Lloyd Boston explains why investing could be right for you and how dentists can get started.
As a dentist, you’re no stranger to investing in your future – whether it’s for training or the latest equipment to elevate your skills. But when it comes to how to invest money that you earn, it’s not unusual to feel unsure about where to begin.
In a profession where the day-to-day outlook is busy and demanding, many dentists can delay investment decisions simply because they seem complex, time-consuming or risky. But investing for beginners doesn’t have to be overwhelming. With the right support and a few simple steps, you can start building an investment strategy with confidence.
Why dentists consider investing
Dentistry can be financially rewarding, but if your money is just sitting in a savings account, it’s not working as hard as it could be. This kind of ‘lazy money’ might feel safe, but over time, inflation can erode its value, especially when interest rates lag – meaning you’re quietly losing purchasing power over time, even if your bank balance looks stable.
To bring this to life, imagine a few years ago, you could walk into your favourite café and buy a latte for £3. Now, thanks to inflation, that same coffee costs £3.50 or more. It’s a small change, but one that adds up over time, and it’s happening across almost everything you buy.
Now let’s apply this to a savings pot of £50,000, tucked safely away in a savings account earning 1% interest. However, if inflation is running at 5%, here’s the problem:
- Your savings earn £500 over the year
- But in the real world, prices have risen by £2,500
- That’s a £2,000 gap – your money’s buying power has shrunk, even though your account balance has technically grown.
This means that while your money might look like it’s growing, it’s now buying fewer coffees (or dental chairs) than it could a year ago. That’s the quiet danger of inflation and why investing can be a powerful way to keep your money pulling its weight.
If your goals include early retirement, funding your children’s education, or simply enjoying more financial freedom, relying solely on income and savings may not get you there in the timeframe that you would like.
That said, investing isn’t without risk. Markets can go up and down, and you may get back less than you invest. But over the long term, a well-diversified investment strategy can help your money grow and keep pace with inflation, something savings alone often can’t do.
The key is balance. Keep enough in savings for short-term needs and emergencies, but don’t let the rest sit idle. Make your money work as hard as you do – strategically and with purpose.
Where to invest money
There are several types of assets (called ‘asset classes’) you can invest in, each with its own risk and return profile. The right mix depends on your goals, timeline, and how much risk you’re comfortable with.
Here are five common asset classes:
- Cash – low risk. Good for short-term needs, but often not as good for long-term growth
- Stocks (Equities) – you’re buying a share of a company. Higher risk, but historically strong long-term growth potential
- Property – investing in residential or commercial real estate. Can offer stable income but is harder to buy and sell quickly
- Bonds – loans to governments or companies. Generally lower risk than stocks, with fixed or inflation-linked returns
- Commodities – think gold, oil, or coffee. High potential gains, but also high volatility.
What are managed funds and how can dentists use them?
If you’re unsure how to start investing, managed funds offer a supportive alternative. Like referring to a specialist, you leave the decisions to a professional fund manager who invests across different asset classes – such as stocks, bonds, and property – to help spread risk.
A stocks and shares ISA is a popular, tax-efficient choice that can be professionally managed or handled yourself if you prefer a hands-on approach.
This approach can be a great way to build long-term wealth while you stay focused on your career.
How dentists can manage investment risk
Investing involves weighing up risk and reward. Higher-risk options (like shares) may offer greater returns but can also fluctuate. If you’re likely to feel uneasy or react quickly to losses, a lower-risk approach might suit you better.
Everyone’s risk tolerance is different – so tailor your investment plan to what feels comfortable, just as you would adapt a treatment plan to each patient’s needs and aspirations.
Investing is rarely a quick fix, and better results often come with time. The general recommendation is to stay invested for at least five years, but ideally 10 or more. This allows your money to grow and helps smooth out market ups and downs.
Longer timeframes also open the door to compound growth, where returns are reinvested and can grow over time, like good oral hygiene habits compounding long-term dental health.
Take the first step
Investing for beginners doesn’t mean doing it alone. In fact, some of the most confident investors are those who started small and leaned on the right advice along the way.
If you’ve been thinking about how to invest money but haven’t quite known where to begin, now might be a great time to take that first step.
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