Diversify Like a Pro: What Physicians Need to Know

Why a smart investing strategy isn’t just about what’s done well lately

If you're like many physicians managing your own investments, you’ve probably heard that diversification is important—but what does that actually mean? And how can you tell if you're truly diversified? Let’s walk through what it means to diversify like a pro—and how data, not emotions, should drive your investment decisions.

First: What Is Diversification?

At its core, diversification means owning a mix of investments that don’t all react the same way to market changes. That might include:

• U.S. stocks
• International and emerging market stocks
• Bonds
• Real estate
• Other alternative assets

And within each category, you want a spread of companies, sectors, and regions. The goal? Reduce risk and smooth out the ride. When one part of your portfolio struggles, another might hold steady or even outperform.

You have to be a little bit of a contrarian with your portfolio. It’s not about chasing what’s worked—it’s about building a plan that works in different conditions.

What the Data Shows (And Why It Matters)

Each year, the team at Callan publishes the Periodic Table of Investment Returns—a visual of how different asset classes have performed over time.

The chart is chaotic by design. One year, emerging markets may lead. The next, they’re at the bottom. There’s no predictable pattern—and that’s the point. If you chase last year’s winner, you’re often too late.

Professionals know this. That’s why truly diversified portfolios include asset classes that haven’t done well lately. Because historically, mean reversion (the idea that long-term returns eventually return to their averages) tends to catch up with everything—even the S&P 500.

What Physicians Often Miss

When things get busy (as they always do), it’s easy to take a set-it-and-forget-it approach. You check your investment account, see the S&P 500 is up again, and think, “Why mess with a good thing?”

But here’s the issue: That “good thing” might not stay good forever.

We’ve seen this play out before. Fifteen years ago, international stocks were the top performers. People shifted their portfolios, and then U.S. stocks took off. Now, many portfolios are overweight in the U.S. market—and particularly large-cap tech.

That’s not inherently bad. But if you’re only holding what’s done well recently, you’re probably not as diversified as you think.

Real Estate, REITs, and the Risk of Overconcentration

Many physicians also consider real estate a way to diversify—and it absolutely can be. But here’s the catch: if your “real estate strategy” is buying one condo in one city, that’s not diversification. That’s a bet.

Instead, a diversified real estate approach might include:

• Real estate investment trusts (REITs)
• Funds that invest across sectors and geographies
• Smaller, targeted real estate allocations (not your whole net worth)

Same asset class—radically different risk profile.

How to Diversify Like a Pro

Here’s what smart diversification looks like:

• Own assets that behave differently. That includes international, emerging markets, bonds, real estate, and more—not just U.S. large caps.
• Rebalance regularly. Don’t just let winners ride. Trim back and reallocate to keep your strategy intact.
• Ignore the headlines. The media focuses on what’s hot. Diversification is about what’s steady.

You don’t have to get every call right. In fact, you won’t. But by building a portfolio that accounts for different outcomes, you give yourself a better chance of reaching your long-term goals without the rollercoaster ride.

That’s how the pros do it. And that’s how physicians should, too.

Additional Resources: 

Finance for Physicians podcast:  Diversification Decoded: Building a Portfolio for Uncertain Times with Jackie Griggs, CFP®

Wrenne Financial Planning is a registered investment adviser. The content of this blog post is intended for informational purposes only and is not intended to be investment advice. The views expressed in blog post are subject to change based on market and other conditions. Some information has been obtained/provided from third party sources and is believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information, and it should not be relied on as such.