Forum Mailbag: Most Lucrative Specialties Over Time, Bob Veres, Avocado Toast, and More!

There is so much great information on personal finance forums. I regularly participate on several message boards, including Bogleheads, White Coat Investor, and Rockstar Finance. This is a roundup of my favorite discussions happening around the internet.

1. White Coat Investor: Do the most lucrative specialties change over time?

Question: Strider_91 is an incoming M1 who is curious if the top-paying specialties change over time. Going into medical school, he is interested in a surgical subspecialty, emergency medicine, or anesthesiology (all high-paying specialties). He wants to poll some of the older WCI readers to see if the top-paying specialties have changed over time.

WSP’s Take: I recently wrote about Doximity’s recent compensation report, and Becker’s Hospital Review summarized average salaries by specialty in 2016, using a variety of survey sources. Not every specialty was included in the Becker’s Hospital Review article, but of those listed, orthopedic surgery, gastroenterology, cardiology, urology, and dermatology topped the list. Anesthesia, general surgery, and oncology also had a median salary of more than $400,000. The lowest paying specialties were family medicine, pediatrics, endocrinology, internal medicine, rheumatology, and psychiatry.

I was not practicing medicine 20 years ago, but Dr. Google found this article in the journal Hospital Physician that summarized the MGMA Physician Compensation Report in 1997. While they included even fewer medical specialties back then, the lowest paying specialties back then were pediatrics, family practice, and internal medicine. The highest-paying specialties were cardiology, orthopedic surgery, and radiology. Radiology was not included in Becker’s article, but it is still one of the highest paying specialties in 2017.

My interpretation of the reports is that the top-paying specialties have not significantly changed over time. There are small changes here and there, but it has mostly stayed the same. Your selection of specialty should take money into account, but if you don’t love your specialty, residency and attending life will be pretty miserable.

I would note that some things never change. In 2016, as it was back in 1997, the anesthesiologist makes more than the general surgeon 🙂

2. White Coat Investor: Bob Veres on Active vs. Passive

Question: Johanna Fox, one of the moderators of the White Coat Investor forum, posted an article by Bob Veres, who argues that the massive influx of money into passive funds has actually been a good thing for investors. She asks what the WCI community thinks about his take.

WSP’s Take: The article is long, but the TL;DR version of the article is that 1) You can divide investment managers into ones that have a passion for marketing and ones that have a passion for investing, 2) Passive index fund investing has created a “herd” mentality such that shrewd investors can choose the good opportunities while avoiding the bad opportunities, 3) There is less competition now that more money is in index funds.

I disagree with Mr. Veres on his major points. I don’t think some investment managers focus on investing and some focus on marketing. Even if there was such a sharp dichotomy between investment managers, how could I tell the difference? I don’t think investing skill and marketing skill needs to be mutually exclusive. A good general surgeon doesn’t also have to be a jerk because he spent his whole life doing surgery and never worked on his bedside manner.

I agree that passive index funds invest in both good companies and bad companies because they are so diversified. I disagree that this implies that a “good” fund manager can pick out the difference. I’ve argued that the stock market is like a sportsbook, where millions of professional and amateur investors bet on the price of stocks and market forces lead to the correct price for each stock. Once the correct price is found, you cannot beat the market.

However, by arguing that there is less competition now that there is less money in index funds, perhaps they believe that instead, Wall Street is a game of high-stakes poker. If that’s the case, then as this commentator in Bloomberg argued, more money in index funds would be bad. More are more unsophisticated investors are getting out of the poker game, leaving only the professionals at the table. Without the fish (ordinary investors) in the sea, the sharks (professional investors) will starve.

3. Rockstar Finance: Avocado Toast

Question: TheFrugalGene has noted and wrote a response to a recent personal finance article by an Australian millionaire real estate investor, who argued that the reason why millennials are unable to buy a home is that they spend too much money on avocado toast and coffee.

WSP’s Take: I visited San Francisco for the first time last year, and I loved the avocado toast! There have been so many takes on this article, including from Physician on FIRE and Financial Samurai. My take is that everyone, including millennials, can splurge every once in a while. They can even have avocado toast and a few lattes every day, so long as they tighten their financial belt in other areas.

You can afford anything, just not everything. That’s a slogan for a personal finance blog, right?

4. Reddit: Using Leverage to Speed Up Time to FI?

Question: Zaladin was wondering whether a levered strategy would boost long-term returns and speed up the time you get to FI.

WSP’s Take: I would generally agree that leverage would give you a higher expected return but at significantly higher risk. This implies that taking on leverage would get you to FI faster on average, but also make the time you reach FI more variable. You could reach FI very, very quickly (such as if you were leveraged over the bull market of the last 8 years), or it could mean you never reach FI (if the stock market struggles for a protracted period of time). Physicians are nearly guaranteed to reach FI if they save and invest wisely. No financial leverage necessary.

Wall Street Shares: 5 Articles I Enjoyed Reading This Week

1. High Income Parents: Should I Pay Down Debt or Save for an Emergency Fund? Maybe Neither. — add HIP to the investing side of the pay off debt or invest debate.
2. Future Proof M.D.: What You Should Know About Trump’s Proposed Student Loan Reform — FPMD puts out so much good information about student loan repayment, so I read his analysis of the Trump administration’s proposed changes with great interest.
3. White Coat Investor: The Informed Pre-Med’s Dilemma — a great discussion of the financial challenges facing new medical students.
4. The Grounded Engineer: What does the new American Health Care Act mean for Health Savings Accounts? — I’m not sure the AHCA will become law (at least in its current form), but any Republican healthcare plan will likely expand the role of HSAs.
5. Physician on FIRE: Case Report: Roth or Traditional Contributions for a Low Six-Figure Household — while I generally favored traditional over Roth IRAs for people in this income range, this article shows that traditional contributions are a no-brainer, especially for people seeking FIRE.

What do you think? Do you agree or disagree with any of my responses? What’s your take on the topics in this week’s forum mailbag?