There are so many sources of investment data that you can easily find support for any hypothesis. Whether you think a particular stock will rise or fall, there are ample data to back up your judgment. The key to great investing, therefore, is not gathering data, but understanding what it means in relation to the stock market as a whole. And that understanding can only be achieved through critical thinking.

Advisors tell me the first question clients invariably ask about their retirement portfolio is, “What will my investment returns be?”

That’s a legitimate concern, but it’s the wrong question. The first questions should be:

“How much risk does my portfolio have?”

“How many years will my retirement be set back if I lose 25 percent or 50 percent of my investment principal?”

Risk should always be evaluated before potential return. It is not a new idea.

Investors commonly confuse a good business with a good investment. Many good businesses have high expectations embedded in their stock prices. As an investor, you face the task of recognizing whether current expectations are overly optimistic or overly pessimistic. Changes in expectations – not earnings growth – move stock prices.

My son, who is a CPA, called me last week to ask for my advice. After picking the phone up off the floor where I had dropped it, I asked him what was up. It seems that one of his New Year’s resolutions was to do a better job with his equity portfolio. He turned 40 last year, a milestone that apparently prompted a reassessment of his retirement assumptions. Given the inconsistent performance of his portfolio, his dream of selling his practice and sailing off into the sunset at age 50 is in serious jeopardy.

Most medical professionals I talk to consider investment performance — annual returns — the most important element of their retirement portfolio. That’s an important consideration, of course, but of even greater consequence is lowering portfolio risk. Those who expect to be financially secure at retirement typically harbor some misconceptions…

For decades, investment brokers, analysts and other members of Wall Street’s largest investment houses have duped the investing public into buying what they had to sell, rather than what their clients should have.

They have churned out a continuous stream of investment advice that is not only flawed, but more often than not, antithetic to the best interests of their clients. Their strategy plays on basic human emotions of fear and greed, and is self-serving at best, corrupt at worst.

Over the years, I have discussed investment strategies and their relationship to retirement planning objectives with thousands of medical professionals. Inevitably, they want to focus the conversations on investment returns. And while investment returns are certainly important, I suggest a more immediate, and ultimately a more critical consideration, is lowering portfolio risk. The concept of lowering risk without disturbing returns may initially appear to be a secondary consideration, but the retirement planning process can be little more than an exercise unless investor and asset manager agree on a strategy to lower the potential for big portfolio losses.

Most physicians who expect to retire comfortably are headed for a rude awakening. It’s going to take a lot more money than you think to retire at the level you had intended. Not only will living expenses cost more than you think, but your assets probably will not grow as fast as you would like.

If you are like many of the healthcare professionals I have talked with, you may be in for a rude awakening in your financial future: Comfortable retirement is going to require a good deal more money than you imagine.

How much? At an after-tax annual return of 3 percent to 5 percent, it may take from $5 million to $6 million in investable liquid assets for most doctors to retire comfortably. This amount excludes residences and other non-liquid assets that tend to be included when calculating “total net worth.”

You’ve probably thought about how much you’ll need to retire comfortably. But if you haven’t done the calculations, you’ll likely be shocked at the actual amount. Most physicians need $5 million-$6 million in investable, liquid (cash) assets to retire comfortably based on a 3%-5% after-tax annual return.

Most doctors expect to do a lot better than 5% after tax on their portfolios. But most doctors to whom I’ve spoken at investment seminars tend to overestimate what they will earn in the markets.