Financial Advisor?

[fozzy40]

Hello. I was recently told to establish a relationship with a financial advisor during my last year of med school. My mentor said it is a smart way to go since "doctors alway seem to think they know how to manage their money." Any thoughts?

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[The White Coat Investor]

Hello. I was recently told to establish a relationship with a financial advisor during my last year of med school. My mentor said it is a smart way to go since "doctors alway seem to think they know how to manage their money." Any thoughts?

Let me give you an idea of what most investor's return goes to:

Let's say you make a 9% return.

3% goes to inflation
2% goes to taxes

That leaves 4%. Would you like to give 1-1.5% of that to a financial advisor? Why shouldn't he get 1/3 of your true earnings just because it is all your money that is invested?

Do yourself a favor and educate yourself. You spent way too long learning to make money to not learn how to take care of it. Start here:

Diehards.org

They have a reading list that will help a great deal. You may also consider a book called the Boglehead's guide to investing.

Most people who use financial advisors are astounded to learn how much it costs them in the end.

 

[fozzy40]

Thanks!

 

[Jocomama]

I agree with Desperado. Unless you are making the $$, which you will not be for quite some time, you should try to understand the basics of business.
Even those of us who have investing experience outside medicine will still get input from advisors, or mentors. Then as we gain experience with the advisor, and our own attempts, we may or may not change.

 

[fozzy40]

I appreciate everyone's input. I'm not financially savvy/educated so I guess it's a little overwhelming to think about loans, save money, and buy a condo for residency. I'll start with the Vanguard website. Any other suggestions are appreciated!

 

[mshheaddoc]

There are "fee-only" advisors and I suggest those are the only way you should good. Those are flat fees you pay. Usually cheaper but don't expect much. Make sure they are CERTIFIED with multiple credentials (particularly NAPFA) but for your purposes I would go with regular mutal funds or something of the sort in a portfolio.

Don't forget that you also need to sock everything in a Roth and 403b during residency either

 

[UserNameNeeded]

Don't forget that you also need to sock everything in a Roth and 403b during residency either

I know about the Roth IRA and why it's good, but what's the deal with the 403b?

 

[mshheaddoc]

its like a 401K but some organizations have 403b's instead (non-profits, etc)

 

[csly]

I'm sure some of you guys are aware of this, but you can not write covered calls on mutal funds, you can however on EFTs. Here is a way to beat 95% of the money mangers. Use tech and fund analysis to find solid EFTs, buy them and write covered calls.

 

[csly]

Double post, sorry

 

[jkhamlin]

There are "fee-only" advisors and I suggest those are the only way you should good. Those are flat fees you pay. Usually cheaper but don't expect much. Make sure they are CERTIFIED with multiple credentials (particularly NAPFA) but for your purposes I would go with regular mutal funds or something of the sort in a portfolio.

Don't forget that you also need to sock everything in a Roth and 403b during residency either

I disagree. If you have discretionary income during residency, your first priority is student loans. As much as it seems like a good idea to put money away for retirement, your first objective should be to eliminate debt first, or the interest on your debt will, in effect, cancel out what you make off of your investments. To further complicate this, many people will be purchasing a home during residency, which is increasing debt. This further prioritizes debt elimination. If you still have discretionary income after this, or you don't have student loans or any other debt, then you put money into 401(K) or 403(B) up to company match, then switch to Roth up to limit, then back to 401(K) / 403(B) up to the limit. After that, look into other investments. At least, that is the best way to maximize your money.

 

[Apollyon]

For the practice group I joined (Emergency Medicine), one of the selling points is that the group covers financial advising from Charles Schwab (and not the bargain-basement) for retirement planning/future planning. As the group president put it (as close as I can remember): "We were going to pay for gym memberships, but we figured most people were more savvy about picking a gym than they were for financial advising."

 

[Jocomama]

Can't make blanket statement.
IT depends upon how much discretionary income. Depends upon the amount, and rate of student loans.
You should always put a portion towards 401K, especially if matching. At the same time, look at the rate of student loans vs rate of other debts. Take into account the tax deductibilty, then correlate the final post-tax rate on debt, vs post-tax rate on investments, and do the math.
OH - And NEVER pay down your mortgage. Interest only during residency on your primary home, unless you have a lot of discretionary income.

There is no clear answer here and I would get an accountant to help weight the best options. I do not suggest any financial advisor at this time. Unless you have $100K liquid at a minimum, no need to pay fees for advisors.

I disagree. If you have discretionary income during residency, your first priority is student loans. As much as it seems like a good idea to put money away for retirement, your first objective should be to eliminate debt first, or the interest on your debt will, in effect, cancel out what you make off of your investments. To further complicate this, many people will be purchasing a home during residency, which is increasing debt. This further prioritizes debt elimination. If you still have discretionary income after this, or you don't have student loans or any other debt, then you put money into 401(K) or 403(B) up to company match, then switch to Roth up to limit, then back to 401(K) / 403(B) up to the limit. After that, look into other investments. At least, that is the best way to maximize your money.

 

[jkhamlin]

Can't make blanket statement.
IT depends upon how much discretionary income. Depends upon the amount, and rate of student loans.
You should always put a portion towards 401K, especially if matching. At the same time, look at the rate of student loans vs rate of other debts. Take into account the tax deductibilty, then correlate the final post-tax rate on debt, vs post-tax rate on investments, and do the math.
OH - And NEVER pay down your mortgage. Interest only during residency on your primary home, unless you have a lot of discretionary income.

There is no clear answer here and I would get an accountant to help weight the best options. I do not suggest any financial advisor at this time. Unless you have $100K liquid at a minimum, no need to pay fees for advisors.

You just made a blanket statement.

 

[etf]

You just made a blanket statement.

and a part of which i personally disagree with. i know that pre-paying a mortgage is bad, because you lose both the tax deductability of the interest as well as the ability to earn more money investing the excess, but I myself plan to get rid of my mortgage as soon as possible - it's more of a psychological thing. maybe if interest rates go to like 1%, i would take out a giant mortgage to capitalize on basically free money.

 

[The White Coat Investor]

Paying down unsubsidized and high rate loans should be a priority. If you have an 8% loan, paying it off is an 8% guaranteed investment. You won't find that anywhere else.

I opted to fund Roth IRAs rather than pay down loans because once I become a civilian physician I won't qualify to put money in an IRA. That tax-deferred money is HUGE for a physician. I currently fully fund my tax-free and tax-deferred accounts AND pay extra on the mortgage, but if I had to choose one, I would definitely fund the Roth first. Super valuable for a doc.

Of course, anytime you hold a loan AND buy stocks, you are in effect buying stocks on margin. So keep that in mind.

 

[The White Coat Investor]

For the practice group I joined (Emergency Medicine), one of the selling points is that the group covers financial advising from Charles Schwab (and not the bargain-basement) for retirement planning/future planning. As the group president put it (as close as I can remember): "We were going to pay for gym memberships, but we figured most people were more savvy about picking a gym than they were for financial advising."

A brilliant Schwab adviser pulled off a major coup there. I recently rescued my father and his investments from a Charles Schwab advisor who was sucking off 1.5-2% a year with his wrap account fees and commissions.

Please don't make the mistake of trusting someone who works for a for-profit brokerage house to give you competent financial advice. You spent too many nights on trauma call to give your money away like that.

 

[jkhamlin]

and a part of which i personally disagree with. i know that pre-paying a mortgage is bad, because you lose both the tax deductability of the interest as well as the ability to earn more money investing the excess, but I myself plan to get rid of my mortgage as soon as possible - it's more of a psychological thing. maybe if interest rates go to like 1%, i would take out a giant mortgage to capitalize on basically free money.

I never suggested pre paying a mortgage; however, in certain circumstances it is a good thing to do. Not necessarily a priority, though, when completing a residency, but other debt is most certainly a priority before investing. I mentioned it because it is debt, and it does increase the debt load.

 

[jkhamlin]

Paying down unsubsidized and high rate loans should be a priority. If you have an 8% loan, paying it off is an 8% guaranteed investment. You won't find that anywhere else.

I opted to fund Roth IRAs rather than pay down loans because once I become a civilian physician I won't qualify to put money in an IRA. That tax-deferred money is HUGE for a physician. I currently fully fund my tax-free and tax-deferred accounts AND pay extra on the mortgage, but if I had to choose one, I would definitely fund the Roth first. Super valuable for a doc.

Of course, anytime you hold a loan AND buy stocks, you are in effect buying stocks on margin. So keep that in mind.

 

[jkhamlin]

A brilliant Schwab adviser pulled off a major coup there. I recently rescued my father and his investments from a Charles Schwab advisor who was sucking off 1.5-2% a year with his wrap account fees and commissions.

Please don't make the mistake of trusting someone who works for a for-profit brokerage house to give you competent financial advice. You spent too many nights on trauma call to give your money away like that.

The places that supposedly have no fees or commissions have plenty of fees and commissions worked in somewhere. The best thing to do is to realize this, make the best of the services provided, and find the ones with the best combination of low fees and investment potential.

 

[mshheaddoc]

IT depends upon how much discretionary income. Depends upon the amount, and rate of student loans.
You should always put a portion towards 401K, especially if matching. At the same time, look at the rate of student loans vs rate of other debts. Take into account the tax deductibilty, then correlate the final post-tax rate on debt, vs post-tax rate on investments, and do the math.
OH - And NEVER pay down your mortgage. Interest only during residency on your primary home, unless you have a lot of discretionary income.

There is no clear answer here and I would get an accountant to help weight the best options. I do not suggest any financial advisor at this time. Unless you have $100K liquid at a minimum, no need to pay fees for advisors.

Paying down unsubsidized and high rate loans should be a priority. If you have an 8% loan, paying it off is an 8% guaranteed investment. You won't find that anywhere else.

I opted to fund Roth IRAs rather than pay down loans because once I become a civilian physician I won't qualify to put money in an IRA. That tax-deferred money is HUGE for a physician. I currently fully fund my tax-free and tax-deferred accounts AND pay extra on the mortgage, but if I had to choose one, I would definitely fund the Roth first. Super valuable for a doc.

Of course, anytime you hold a loan AND buy stocks, you are in effect buying stocks on margin. So keep that in mind.

I have to say that I agree with these two posters. Everyone has their own personal standpoint on finance. I for one will never ever pre-pay a mortgage if I have student loans outstanding. And I will probably not pay my federal student loans off until the private ones are paid off. I won't start paying down the private loans until my higher credit cards are paid off. Just my philosophy in minimizing interest. Of course you also have to take into account the balances on these vehicles and rearrange accordingly

In residency your retirement should come first for reasons that Desperado pointed out.

Financial planners can be a good way to go but I'm surprised that no one has commented on the fixed fee financial planners. You can't get anything for free but there are some great planners out there. But you as the consumer have to do your own homework and understand what you are getting yourself into and be proactive for finding information.

 

[jkhamlin]

I have to say that I agree with these two posters. Everyone has their own personal standpoint on finance. I for one will never ever pre-pay a mortgage if I have student loans outstanding. And I will probably not pay my federal student loans off until the private ones are paid off. I won't start paying down the private loans until my higher credit cards are paid off. Just my philosophy in minimizing interest. Of course you also have to take into account the balances on these vehicles and rearrange accordingly

In residency your retirement should come first for reasons that Desperado pointed out.

Financial planners can be a good way to go but I'm surprised that no one has commented on the fixed fee financial planners. You can't get anything for free but there are some great planners out there. But you as the consumer have to do your own homework and understand what you are getting yourself into and be proactive for finding information.

Desperado seems to be saying that paying off loans comes first, except in his very unique situation.

 

[mshheaddoc]

Then for clarification his outlook on Roths is what I was specifically looking at. He is right that you should pay down your debts but for his specific situation is a generalized situation that most residents will also face.

 

[InvestingMD]

I disagree. If you have discretionary income during residency, your first priority is student loans. As much as it seems like a good idea to put money away for retirement, your first objective should be to eliminate debt first, or the interest on your debt will, in effect, cancel out what you make off of your investments. To further complicate this, many people will be purchasing a home during residency, which is increasing debt. This further prioritizes debt elimination. If you still have discretionary income after this, or you don't have student loans or any other debt, then you put money into 401(K) or 403(B) up to company match, then switch to Roth up to limit, then back to 401(K) / 403(B) up to the limit. After that, look into other investments. At least, that is the best way to maximize your money.

Wrong. Many people see debt and they say BAD!!! Get rid of it. Good debt is beneficial when you leverage it to your advantage. For example, I'm in debt on my bed. $1000 with 0% for 2 yrs. I pay minimum payments. For those 2 years though, I'm using the cash I would be paying for the bed and placing it into a Money Market account making 4.5%. I'm making money with good debt while not even working!

Student loans are another example of good debt. Say your loans are at 6.8%.. Using the tax writeoffs, your effective rate is around 4.4%. If you can manage more than 4.4% annual return, you should be making minimum payments on your loans and saving in your Roth. Plus, an extra into a non-retirement account. I've got a 12% gain on my portfolio from 2006. So in effect, I've made an net gain on my free money of 8% last year. No work required.

Always keep your money fluid though. If a recession comes and you believe that you can only squeek out a small gain in the market or 3% at your bank then it's time to pay your loans.

ALWAYS Pay your biggest interest off FIRST, unless you can make more money than your biggest interest.

 

[InvestingMD]

Can't make blanket statement.
IT depends upon how much discretionary income. Depends upon the amount, and rate of student loans.
You should always put a portion towards 401K, especially if matching. At the same time, look at the rate of student loans vs rate of other debts. Take into account the tax deductibilty, then correlate the final post-tax rate on debt, vs post-tax rate on investments, and do the math.
OH - And NEVER pay down your mortgage. Interest only during residency on your primary home, unless you have a lot of discretionary income.

There is no clear answer here and I would get an accountant to help weight the best options. I do not suggest any financial advisor at this time. Unless you have $100K liquid at a minimum, no need to pay fees for advisors.

The reasoning for never paying your mortgage? Paying interest only is basically RENTING. You are just paying the bank some cash but You are building no equity. And if you only want to rent, why not just RENT a place and skip the insurance fees and property taxes? (And not have to mow your own grass/shovel the sidewalks.)

 

[mshheaddoc]

Interest only = bad.

 

[etf]

The reasoning for never paying your mortgage? Paying interest only is basically RENTING. You are just paying the bank some cash but You are building no equity. And if you only want to rent, why not just RENT a place and skip the insurance fees and property taxes? (And not have to mow your own grass/shovel the sidewalks.)

assuming that your property does not appreciate. which it does. in some cases, a lot. but not so much anymore.

 

[InvestingMD]

If you have an 8% loan, paying it off is an 8% guaranteed investment. You won't find that anywhere else.

Very true. Risk takers can be rewarded but eventually the law of averages will catch up to MOST people getting 10-50% gains.

I opted to fund Roth IRAs rather than pay down loans because once I become a civilian physician I won't qualify to put money in an IRA. That tax-deferred money is HUGE for a physician. I currently fully fund my tax-free and tax-deferred accounts AND pay extra on the mortgage, but if I had to choose one, I would definitely fund the Roth first. Super valuable for a doc.

I agree but you might want to check out this article. Physicians will be able to invest in Roth!
http://money.cnn.com/magazines/mone...8/01/8382153/index.htm?postversion=2006072412

(MONEY Magazine) -- For the first time since Roth IRAs were introduced almost 10 years ago, politicians are finally ready to give everybody the chance to save in these accounts.
In May, Congress eliminated the restriction barring anyone who makes more than $100,000 from converting a traditional IRA to a Roth IRA. Now no matter what your income is, you'll be able to enjoy the chief benefit of a Roth: tax-free income when you retire.

Call me a Roth-o-maniac, but I think you should probably take Washington up on the offer.
A couple of notes: First, the new provision doesn't kick in until 2010. Second, the new law dealt only with conversions, leaving in place rules that prevent you from contributing to a regular Roth account each year if your income is $110,000 or more ($160,000 for couples).
But there's an easy way around this. Just open a nondeductible IRA - which anyone with earned income can do - and then convert it to a Roth.
So by 2010 everyone will be able to have a Roth one way or another.

 

[InvestingMD]

assuming that your property does not appreciate. which it does. in some cases, a lot. but not so much anymore.

LOL. I'm an idiot. I was in post-real estate bubble thoughts. Real estate speculation should be done BEFORE a bull run.. not after a bull run in my point of view. But if you get a residency where you expect a run up, go for it.. If you plan on living there, I recommend building equity instead of paying INTEREST only.. Its also a good way to not "Stretch" your money and live a lifestyle you cannot afford as most INTEREST only people are doing currently.

 

[Jocomama]

I have two homes and sold my condo in S Beach 2 years ago. I had my S Beach condo on an Option Arm through WAMU. I was able to pay either interest only, less than that (neg am), fully amortized 15 or fully amortized 30yr. IT was the BEST thing I ever had. Initially it was 2nd home, then became rental. As rent was higher, I did the 15yr amort and took the advertizing, marketing, etc and had a great Schedule E where my losses were taken against my Capital Gains because that year I was below the AMT on my income.

My ANN Arbor home is interest only 3/1 arm. The values have dropped in the last 2 years. If I sell today, then $10K less then when I bought. If I would have put equity into the house via increased principal payments on my mortgage, I would still have paid the same interest, PLUS I would have given the bank "equity" money in my house. Now that Principal over the last 2 years would be with the bank. SO when I sell my house, I get back my downpayment plus (or minus) the extra money I gave the bank. And that Principal given to the bank via mortgage payment earned NOTHING!!!! Instead I invested my money into a secured note paying 1% per month.

No offense, but this is why I asked to start this Financial Forum. Paying down equity into your house is NOT the way to go. THere are three groups of people that should pay down their mortgages:

1) Those making > $750k - $1mil per year that have their retirement, trusts and other securities all established.
2) THose >55-60yrs who have no other debt and are all set-up with their retirement funds.
3) Investment properties where the rent > PITI and they need to match-out the gains/losses on Schedule E.

With interest only loans, you can pay down principal each month if you like. You have more options.

Thanks

Gee, you think I have an opinion on this mortgage investing stuff, eh?

LOL. I'm an idiot. I was in post-real estate bubble thoughts. Real estate speculation should be done BEFORE a bull run.. not after a bull run in my point of view. But if you get a residency where you expect a run up, go for it.. If you plan on living there, I recommend building equity instead of paying INTEREST only.. Its also a good way to not "Stretch" your money and live a lifestyle you cannot afford as most INTEREST only people are doing currently.

 

[etf]

Very true. Risk takers can be rewarded but eventually the law of averages will catch up to MOST people getting 10-50% gains.



I agree but you might want to check out this article. Physicians will be able to invest in Roth!
http://money.cnn.com/magazines/mone...8/01/8382153/index.htm?postversion=2006072412

(MONEY Magazine) -- For the first time since Roth IRAs were introduced almost 10 years ago, politicians are finally ready to give everybody the chance to save in these accounts.
In May, Congress eliminated the restriction barring anyone who makes more than $100,000 from converting a traditional IRA to a Roth IRA. Now no matter what your income is, you'll be able to enjoy the chief benefit of a Roth: tax-free income when you retire.

Call me a Roth-o-maniac, but I think you should probably take Washington up on the offer.
A couple of notes: First, the new provision doesn't kick in until 2010. Second, the new law dealt only with conversions, leaving in place rules that prevent you from contributing to a regular Roth account each year if your income is $110,000 or more ($160,000 for couples).
But there's an easy way around this. Just open a nondeductible IRA - which anyone with earned income can do - and then convert it to a Roth.
So by 2010 everyone will be able to have a Roth one way or another.

this is what i did for my mom. she had the majority of her retirement investments in ucsf 403(b), 457, and 401(a) accounts - i simply rolled it all over to a fidelity ira. she's got more investment choices now, and come 2010, converting to a roth will be as easy as checking a box online.

 

[UserNameNeeded]

I'm sure some of you guys are aware of this, but you can not write covered calls on mutal funds, you can however on EFTs. Here is a way to beat 95% of the money mangers. Use tech and fund analysis to find solid EFTs, buy them and write covered calls.

What's a covered call?

 

[UserNameNeeded]

this is what i did for my mom. she had the majority of her retirement investments in ucsf 403(b), 457, and 401(a) accounts - i simply rolled it all over to a fidelity ira. she's got more investment choices now, and come 2010, converting to a roth will be as easy as checking a box online.

But aren't you going to have to pay taxes in 2010 on the conversion?

 

[mshheaddoc]

But aren't you going to have to pay taxes in 2010 on the conversion?

Yes you will, but technically if you play it right you can have other deductions to offset part of the taxes. Better to pay them now while you are working and can afford it then when you are on a fixed income with retirement.

 

[etf]

Yes you will, but technically if you play it right you can have other deductions to offset part of the taxes. Better to pay them now while you are working and can afford it then when you are on a fixed income with retirement.

right. in this case, i'm willing to pay taxes now, because i know that by the time she will withdraw the money, it will have grown to a much larger amount, and we'll avoid paying capital gains on any of that.

covered calls are essentially the "safest" option play, in that it is the only one that the government will let you do in a retirement account. basically you're selling the right for someone to buy stock you own at a future date for a specific price, and getting paid to do so. if you have 100 shares of aapl, trading at $95, you can sell 1 call for next month at $100, which means that the person you sell it to can buy the stock you own next month for $100. you're hoping it stays at or below $100, so that the call is unexercised and you keep the premium. worst case scenario, aapl is at like $200 next month and you have to give it away at $100. so you don't really "lose" money per se, since you're still getting a $5/share profit, but you lose the potential appreciation to $200.

 

[The White Coat Investor]

Very true. Risk takers can be rewarded but eventually the law of averages will catch up to MOST people getting 10-50% gains.

I agree but you might want to check out this article. Physicians will be able to invest in Roth!.

I'm quite familiar with the non-deductible IRA to Roth provision in 2010, but I cannot take advantage of it because for the next 4 years I am able to do a regular Roth IRA due to my low (military) income.

Your first comment seems to have missed a very important point of mine. If you have an 8% (or whatever) loan, paying it off is a GUARANTEED investment that will earn 8%. There are no other guaranteed investments at this time paying better than 6.25% as far as I know (that's a CD at the Pentagon credit union BTW.) Just because you invest in emerging market stocks (or whatever) and make 15%, doesn't mean that is a better investment than paying off your loan. Paying off the loan is zero risk so its risk-adjusted returns may be higher than what you made with the stock (or whatever.)

My opinion is that you should generally use your financial options as follows:
1) Pay off loans with egregious interest rates (anything >7.5% IMO)
1) Max out tax-advantaged accounts
2) Pay off loans which have a rate higher than you can make in a good money market account (about 5.1% now)
3) Invest in taxable accounts
4) Pay off loans with very low interest rates (0-5%)

 

[The White Coat Investor]

What's a covered call?

Something 99% of investors don't need to know about.

ETF gives a good explanation but an important point one should know about covered calls is that you retain all the downside potential of the stock/ETF while forfeiting a good portion of the upside potential in exchange for the option premium. You buy a covered call because you don't believe the stock price is going anywhere. If you really don't believe a stock/ETF is going anywhere, why not sell it and buy a bond? Much safer with less downside potential and the same upside potential.

 

[Miami_med]

I have two homes and sold my condo in S Beach 2 years ago. I had my S Beach condo on an Option Arm through WAMU. I was able to pay either interest only, less than that (neg am), fully amortized 15 or fully amortized 30yr. IT was the BEST thing I ever had. Initially it was 2nd home, then became rental. As rent was higher, I did the 15yr amort and took the advertizing, marketing, etc and had a great Schedule E where my losses were taken against my Capital Gains because that year I was below the AMT on my income.

My ANN Arbor home is interest only 3/1 arm. The values have dropped in the last 2 years. If I sell today, then $10K less then when I bought. If I would have put equity into the house via increased principal payments on my mortgage, I would still have paid the same interest, PLUS I would have given the bank "equity" money in my house. Now that Principal over the last 2 years would be with the bank. SO when I sell my house, I get back my downpayment plus (or minus) the extra money I gave the bank. And that Principal given to the bank via mortgage payment earned NOTHING!!!! Instead I invested my money into a secured note paying 1% per month.

No offense, but this is why I asked to start this Financial Forum. Paying down equity into your house is NOT the way to go. THere are three groups of people that should pay down their mortgages:

1) Those making > $750k - $1mil per year that have their retirement, trusts and other securities all established.
2) THose >55-60yrs who have no other debt and are all set-up with their retirement funds.
3) Investment properties where the rent > PITI and they need to match-out the gains/losses on Schedule E.

With interest only loans, you can pay down principal each month if you like. You have more options.

Thanks

Gee, you think I have an opinion on this mortgage investing stuff, eh?

These were good investments in a real estate bull market. I can tell you from experience (and as a person who has most of his family living in the volatile S. Florida housing market), that it is possible to buy property and have it be worth less in actual (let alone inflation adjusted) dollars 10 years later. If you do not pay down the mortgage over that time, you will be stuck with whatever interest rate you have on debt that is covering no value.

Interest only and even more so Neg Am mortgages are investment tools for very Savvy investors, who are in a position to take losses in the case of a market downturn. Most people starting residency are not in this position.

Of course, the general rule of thumb in any sort of economic undertaking is to maximize profit while minimizing risk. Loan repayment is risk free, and it will create a defacto profit of your interest rate-minus interest rate tax deductions. Investments can go from low risk bonds or savings accounts to high risk commodity trading. Calculate potential profit - taxes and apply against the risk of loss based on your personal risk tolerance. Just remember that most people starting residency can tolerate almost NO risk. They have no money to lose. Owing an extra 50-100k on a house than you can gain by selling it at the end of residency can be disasterous if a newly minted specialist, with no income and 250k in student loans, finds himself in the position of having to move for a job.

 

[etf]

Something 99% of investors don't need to know about.

ETF gives a good explanation but an important point one should know about covered calls is that you retain all the downside potential of the stock/ETF while forfeiting a good portion of the upside potential in exchange for the option premium. You buy a covered call because you don't believe the stock price is going anywhere. If you really don't believe a stock/ETF is going anywhere, why not sell it and buy a bond? Much safer with less downside potential and the same upside potential.

well personally i sell covered calls for my citigroup position, because it didn't really go anywhere for 5 years and i kept the stock for the dividend.