low cost broadly diversified index funds of stocks and bonds. 

And if you are not investing for the long term because you plan to retire in the short term? Go back to point #1 above to that you make sure now is not a bad time for you to retire.

3. Ignore the noise

This is so important and dovetails nicely on the point above.

The #1 reason that investors end up in a bad position during market volatility or near retirement is because they were convinced to do something foolish by someone else. That someone else could be the news, a podcast, a financial advisor, a family member, or a friend.

Because when the market is good, the noise gets loud. Remember, everything (even NFTs for crying out loud!) can do well in a crazy up-market. So it can be hard to differentiate good from bad investments if you listen to the wrong noise. And then when the market is up, other investments can look much more safe, even if they are not good investments in the long term.

And let’s be honest, it’s not sexy to talk about low cost index funds or eliminating debt before retirement so your cash flow increase. So that tends to get drowned out by people who are shouting louder, more seemingly exciting things. But remember, investing is not sexy. Or all that exciting on a short term scale. But speculating and gambling are very exiting on a short term scale. And market volatility, which inherently includes short term swings, can make this feel enticing. But don’t confuse them. You don’t want to gamble or speculate with your financial freedom.

And it all culminates by having a written financial plan

This is really what it is all about.

You want an investment strategy that matches your risk tolerance, that keeps it simple, and that ignores the noise. That makes sense in a bull market. And in a bear market. And everything in between.

So, you need to sit down, with alone or with your partner if you have one. And if you have partner, you need to include them – tips here for navigating those waters. And you want to formulate a written financial plan that you can refer back to when the noise gets loud. To remind yourself that all you need to do to reach financial freedom is to follow your plan. That gives you a peace of mind that is unmatched. The peace of mind that you can retire when you want, regardless of what is going on in the stock market. And without worrying if now is a bad time to retire. Creating such a plan with my wife, Selenid, even went so far to improve my financial well-being that my burnout improved as a result. The same can be true for you!

No matter your situation, building physician wealth is well within your grasp and you can prepare to retire on your own terms without worrying if it is a bad time!

More information about some of the concepts discussed within this post are found below:

• How to calculate how much you need for retirement
• Why index fund investing is the way to go
• How to set your asset allocation and rebalance
• How to create your own written financial plan
• An introduction to real estate investing
• How to keep score of your wealth with net worth

What do you think? What strategies do you use to build wealth as a physician? How did you decide which to use? Did I miss any important points? Let me know in the comments below!