Ten Investment Ideas for Pharmacists
On the whole, Pharmacists are high income earners. Although their salary can vary widely by state and experience, the website ZipRecruiter indicates a salary range $90,000 – $126,000 annually. This is far above the median wage for the US as a whole, which means that Pharmacists are likely to have excess income that can be invested for the future to help Pharmacists achieve their financial goals.
In this article, we are going to describe ten investment ideas for Pharmacists. For each one, we describe what it is, how it generates a return, and the pros and cons of allocating capital to it. By the end, the goal is for Pharmacists to identify one or more investment opportunities that are suitable for their own individual preferences.
At First National Realty Partners, we specialize in the acquisition and management of grocery store anchored retail centers, which can be a suitable fit for some Pharmacist investors. If you are an Accredited Investor and would like to learn more about our current investment opportunities, click here.
What To Think About Before Making An Investment
The investment decision-making process can be a tricky one. Every investor has their own unique needs, preferences, and financial circumstances. As such, it isn’t a given that the best use of funds is an investment. Among other things, investors should consider:
- Debt Levels: Pharmacy school is expensive and many leave school with high levels of student loan debt. In addition, they may have other types of consumer debt from credit cards, car loans, or mortgages. As a general personal finance rule, high interest rate consumer debt should be paid off prior to making investments. As such, Pharmacists may find that it is a better idea to use their excess cash to pay off debt before making an investment.
- Emergency Fund: Once debt is paid off, it is a best practice for Pharmacists to establish an emergency fund that contains three to six months worth of living expenses. This will provide a cushion against an unforeseen financial event like a job loss or medical expense.
- Available Capital: Different types of investments require different amounts of capital. At one end of the spectrum, a Pharmacist could get started with a stock purchase for less than $100. At the other end of the spectrum are the types of private equity investments that we offer, which have minimum capital requirements of $25,000 or more.
- Time: Some investments, like a bond, require almost no time to manage or supervise. Others, like real estate, can be very time consuming – like a full time job.
- Risk & Return Preferences: Finally, every investment has risk, but some have more than others. At one end of the spectrum something like a bond is very safe. At the other end, something like cryptocurrency can be very speculative.
The broader point is that investors should consider a number of factors, including their debt levels, emergency fund balance, and capital available to invest before deciding to make an investment. In some cases, it may turn out that the best investment is paying down debt and contributing to an emergency fund.
With these considerations in mind, below are ten investment ideas for Pharmacists.
Idea #1: Real Estate Syndication
Pharmacists are busy healthcare professionals and providers who dedicate the bulk of their time to patient care. As such, they may not have the time needed to manage a direct property purchase. For these individuals, a real estate syndication may be a good option. A syndication is a deal structure that allows individual investors to purchase a fractional share of a commercial property while outsourcing the hard work of finding, financing (or refinancing), and managing it to a professional investment firm.
The benefit of a syndication investment is passive income, tax deductions, and the potential for capital growth. The downside is that investors have no say in property management decisions and fees charged by the manager could impact the overall return. In addition, they are typically only available to high net worth investors who meet certain income and net worth requirements.
Real estate syndications tend to be a good fit for investors who have large amounts of investable capital, a long term time horizon, and a moderate tolerance for risk.
Idea #2: Dividend Stocks
Again, Pharmacists are an integral part of the healthcare system and may not have time to devote to earning extra income from side hustles or their own startup. Fortunately, there is another option. Mature companies that generate consistent, stable profits may opt to return capital to shareholders through periodic dividends. For example, the Ford Motor Company pays an annual dividend of 40 cents per share.
The major benefit of dividend stocks is that investors can earn passive income. In addition, they can earn additional returns from increases in the share price.
The major downside of this investment idea is that the price can be somewhat volatile, especially in periods of market turbulence. In addition, dividends are not guaranteed. If a company experiences a period of declining profits, they may have to cut the dividend to conserve capital. This will almost certainly have a negative impact on the share price.
Dividend stocks tend to be a suitable investment for pharmacists with smaller amounts of capital, a long time horizon, and a higher risk tolerance.
Idea #3: Direct Real Estate Purchase
A direct real estate purchase means that a Pharmacist, alone or with a group, purchases an investment property directly. It could be a single family rental, a vacation rental, or even a small commercial property and the goal is typically to rent the space to earn income from the asset.
There are a number of benefits to this approach including recurring income, tax advantages, and the potential for asset appreciation.
The major downside of this investment is that managing the property can be very time consuming. In addition, the cost means that it is likely that much of or all of an investor’s capital is tied up in the asset, which means that risk is not fully diversified.
Direct real estate tends to be a good fit for investors with moderate to high amounts of investable capital, high risk tolerance, and a long term time horizon.
Idea #4: Peer-to-Peer Lending
Modern technology has made it possible for individuals to borrow and lend directly to each other without a financial institution intermediary. To facilitate this activity, there are a number of internet platforms that directly match borrowers to lenders.
An investment in peer-to-peer loans can produce passive income and a low to moderate return on an annual basis. In addition, the investment platforms handle the hard work of tracking payments, crediting them, accruing interest, and managing delinquencies.
The downside of this investment idea is that, for the most part, peer-to-peer loans are unsecured. If the borrower defaults, the lender (investor) has little or no recourse to collect their lost funds. For this reason, these types of loans are on the higher end of the risk spectrum.
Peer-to-peer loans are a good fit for investors with a high risk tolerance and a moderate to long-term time horizon.
Idea #5: REITs
A Real Estate Investment Trust, REIT for short, is a company that owns, operates, or finances real estate assets. REITs can be publicly or privately traded and the scope of practice means that they tend to specialize in certain property types. For example, one REIT may specialize in medical properties where they work with healthcare providers to design and operate space that is uniquely suited for their needs. Another may specialize in multifamily assets or industrial properties – like an Amazon warehouse.
For Pharmacist investors, REIT benefits include passive income, tax advantages, and the opportunity for price appreciation. In addition, publicly traded REITs offer a relatively low share price and a high degree of liquidity. Often, a REIT may be a good starting point for individuals interested in real estate investment.
The downside of this investment idea is that investors don’t really have any say in which properties their capital is used to purchase. In addition, the share price of a REIT, especially the publicly traded ones, can be volatile and get swept up in market sentiment that doesn’t really reflect the underlying performance of the real estate.
REITs tend to be most suitable for beginner investors and those with a small amount of investable capital.
Idea #6: High Yield Savings Account
A high yield savings account is a type of deposit account that pays a higher than normal amount of interest when compared to a deposit account.
The benefit of investing in a high yield savings account is that balances are insured up to a certain amount and there is very little volatility.
The downside of this investment idea is that a high yield savings account doesn’t actually pay all that much interest. Often, it is in the 0.50% – 0.75% range annually so it would take significant balances to amount to material investment income. In addition, the interest payers (the banks) have the ability to adjust the amount of interest paid in response to market conditions.
High yield savings accounts tend to be most suitable for investors who want to minimize the chance that they will lose their investment capital.
Idea #7: Index Funds
An index fund is a type of investment that models its portfolio after the composition of a chosen index. For example, one of the most common index fund investments is an S&P 500 index fund, whose portfolio is constructed to match the movement of the index.
The major benefit of investing in an index fund is that it is a broadly diversified portfolio. For example, it could include stocks in technology companies, health insurance companies, industrial companies, or even pharmaceutical companies (often referred to in a shorthand manner as “pharma” companies). In addition, index funds have a long track record of consistent returns and often pay a small annual dividend.
The downside of this investment idea is that index fund prices can be quite volatile. While the long term trend has always been up, there are intermittent periods that can see significant drops.
Index funds tend to be most suitable for investors who prefer liquidity, diversification, and those with a long term time horizon.
Idea #8: Real Estate Debt Funds
More often than not, a discussion of real estate investing involves the “equity” portion of the capital stack. But, this isn’t the only way to gain exposure to real estate assets. Investors could also purchase shares in a debt fund, which makes loans to real estate borrowers.
The benefit of this approach is that debt holders have higher repayment priority than equity holders and returns tend to be less volatile.
The downside of this investment idea is that the return is relatively low and there isn’t much of a chance for price appreciation. In addition, there is always the risk of payment default by the borrower as there is no guarantee the lenders will receive full reimbursement by loan maturity.
Debt funds tend to be a suitable fit for investors with low to moderate risk tolerance and a long term time horizon.
Idea #9: Cryptocurrency
A cryptocurrency is a digital currency that serves as a medium of exchange through a computer network or “blockchain.” The most well known cryptocurrencies are Bitcoin and Ethereum.
As an investment, the major benefit of cryptocurrency is its potential for stratospheric growth. A single Bitcoin used to trade for less than one penny. At the time of writing, it costs ~$43,000 and has made many investors tremendously wealthy. In addition, it serves as a way to pay for things in a faster, more efficient manner and the transaction costs are relatively low (depending on the network).
But, that growth potential comes at a price. Cryptocurrency prices are notoriously volatile. Changes of 20% or more in a single day are common. In addition, there continues to be uncertainty around the regulatory and tax implications of owning it.
Cryptocurrency is more suitable for investors with a very high risk tolerance and the ability to stomach potential capital losses.
Idea #10: Donor Advised Funds
A donor advised fund is not a traditional investment in the sense that an individual contributes capital with the hope of earning a return on it. Instead, it is a charitable giving vehicle that allows individuals to make a donation and then provide input into which initiatives are provided a grant with it.
From a financial standpoint, the major benefit of giving to a donor advised fund is the tax deduction that comes with it. They are provided up to a certain limit and act as an incentive to encourage giving.
The downside of this investment idea is that this is not a vehicle for growing money over time.
Donor advised funds tend to be most suitable for Pharmacists who have reached a certain amount of income and/or net worth to the point where giving away substantial sums of money will not have a detrimental impact on their personal finances.
Why Pharmacists Should Consider Investing
Pharmacists, like everyone, have long term financial goals. Whether they work for an independent pharmacy, community pharmacy, compounding pharmacy, medical formulary, or more traditional pharmacy business like a national chain drug store, they offer incredibly important pharmacy services and interventions (like vaccines, prescription drugs, or other FDA approved therapeutics) to their communities.
As such, they tend to be high earners which gives them the resources to invest for their future. Doing so is a good idea because it will go a long way in helping them achieve their financial goals, whether it be buying a house, retiring early, or providing an inheritance for their kids or grandkids. Implementing a financial plan that invests consistently over a long term will go a long way in achieving their objectives.
Interested In Learning More?
First National Realty Partners is one of the country’s leading private equity commercial real estate investment firms. With an intentional focus on finding world-class, multi-tenanted assets well below intrinsic value, we seek to create superior long-term, risk-adjusted returns for our investors while creating strong economic assets for the communities we invest in.
If you are an Accredited Real Estate Investor and would like to learn more about our investment opportunities, contact us at (800) 605-4966 or email@example.com for more information.