The Kubler Ross Five Stages of Investing #illumedati 1

Hey everyone, it’s Finance Fridays again. My 401k/403b in Residency Series has come to an end, although I may visit it again later. Today we’re going to refocus on the basics and talk about The Kubler Ross Five Stages of Investing.

Stock Photo from: Pixabay

So, this is my version of the The Kubler Ross 5 Stages of Grief. We all learned about this in medical school, or maybe even during a psychology course in college.

Excerpt from Wikipedia:

  1. Denial – The first reaction is denial. In this stage individuals believe the diagnosis is somehow mistaken, and cling to a false, preferable reality.
  2. Anger – When the individual recognizes that denial cannot continue, they become frustrated, especially at proximate individuals. Certain psychological responses of a person undergoing this phase would be: “Why me? It’s not fair!”; “How can this happen to me?”; “Who is to blame?”; “Why would this happen?”.
  3. Bargaining – The third stage involves the hope that the individual can avoid a cause of grief. Usually, the negotiation for an extended life is made in exchange for a reformed lifestyle. People facing less serious trauma can bargain or seek compromise. For instance: “I’d give anything to have him back.” Or: “If only he’d come back to life, I’d promise to be a better person!”
  4. Depression – “I’m so sad, why bother with anything?”; “I’m going to die soon, so what’s the point?”; “I miss my loved one, why go on?”
    During the fourth stage, the individual despairs at the recognition of their mortality. In this state, the individual may become silent, refuse visitors and spend much of the time mournful and sullen.
  5. Acceptance – “It’s going to be okay.”; “I can’t fight it; I may as well prepare for it.”
    In this last stage, individuals embrace mortality or inevitable future, or that of a loved one, or other tragic event. People dying may precede the survivors in this state, which typically comes with a calm, retrospective view for the individual, and a stable condition of emotions.

However, note that this model did receive some criticism, citing lack of empirical evidence, etc. Nonetheless, the model is relatively well-known.

How does this apply to investing?

Well, I think it applies pretty well to the new investor, and maybe even more so to the novice physician investor.

Let me tell you a story:

John Smith, MD just finished his residency. This will be his first year as an attending. He didn’t put any money away into a Roth 401k/403b in Residency. However, he does have the ~$300k in student loans. For most of residency, he was just trying to get “get by”, right?

This is all understandable.

Well, let’s say he doesn’t want to make The Biggest Mistake of His Life, and has therefore decided to put away the maximum in his first half year as an attending.

Let’s start with the Five Stages of Investing now:


John Smith, MD went straight through college, medical school, and residency. So he’s around 30 years old. For the last 12 years or so he has been completely focused on medicine, as a pre-med, med student, and resident. However… John Smith considers himself to be a smart guy. He did get a 3.8 GPA in hard pre-med classes, a 40 on the MCAT, and was top 10% of his med school class. He got into a good residency program and has been repeatedly told by his attendings and peers that he’s a smart resident and will make a good attending.

For all the reasons above, John thinks this finance and investing stuff isn’t hard comparatively. As such, he hasn’t read any books and is relying solely on any knowledge he picked up from his life experiences. I mean, it’s easy right? Supply and Demand. Buy Low Sell High. All that stuff I learned in Econ 101 as a freshman.


So then, without reading any books on investing, John Smith pushes forward with his 401k choosing Small Caps and other more volatile stock offerings. Looking at the past year, this particular fund did great, it should continue to do great right? It made 20%, that’s much more than the measly 5% return than VTSAX made. Who would choose a fund that only made 5% last year? (Sensei’s note, VTSAX didn’t make 5% in 2016, it made 18%. However, this is for illustrative purposes.)



John Smith, MD continues with his job, paying down his loans, and keeps contributing to his 401k like clockwork. Let’s say a few years pass.

I wonder how my stocks are doing?

The funds that John chose did very well in 2016. However, because of their volatility and the market, they did very poorly in 2017-2020. Additionally, because of their high expense ratios and loads, the $18k a year John has put in over the last few years has barely gained any compound interest.

John is FURIOUS.

Why isn’t compound interest working for me? I’m smarter than these “business guys”. There must be some trick to it. I’m being cheated out of my hard-earned money by these vultures.


So what does John do now? He tries to bargain.. with himself.

What if I had put my money into this Mid-Cap or this Large-Cap fund instead? How much money would I have then?

Is there a way to recoup this money somehow?

I KNOW. I can transfer all of into this other fund which did very well between 2017-2020. It’ll do great and then I can just recoup my losses.



Surprise! This other fund didn’t do well between 2020-2023 and the previous fund did well! Poor John is depressed now.

No matter what I do, I lose money. Nothing matters. I should just put all of it into bonds, those are the least volatile right?

I’ll just put them all in bonds.


Bonds are the least volatile, he’s right. But their return will barely keep up with inflation… a 100% bond portfolio is not a good idea.


John finally sits down and says “I have no idea what I’m doing.”

Illustrative Meme:

Now accepting his own limitations, John finally sits down and either reads a finance blog (like mine), a few books, or both. Then he learns to Talk the Talk and The Philosophy.

After examining the fund offerings available to him, he figures out which funds are best to approximate his portfolio. Hopefully, after this process he is a Boglehead, or some variant of one.

Did it really need to take him so long?

No, of course not. This is just an illustrative example, but I don’t think it’s that far off from what can (or has) happened before.

Of course, this can also apply to a different scenario, and probably more common scenario:

John puts his 401k into a Target fund (because he was told to), and then tries to pick his own stocks in an investment account. However, the Five Stages of Investing still apply.

You don’t know what you don’t know.

It amazes me that physicians think that just because they are intelligent enough to learn medicine that they gives them a shortcut to understanding anything else. Let me ask you this:

If you need a new roof, do you just decide to go to Home Depot or Lowes and buy shingles and start tearing the old roof off your house?

You would do this despite never learning how to put on a roof?

And yet, you think that you can just start investing with little or knowledge and “beat everyone”?

That doesn’t make sense.

“I don’t want to read anymore. That’s all I did in medical school.”

I understand. However, would you rather set your money on fire or read a book/blog?

For many of you, I think you would still choose the latter.

However, if you’re already reading my blog, the above should never happen to you.

My hope is that by making medical students and residents aware of things early in their career that they won’t be like John Smith or Dr. Yoloswag. I also want to make sure they don’t pay AUM. One of the main reasons I wrote a whole series on Roth 401/403b in Residency is because I think it is important to establish some degree of financial literacy early as well as understanding that you need to grow slowly into your money.

If you live like a college student as a resident, you can live like a resident as an attending.

However, your job as someone reading my blog is to spread awareness to the rest of your medical student, resident, and attending colleagues.


Kubler Ross Five Stages of Grief can parallel Investing.

In my example, don’t be like John Smith, MD.

It still amazes me that people (especially doctors) would start investing with little knowledge of it.

It’s like reroofing your house without ever learning how.

Would you rather set your money on fire… or read a book/blog?



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