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What Every Physician-Investor Should Know
And … Why Trade Execution Isn’t Instantaneous!
By Dr. Gary L. Bode MSA CPA CMP [Hon]; PC
Many physician investors who trade through online brokerage accounts assume they have a direct connection to the securities markets.
But, they don’t. When you press “enter,” your order is sent over the Internet to your broker – who in turn decides which market to send it to for execution. A similar process occurs when you call your broker to place a trade.
While trade execution is usually seamless and quick, it does take time. And prices can change quickly, especially in fast-moving markets. Because price quotes are only for a specific number of shares, MD investors may not always receive the price they saw on their screen or the price their broker quoted over the phone. By the time your order reaches the market, the price of the stock could be slightly – or very – different.
Note: No SEC regulations require a trade to be executed within a set period of time. But if firms advertise their speed of execution, they must not exaggerate or fail to tell investors about the possibility of significant delays.
Tip: To avoid buying or selling a stock at a price higher or lower than you wanted, place a limit order rather than a market order. A limit order is an order to buy or sell a security at a specific price. A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher. When you place a market order, you can’t control the price at which your order will be filled.
Example: You want to buy the stock of a “hot” IPO that was initially offered at $9, but don’t want to end up paying more than $20 for the stock. Place a limit order to buy the stock at any price up to $20. By entering a limit order rather than a market order, you will not be caught buying the stock at $90 and then suffering immediate losses as the stock drops later in the day or the weeks ahead.
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Caution: Your limit order may never be executed because the market price may quickly surpass your limit before your order can be filled. But by using a limit order you also protect yourself from buying the stock at too high a price.
More:
ABOUT
Dr. Gary L. Bode was Chief Executive Officer of Comprehensive Practice Accounting, Inc., a firm specializing in providing tax solutions to medical professionals. Originally, he was a board certified podiatrist and managing partner of a multi-office medical practice for a decade before earning his Master of Science degree in Accounting from the University of North Carolina. He then served as Chief Financial Officer [CFO] for a private mental healthcare facility. Today, Dr. Bode is a nationally known Certified Public Accountant, financial author, educator, and speaker. Areas of expertise include producing customized managerial accounting reports, practice appraisals and valuations, restructurings, and innovative financial accounting as well as proactive tax positioning and tax return preparation for healthcare facilities. He has been quoted in Newsweek.
Conclusion
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OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:
- PRACTICES: www.BusinessofMedicalPractice.com
- HOSPITALS: http://www.crcpress.com/product/isbn/9781466558731
- CLINICS: http://www.crcpress.com/product/isbn/9781439879900
- ADVISORS: www.CertifiedMedicalPlanner.org
- FINANCE: Financial Planning for Physicians and Advisors
- INSURANCE: Risk Management and Insurance Strategies for Physicians and Advisors
- Dictionary of Health Economics and Finance
- Dictionary of Health Information Technology and Security
- Dictionary of Health Insurance and Managed Care
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Filed under: CMP Program, Financial Planning, Investing | Tagged: certified medical planner, Gary Bode, robo advisors, stock-brokers, Trade Execution Isn't Instantaneous, trading stocks | 3 Comments »
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