BIO: Dr. Carolyn McClanahan is a physician turned financial planner. In addition to working in her financial planning practice, she speaks regularly on the interplay between health and financial issues, particularly regarding aging, chronic illness, end-of-life, long-term care, health care reform, and health care costs.
STORY: Carolyn lost a good chunk of her portfolio while doing active management.
LEARNING: There’s nobody out there who can be consistently smart to beat the market. Know your money goals. Be careful of overconfidence bias.
“We (doctors) think just because we’re smart at medicine, that we can beat the market, we can pick the best investments, and get rich.”
Carolyn McClanahan
Guest profile
Dr. Carolyn McClanahan is a physician turned financial planner. In addition to working in her financial planning practice, she speaks regularly on the interplay between health and financial issues, particularly regarding aging, chronic illness, end-of-life, long-term care, health care reform, and health care costs. She is an Investopedia Top 100 advisor, serves on the CNBC Financial Advisor Council, and writes for various publications. She is quoted regularly in the Washington Post, New York Times, and CNBC.
Worst investment ever
Carolyn started experimenting with investing in the 90s when she was in her 30s. Her husband inherited a little money from his parents, and they invested it. The investment did super well because it was the mid-90s.
Her husband didn’t want to be an engineer anymore. He wanted to be a track coach and a photographer. The couple tried to find a financial planner to help them plan their finances to accommodate the husband’s wishes. All the financial planners wanted to do was take over the couple’s money and charge a fee to put them in a bunch of mutual funds. They didn’t do actual financial planning.
That’s why Carolyn decided to go back to school. She did stuff like day trading along the way, which was crazy. Carolyn also became a financial planner and got to learn about mutual funds. She spent so much time picking these great mutual funds that were supposed to grow beyond everything else. She also started investigating alternative assets.
The stock market crashed in 2008-2009, and Carolyn suffered a massive loss due to active management.
Lessons learned
- Everybody is brilliant in a different way, but there’s nobody out there who can be consistently brilliant to beat the market.
- Know your money goals. For short-term money, invest conservatively. For long-term money, you can be more aggressive, but don’t try to pick what’s going to do best because you’re not going to know what that is—pick the whole basket.
Andrew’s takeaways
- Active management makes it very difficult to beat the market.
- Set up a passive investment account and let it grow.
- Be careful of overconfidence bias.
Actionable advice
Know your money goals and your time horizon, and make sure you have an investment policy statement that you follow and stick to through thick and thin, and you’ll be okay.
No.1 goal for the next 12 months
Carolyn’s number one goal for the next 12 months is to start her succession plan, so she’s hoping to hire three new advisors, grow the practice a little more, and get ready to launch herself in the next five to 10 years.
Parting words
“Just live life fully every day because you won’t get another one.”
Carolyn McClanahan
[spp-transcript]
Connect with Carolyn McClanahan
Andrew’s books
Andrew’s online programs
Connect with Andrew Stotz:
