Risk Aversion and Investment Alternatives

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Understanding Financial Tolerance in the New Era

[By Dr. David E. Marcinko MBA and Staff Reporters]

Some physicians and financial planners prefer to use a specific approach in determining these difficult-to-determine areas, in lieu of one of several psychological tests that are currently available.

Examples of this specific approach follow.

Investment Temperament

Which statement best describes your investment temperament? Please indicate by ranking the items below from 1 to 4, with 1 being the most descriptive and 4 being the least descriptive. Also, please indicate the extent of your risk aversion by indicating what percentage of your assets you would feel comfortable investing in each category (for example, 50% in the first category, 25% in the second, etc.).

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Numerical   Percentage  
ranking   allocation  
* I prefer only the safest of investments.
* I am interested only in “blue-chip” investments.
* An occasional risk is worth the effort for above-average potential reward.
* I’m willing to put everything on the line if the potential reward is large enough.

Listed below are various forms of investments. Please indicate your familiarity with each.

  Familiarity
Description High   Low
Certificates of deposit 5 4 3 2 1
Treasury bills 5 4 3 2 1
Other short-term fixed income 5 4 3 2 1
Stocks 5 4 3 2 1
U.S. government bonds 5 4 3 2 1
Corporate bonds 5 4 3 2 1
Municipal bonds 5 4 3 2 1
Mutual funds 5 4 3 2 1
Real estate—direct ownership 5 4 3 2 1
Real estate—limited partnerships 5 4 3 2 1
Oil and gas 5 4 3 2 1
Collectibles 5 4 3 2 1
Precious metals 5 4 3 2 1
Insurance products 5 4 3 2 1

Assessment

Any other thoughts on behavioral finance topics, like this?

Conclusion

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ACO Home-Visit Initiatives

ACCOUNTABLE CARE ORGANIZATIONS

By MCOL and Charlene Ice

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ACOs That Offer 6 Primary Care Services

  • home-based primary care: 37%
  • care coordination: 24%
  • care transitions support: 13%
  • addressing social needs: 13%
  • acute hospital-level services: 11%
  • palliative care services: 2%

Notes: From an article entitled, “Characteristics of Home-Based Care Provided by Accountable Care Organizations,” by Robert E. Mechanic, MBA, Jennifer Perloff, PhD, Amy R. Stuck, PhD, RN, Christopher Crowley, PhD. In a 2019 ACO survey, 40 out of 151 responding ACOs reported formal home-visit initiatives serving high-need, high-cost patients.

Source: The American Journal of Managed Care, May 12, 2022
Source URL: https://www.ajmc.com/view/characteristics-of-home-based-care…

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COMMENTS APPRECIATED

Thank You

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PODCAST: What is the Corporate Bankruptcy ZETA Model?

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By Dr. David Edward Marcinko MBA CMP®

SPONSOR: http://www.CertifiedMedicalPlanner.org

CMP logo

What Is the Zeta Model Altman Score?

The Zeta Model is a mathematical model that estimates the chances of a public company going bankrupt within a two-year time period. The number produced by the model is referred to as the company’s Z-score (or zeta score) and is considered to be a reasonably accurate predictor of future bankruptcy.

REF: https://c996d1545ece1ca2b7ff440941e7b83b.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

CITE: https://www.r2library.com/Resource/Title/082610254

The model was published in 1968 by New York University professor of finance Edward I. Altman. The resulting Z-score uses multiple corporate income and balance sheet values to measure the financial health of a company.

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Altman's Z-Score Model - Overview, Formula, Interpretation

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READ: https://pages.stern.nyu.edu/~ealtman/ZETA-Analysis.pdf

PODCAST: https://www.bing.com/videos/search?q=altman+z-score&&view=detail&mid=A638789D96F2C2946170A638789D96F2C2946170&&FORM=VRDGAR&ru=%2Fvideos%2Fsearch%3Fq%3Daltman%2Bz-score%26FORM%3DHDRSC3

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A Brief Historical Review of Behavioral Finance and Economics

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And Related Influential Thought-Leaders

  • Dr. Brad Klontz CSAC CFP®
  • Dr. Ted Klontz PsyD
  • Dr. Eugene Schmuckler MBA MEd CTS
  • Dr. Kenneth Shubin-Stein FACP CFA
  • Dr. David Edward Marcinko MEd MBA CMP™

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doctor

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James O. Prochaska PhD, Professor of Psychology and Director of the Cancer Prevention Research Center at the University of Rhode Island, developed the Trans-Theoretic Model of Behavior Change [TTM] which has been evolving since in 1977. Nominated as one of the five most influential authors in Psychology, by the Institute for Scientific Information and the American Psychological Society, Dr. Prochaska is author of more than 300 papers on behavior change for health promotion and disease prevention.

TTM Stages of Change

In his Trans-Theoretical Model, behavior change is a “process involving progress through a series of these stages:

  • Pre-Contemplation (Not Ready) – “People are not intending to take action in the foreseeable future, and can be unaware that their behavior is problematic”
  • Contemplation (Getting Ready) – “People are beginning to recognize that their behavior is problematic, and start to look at the pros and cons of their continued actions”
  • Preparation (Ready) – “People are intending to take action in the immediate future, and may begin taking small steps toward behavior change”
  • Action – “People have made specific overt modifications in changing their problem behavior or in acquiring new healthy behaviors”
  • Maintenance – “People have been able to sustain action for a while and are working to prevent relapse”
  • Termination – “Individuals have zero temptation and they are sure they will not return to their old unhealthy habit as a way of coping”

Relapse

In addition, researchers conceptualized “relapse” (recycling) which is not a stage in itself but rather the “return from Action or Maintenance to an earlier stage.” In medical care, these stages of behavior change have applicability to anti-hypertension and lipid lowering medication use, as well as depression prevention, weight control and smoking cessation.

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Psychology

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Uniting Psychology and Financial Behavior

More recently, validating the emerging alliance between psychology (human behavior) and finance (economics) are two Americans who won the Royal Swedish Academy of Science’s 2002 Nobel Memorial Prize in Economic Science. Their research was nothing short of an explanation for the idiosyncrasies incumbent in human financial decision-making outcomes.

Enter Kahneman and Smith

Daniel Kahneman, PhD, professor of psychology at Princeton University, and Vernon L. Smith, PhD, professor of economics at George Mason University in Fairfax, Va., shared the prize for work that provided insight on everything from stock market bubbles, to regulating utilities, and countless other economic activities. In several cases, the winners tried to explain apparent financial paradoxes.

For example, Professor Kahneman made the economically puzzling discovery that most of his subjects would make a 20-minute trip to buy a calculator for $10 instead of $15, but would not make the same trip to buy a jacket for $120 instead of $125, saving the same $5.

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in vitro and in-vivo Economics

Initially, in the 1960’s, Smith set out to demonstrate how economic theory worked in the laboratory (in vitro), while Kahneman was more interested in the ways economic theory mis-predicted people in real-life (in-vivo). He tested the limits of standard economic choice theory in predicting the actions of real people, and his work formalized laboratory techniques for studying economic decision making, with a focus on trading and bargaining.

Later, Smith and Kahneman together were among the first economists to make experimental data a cornerstone of academic output. Their studies included people playing games of cooperation and trust, and simulating different types of markets in a laboratory setting. Their theories assumed that individuals make decisions systematically, based on preferences and available information, in a way that changes little over time, or in different contexts.

University of Chicago

By the late 1970’s, Richard H. Thaler, PhD, an economist at the University of Chicago also began to perform behavioral experiments further suggesting irrational wrinkles in standard financial theory and behavior, enhancing the still embryonic but increasingly popular theories of Kahneman and Smith.

Laboratory

Other economists’ laboratory experiments used ideas about competitive interactions pioneered by game theorists like John Forbes Nash Jr., PhD, who shared the Nobel in 1994, as points of reference.

Assessment

But, Kahneman and Smith often concentrated on cases where people’s actions departed from the systematic, rational strategies that Nash envisioned. Psychologically, this was all a precursor to the informal concept of life or holistic financial planning. Kahneman was awarded the Medal of Freedom, by President Barack Obama, on November 20, 2013.

READ: Behavioral Economics and Psychology DEM

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Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners(TM)

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Prioritizing Mental Health Care In America

By NIHCM Infographics

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Data Insights

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By the end of 2021, Americans found themselves in one of the worst nationwide mental health crises in years. Nearly 1 in 5 U.S. adults experience a mental illness each year, or more than 50 million people. Unfortunately, less than half of the people in need ever receive the mental health care they require. Due to physician burnout, a workforce shortage, and poor funding, this country has long struggled with handling the growing mental health crisis and providing equitable access to behavioral health care.

The mental health system in America may be largely broken, but conditions are ideal for transforming the system with scientific advances, improved coverage, and political consensus on the importance of mental health. Goals once thought to be long out of reach may soon be possible.

CITE: https://www.r2library.com/Resource/Title/082610254

This NIHCM infographic highlights the many challenges contributing to America’s mental health crisis as well as steps to improve and strengthen mental health care and the behavioral health industry and promote individual resiliency.

NIHCM: https://tinyurl.com/3whz69vk

ME-P: https://medicalexecutivepost.com/2022/06/02/medical-workplace-violence-prevention-guidelines/

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