Introduction to the Stock Market for Medical Students & Doctors
Updated: Jun 18, 2021
My father is an economist. Intuitively, he was the first person to go to when I sought advice in stock trading. However, he left me with one advice: “If the knowledge in finance and economy was proportionate to the success in stock trading, all the professors in these fields would have been billionaires already.”
This phrase denotes the volatility and the multivariate nature of the stock market. This is bad because it gives us, amateurs from the healthcare profession, the fear of being a trader. This is also good because you don’t need to be an investment banker to succeed in your individual portfolios.
Being an investor and looking at the stock market is a bit like formulating your differential diagnosis and daily practices of your medical life. You need to be aware of the company, industry, society, policies, and the global trend. Here are few tips for those in their early medical professions:
STRATEGIC APPROACH
Successful stock trading is as simple as buying in the “dips” and selling at the “highs,” AND buying a stock that is undervalued in hopes of its stock price soon reflecting its true business potential. Before anything, it is pivotal to identify your financial situation and determine the time period to grow your investments. As a medical student my aim for stock-trading is not a jackpot but rather a “side-hustle” to get a greater return on my equity compared to what the bank provides. This mentality is important as I believe losing money is definitely worse than making less profit. In other words, calculated risks are safe to take; however, I strongly recommend against taking risks blinded by the desire to hit a jackpot. You do not want to be looking at your stocks 24/7 in the wards, during clinics, and between operations.
CONSTRUCTING YOUR PORTFOLIO
A great part of the strategy comes down to planning your portfolio. Are you looking for long-term, Mid-term, or short-term returns?
Conservative Portfolio
Some people approach stocks like you would invest into your savings. You can deduce that these people are looking into long-term (> 1 year) investments rather than short-term returns. For long term investments you are looking for companies that
Have shown a gradual and steady increase in their stock price
Have their stock price well reflected upon their financial statements (less volatility)
Are undervalued at that given point in time (future potential)
Around December 2020, few examples of Warren Buffet’s picks for long-term stocks are:
Bank of America (NYSE: BAC)
Coca-Cola (NYSE: KO)
American Express (NYSE: AXP)
The Kraft Heinz Company (NYSE: KHC)
I would say this is one of the best approaches as a medical student or for any young professionals who have limited time to do new research and follow the stocks on a daily basis.
Moderately Aggressive
This is the choice for my personal portfolio. I have chosen a few companies that I treat as my saving’s account. I am not faltered by their bearish-runs and am not looking to exit my investments during their bullish runs. In addition, I use an aggressive approach to acquire extra capital to invest into my long-term stocks. I proportionately invest more into the long-term stocks compared to that of my short-term in order to reduce the risk.
One example is Novavax (NASDAQ: NVAX). As a medical student I had an upper hand compared to the general public when understanding the science behind other successful vaccine producers such as the Moderna, and Pfizer. With a bit of research into Novavax’s production capabilities and their FDA approval timeline, I was able to gain a profit of 180%. I re-invested this profit into one of my long-term stocks, Alphabet Inc Class A (NASDAQ: GOOGL)
This approach requires some time taken for research in order to succeed in your aggressive investments. It also requires you to take some risks. However, if you are financially confident enough and have a keen interest in finances and stock-trading, this approach can give you both immediate profit and future security.
Aggressive
As a medical student myself, this is an approach that I will least recommend. To set up your aggressive portfolio, you are in for the big-risk and big-return journey. This will also mean that at 0800 (BST) just before your clinics and your placements, you will be waiting for the London Stock Exchange (LSE) to be opening as well as at 1430 for opening of your NASDAQ/NYSE (US) stocks.
In order to succeed in an aggressive portfolio, you will need to do great amount of research into a company’s financial statements, short-term/long-term goals, media highlights, insider trading, insider tips, as well as tapping into the Regulatory News Service (RNS) routinely. Most of the companies that would be part of the aggressive portfolio will be only profitable for a given amount of time. Moreover, in many cases, the true value of the company will not reflect its finances and business but merely the psychology of the public (FOMO – fear of missing out). If you have a good enough insider tip or enough time to evaluate more and all the things that are mentioned above, this might be the way to go for your immediate fortune.
CHOOSING YOUR STOCKS
*I will not be discussing other securities such as bonds, mutual funds, and Exchange-Traded Funds (ETFs) in this article.
The technique for choosing your stocks varies immensely from investor to investor. I will just give an introduction using my personal approach as an example when choosing stocks.
Keeping your portfolio in mind, one of the first investigations you could do is the sector AKA the industry: Healthcare, technology, finances, energy, and etc. Look out for the recent trends of the industry, future prospects, the companies in the sector with a large market capitalisation, promising infrastructure or core technology, and the start-ups with great potential. As a medical student, I felt pharmaceutical companies and healthcare industry felt most approachable and easy to follow (My portfolio however is not necessarily focused around this sector for other reasons to be discussed in the future). It is definitely an upper hand to be an expert in a certain industry, but don’t let this discourage you for going for the classic large conglomerates, irrespective of the industry.
Do your due diligence! Due diligence is the process of investigating and auditing a company to ascertain the facts and details. This is same as doing a full investigation for your patients! As much as we love evidence-based approach in our holistic care for patients, due-diligence is extremely important when it comes to investigating companies. Don’t solely rely on other investors (other doctors) to confirm the value of a company (diagnosis of a patient). Do your own history & examination as well as a full investigation.
There are tremendous number of things to look for when choosing a stock; therefore, I will be covering these hopefully in the near future. But once you have a clear basic understanding of a company’s financial situation, the industry, and its valuation you are less likely to go wrong. Sometimes however, just leave it up to your gut instincts like when you are effortlessly eliminating your differential diagnoses for patients of your expertise.
WHAT NOW?
I am not in any manner making recommendations to buy the stocks I have mentioned above. Also, I declare that I am no expert in this field but merely a medical student who has a keen interest in finances and investments. I have had great success so far for the last year (figure 1); however, there are many investors out there who have gained larger profits due to the volatility of the market during the pandemic. There might even be few of my colleagues who were able to achieve such a feat.
Figure 1: Time-weighted rate of return compared to that of the world (FTSE All world ETF) since April 2020 till 11th of March 2021. – On Freetrade
I will recommend a few platforms and tools that can help you get into stock trading:
STOCK TRADING PLATFORMS
1. Freetrade:
Pros:
Both compatible with iOS and android
Extremely easy to use (recommended for beginners)
0% commission for transactions
Great customer service team
Cons:
Relatively new platform; occasional service errors
Only mobile platform
No use of leverage or inverse ETFs
Limited number of companies that are listed (although they are increasing their listings during the recent times)
Delay on the stock prices from the actual prices & charts do not display candlesticks (not very suitable for day trading or scalping)
2. Plus500:
Pros:
Compatible with web and mobile
Leverage (CFD) and inverse-ETF trading is possible
Low trading fees
Cons:
Fee occurrences for transactions
CFD does not have an option to trade without leverage
Lack of customer support
There are other popular platforms such as eToro, Robinhood, and etc.
TOOLS
1. Simplywall.st :
Excellent tool for beginners and experts where financial metrics and statements have been taken into account in the reports. Interface is extremely approachable, and the website is very easy to navigate. If you don’t have time or the skills to do a due diligence for a company, I suggest you get the basic idea of the company’s financials and recent news by referring to the report provided on Simply Wall Street.
2. Zacks.com:
Zacks ranking is extremely popular amongst amateur investors. Zacks Investment Research is a leading investment research firm that provides the ranking of companies according to their analysis. They provide a simple outlook of important financial metrics and also make their own investment suggestions.
Again, these tools should be used as reference and to reduce the risks for your investments I recommend you take personal interest in the companies’ social, financial, and business status.
ABOUT THE AUTHOR
Jay Park is currently a 5th year medical student at Edinburgh Medical School, University of Edinburgh, UK after serving in the Army for Republic of Korea. He has had experience working as a research analyst for PartnerOne Inc., a Private Equity firm based in South Korea. He is also the Vice-Chair for Finances in Neurology and Neurosurgery Interest Group, a global organisation based in the UK, and is a major stakeholder for a few start-up businesses in both South Korea and the UK.
Email: jay.park@connectone.co.kr
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