Where Should I Invest?

Dentists often ask me where the best place to invest is. Should it be property, shares, buying a practice, or simply paying down the mortgage? Or should it be gold or bitcoin?

The honest answer is that there is no single rule that works for everyone. The right decision depends on your values, goals, risk tolerance, time horizon, and how much time and mental energy you are willing to spend managing investments.

Here are some career-stage guidelines; however, I feel that when I give general advice, it seems like I am not writing to anyone, since no dentist is truly “typical”.

Young Dentists

Early in your career, investing in yourself is often the best investment you can make. Expanding your clinical skills increases the range of treatments you can offer patients.

At this stage, building savings is important. Having money in the bank gives you options such as a practice or home ownership, further training or other investments. Its this financial flexibility early in your career that gives you these choices.

Mid-Career Dentists. For many dentists, buying a practice can be one of the most significant financial decisions they make. A well-run practice can generate returns that exceed many traditional investments. At the same time, it is demanding in terms of staff management and business decisions.

With practice ownership, the challenge is balancing how much you invest inside the practice versus outside it. Many dentists concentrate most of their wealth in their practice and their home. It is important to remember that a practice may not be worth as much as you expect when it is time to retire. Practice ownership is not appealing to many dentists, so they remain long-term Associate Dentists. The key, then, is to consistently save and invest in other assets.

The most common investment is in shares or property, each of which comes with different risks, so deciding what works for you would be the first step. Having a plan or Investment Policy Statement formulates the rationale for your investment and is particularly helpful when your investment is not doing well.

Direct property investing concentrates a large amount of capital in a single asset, with tenancy risks and should be approached like a business.

Share investing allows diversification but requires the discipline to stay invested through the ups and downs of the market. Investor psychology often plays a large role in long-term success.

Alternative investments such as commodities, bitcoin, or collectibles carry different risks, so it is important to understand where they fit into your investment strategy.

Across all career stages, paying down your mortgage provides a risk-free return equal to your interest rate. The challenge is that if too much focus goes into mortgage repayment, you may miss out on the long-term compounding that can come from investments.

Finding the right balance is different for everyone.

Pre-Retirement Dentists

Matching your accumulated assets to future liabilities requires some planning and ongoing refinement of the plan.

Associate dentists require more planning because all you have is your working cash flow, i.e., your current income, to translate into investments you use in retirement.

Practice owners have an additional asset in their practice that increases their retirement amount upon sale. This can be lower than expected, as it is common to see a gradual slowing down before retirement, which reduces the value of your practice. Ideally, exit planning should start at least 5-10 years before you expect to exit. Preparing the practice for sale, developing systems that do not rely solely on you, and maintaining strong profitability will improve your sale price.

Every dentist’s situation is different. Career goals, family commitments, debt levels, and risk tolerance all influence the right approach. Having a clear financial plan provides direction and helps you make better decisions along the way.

If this is something you are struggling with, feel free to reach out. I work with dentists on both financial planning and insurance protection, helping them build a strategy that supports their career, long-term goals and retirement. Email me at ko@tfd.co.nz or text/ring 021469500.

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