It is believed that doctors earn a decent amount, however, they are poor in financial planning. It is common to see doctors getting "cheated or talked into" unwise investments, which they later regret. This presentation looks at various investment options (suitable for Indian doctors).

1. INVESTMENT OPTIONS
FOR DOCTORS
DR SUDHIR KUMAR MD DM
CONSULTANT NEUROLOGIST
APOLLO HOSPITALS, HYDERABAD

2. SIGNS of GOOD
INVESTMENT
• Capital (income) is protected,
• One should earn good profits on the investment,
• Investments should have lesser risks,
• Investment should be tax-efficient (lesser tax on
profits),
• Should be able to build wealth for needs (children’s
education & marriage, travel, retirement),
• Investments should be easy to redeem.

3. PROTECTIVE COVERS
Before we start investing, a few protective covers
are very important:
1. Life insurance
2. Medical insurance (mediclaim)
3. Professional indemnity insurance
(Do not mix insurance and investment; treat
insurance as purely protection against risks)

4. LIFE INSURANCE
• Best are the online term plans
• For a 40-year old non-smoker man, Rs 18,000/ per
annum would give a cover of one crore for the next 30
years. (i-protect by ICICI prudential)
• Term plan for one crore by LIC would cost Rs 57,000/
per year
• In contrast, a similar cover by LIC (Jeevan Anand)
would cost Rs 4 lakhs per year!
• Please compare the different plans online and choose.

5. INSURANCE (2)
• Mediclaim: a must in view of spiraling cost of
healthcare (family floater plans are more
economical),
• Professional indemnity insurance: Rs 5300/ for
1 crore, and Rs 10,500/ for 2 crore (details on
IAN website)

6. INVESTMENT OPTIONS
• Cash,
• Gold and silver,
• Real estate,
• Fixed return instruments (FD, PPF, bonds, etc)
• Debt mutual funds,
• Equity (equity mutual funds, shares)

7. CASH (1)
• Many doctors earn in cash (OP fees, etc),
• They prefer keeping cash at home (so that
they can avoid paying taxes),
• Cash can be used only for buying gold or real
estate (or can be blown away on shopping),
• Value of cash erodes over time (with 7%
average inflation per year, one lakh will be
worth only Rs 13,000 after 30 years)

8. CASH (2)
• For ex: In 2000, you could watch a movie for Rs 15,
now the cost has multiplied 15 times (Rs 225), you
may spend Rs 15 just for parking!
• So, the value of cash kept at home would always
diminish over time,
• Moreover, it is unsafe (risk of theft),
• Risk of getting caught by IT authorities.
• Cash at home: Strict NO (except for keeping some
cash for emergencies)

9. Rs 500 and Rs 1000 NOTES
BANNED- What should you do?
• All old notes of Rs 500/ and Rs 1000/ made
illegal since 9/11/2016
• These would not be accepted for any
transactions,
• You can deposit them into your account until
Dec 30th 2016; or get them exchanged with
new notes until Dec 30th at banks (or RBI
offices thereafter)

10. SAVINGS ACCOUNT
• Many people leave money “idle” in savings
account, as they consider it “safe”
• Interest rate is 4% in most banks (6% in a few),
which is lower than the average inflation rate of
7%,
• Moreover, we need to pay taxes on the interest
earned (so, for a 30% tax bracket, post tax returns
are only 2.8%),
• Investment in savings bank account: Not advisable
(except for routine and emergency needs)

11. FIXED DEPOSITS
• Many people prefer fixed deposits (FDs), as it is considered safe,
• The interest rates are about 7-8%,
• The interest is taxable. So, in 30% tax bracket, the post-tax returns
would be about 5-5.5% (again lower than the inflation rate)
• So, the value of investment would erode in FDs.
• Also, the money gets locked (can not be withdrawn) for 1-5 years.
• FD: Not a “good” investment option

12. DEBT FUNDS ARE
BETTER THAN FD

13. RECOMMENDED FIXED
RETURN INVESTMENTS (1)
• PPF: any person can open an account, with annual deposit between Rs
500 to 1.5 lakhs,
• Rate of interest: 8.7% per year, compounded,
• Both the principal and interest are exempted from tax
• Sukanya Samridhi scheme: Pays 0.5% more interest than PPF. Can be
opened in the name of girl child below 10; maturity after 21 years or
marriage (which ever is earlier). Amount that can be invested (Rs 1000-
1.5 lakhs/year)
Verdict: A must for all (Limitation is the low ceiling of 1.5 lakhs per
year)

14. FIXED RETURNS (2)
• Tax-free Bonds: These bonds are opened for
subscription at certain times only, and pay an interest
of 7-9% per year for 10-15 years,
• As the name suggests, the interest is tax-free,
• There is no limit on the amount of investment
(however, due to oversubscription, one may not get
the required amount of bonds)
• These are listed on stock exchanges, so are liquid
assets (can be redeemed any time).
• EXCELLENT investment option

15. GOLD
• We are fascinated with GOLD. Every Indian
household has significant gold assets.
• According to estimates, Indian households have
22,000 tons of gold; in addition to 558 tons held by
central bank,
• Jewelry has sentimental value and usually is not
sold/traded; important part of weddings
• So, sometimes gold is considered a dead
investment.

16. INDIA’S FASCINATION
FOR PHYSICAL GOLD

17. GOLD (2)
• Gold is relatively safe investment option, and offers a hedge
against inflation too,
• Various options- jewelry, Gold bars, ETFs, Fund of funds, and
sovereign Gold bonds
• Gold bonds give an interest of 2.5% per year (tax free), and are
very safe, lock in period of 8 years, can be redeemed after 5
years, Limits: 1 gm to 500 gms
• Jewelry is not safe (risk of theft), storage (bank lockers) requires
money, purity is not assured, and there is no earning unless sold.
• Gold should form 5-10% of investment portfolio (preferably in
the form of sovereign gold bonds).

18. REAL ESTATE
• “Black money (undeclared cash income)” is
usually used for buying real estate,
• Also, people feel real estate gives fascinating
returns,
• Land value usually appreciates, however, cost
of property built on it depreciates in value,
• A “bit of luck” is needed, as not every real
estate value appreciates the same,

19. REAL ESTATE (2)
• Real estate can create “tensions” among family members,
partners and friends and may lead to “murders”
• Litigations and disputes are common,
• Land may get encroached by land grabbers,
• Real estate may also suffer, if Government acquires it for
infrastructure, industries, etc
• “Big” investments are needed (as you can not buy land square
feet by square feet)
• It is mostly “illiquid” as you can not sell part of land and also it is
not easy to find buyers when you need the cash.

20. BUYING PROPERTY CAN LEAD TO
LITIGATION OR EVEN DEATH

21. REAL ESTATE (3)
• Some people buy apartment or villas to earn
“rental” income; however, it does not make
good investment sense,
• This is because “rental yields” are very low in
India (2-4% of the property value per year),
which is much lower than even the FD rates,
• In addition, one needs to maintain the
property, pay property taxes and “dance to
the tunes” of the tenant.

22. RESIDENTIAL PROPERTY
YIELDS ARE LOW

23. EQUITY
• Equity is by far the best investment option,
• You can either do it indirectly through mutual
funds (demat account is not needed), or you can
directly buy shares of various companies (demat
account is needed),
• Need to select good mutual funds or good
companies
• Stay invested for long term to get the best
returns,

24. EQUITY MUTUAL FUNDS (1)
• Mutual funds (MFs) are managed by fund managers
(experts in financial field) for a fee (about 2-3% fees on
invested amount),
• Fund managers buy shares of various companies from
the money that people invest into various MFs
accounts.
• On an average, equity MFs give returns of 15% or more
per year (these returns are tax free after one year),
• Investments can be done as SIP (fixed amount every
month) and as lump sum whenever market indices are
down.

25. EQUITY MFs (2)
• Start investing early to gain more (due to
compounding value),
• Invest regularly over long periods,
• Hold for long term to gain maximum returns
(rather than selling in short periods- taxable if
sold within one year, also lower returns)

26. POWER OF COMPOUNDING
Amount/
month
No of
years
Total
invested
Returns Maturity Gain
Mr A 10000 20 24 lakhs 15% 1.51 crore 1.27 cr
Mr B 20000 10 24 lakhs 15% 55.7 lakh 31.7 lakh
Starting investing 10 years earlier has given four-times higher returns
for Mr A, even though the amount invested is the same.

27. SHARES
• One can invest in shares directly, demat
account is needed,
• More risky (than MFs), as wider swings are
seen (up or down),
• In-depth knowledge about a company is
needed before investing,
• Holding shares for a long-term gives better
returns.

28. SHARES MULTIPLYING
>100 TIMES IN 20 YEARS

29. REAL ESTATE vs EQUITY
REAL ESTATE EQUITY
Amount needed Large amounts Any amount
Diversification Usually not possible Possible
Risk High Moderate
Returns Moderate-high Moderate-High
Redemption Difficult Easy
Partial redemption Usually not possible Possible
Litigation Mild risk None
Regular income Land(none), rental* Yes (dividend)

30. DIVERSIFICATION IS
IMPORTANT

31. RETURNS OF VARIOUS
ASSET CLASSES

32. CONCLUSIONS (1)
• Financial planning is a must for all doctors, including
neurologists.
• The first step is to make a file with details of income and
expenditure.
• Second step is to declare all the income, rather than falling into
the trap of keeping cash at home to avoid paying taxes.
• Third step is to take all the protective covers, such as life
insurance, mediclaim and professional indemnity insurance.
• Finally, the surplus money (left over after expenditure) should
be wisely invested.

33. CONCLUSIONS (2)
• Keeping the money idle in the saving account or investing in
fixed deposits is not a wise option, as the returns are taxable
and they are lower than inflation.
• Lesser risky options with reasonable returns (8-10% tax-free
returns) include PPF, Sukanya samridhi scheme, tax free bonds
and debt mutual funds. Slightly more risky options with better
returns (>15% returns per year; tax-free after one year) include
equity mutual funds and shares.
• A part of investment (5-10%) should be in gold (best option is
sovereign gold bonds).
• Real estate investment is better avoided due to higher costs, risk
of conflicts/litigations, difficulty in redemption, involvement of
"black money” and relatively lower returns.

34. QUERIES/COMMENTS?
• Email: drsudhirkumar@yahoo.com
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