Investing Advice for Incoming Med Student?

[bostonbean]

Hi guys!

I was hoping to get some advice on where/how to invest some money before I go to medical school this Fall.
Some background on my financial situation:
I was fortunate enough to have my parents pay for my undergraduate tuition so I currently have no debt. This being said, I don't want to burden them with paying for medical school so I will most likely be taking out $80,000 in loans for each year of medical school. I currently have savings of about $20,000 just sitting in a savings account and after reading a lot of the posts here, I think it would be a good idea to invest most of that long-term in an index fund.

Here is my plan:
Keep about $5000 as emergency money and invest $15,000. Of the $15,000, invest $6,000 in a Roth IRA (the annual maximum), and invest the rest ($9,000) in a taxable account (still would be index fund only) over the next three months through dollar-cost averaging. I would put down $3,000 to open an account and buy in with $1,000 every two weeks for a total of 12 weeks. This would hopefully help me catch the bottom of this COVID-19 market crash. The end goal would be to take out some of the money in the taxable account by the end of residency (possibly about 10 years from now but who knows) for a down payment on a house/car.

Also I would greatly appreciate any advice on which index funds to look at. Doing some research, I was interested in VFIAX (less risky) and VIGAX (more risky). Any suggestions between the two or others?

I'm just getting started in all this (just started reading The White Coat Investor) and would appreciate any help you could offer!

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[TMP-SMX]

Take less loans

 

[bostonbean]

Take less loans

Unfortunately tuition is fairly expensive so there's only so much I can lower the loans. Do you think I shouldn't invest the money and use it to take less loans?

 

[sliceofbread136]

Unfortunately tuition is fairly expensive so there's only so much I can lower the loans. Do you think I shouldn't invest the money and use it to take less loans?

correct. Do your very best to cash flow medical school. Investing on leverage is never a good idea for the average joe

320k is an astronomical amount of student loans. Do your best to lower that as much as possible

 

[ThoracicGuy]

Hi guys!

I was hoping to get some advice on where/how to invest some money before I go to medical school this Fall.
Some background on my financial situation:
I was fortunate enough to have my parents pay for my undergraduate tuition so I currently have no debt. This being said, I don't want to burden them with paying for medical school so I will most likely be taking out $80,000 in loans for each year of medical school. I currently have savings of about $20,000 just sitting in a savings account and after reading a lot of the posts here, I think it would be a good idea to invest most of that long-term in an index fund.

Here is my plan:
Keep about $5000 as emergency money and invest $15,000. Of the $15,000, invest $6,000 in a Roth IRA (the annual maximum), and invest the rest ($9,000) in a taxable account (still would be index fund only) over the next three months through dollar-cost averaging. I would put down $3,000 to open an account and buy in with $1,000 every two weeks for a total of 12 weeks. This would hopefully help me catch the bottom of this COVID-19 market crash. The end goal would be to take out some of the money in the taxable account by the end of residency (possibly about 10 years from now but who knows) for a down payment on a house/car.

Also I would greatly appreciate any advice on which index funds to look at. Doing some research, I was interested in VFIAX (less risky) and VIGAX (more risky). Any suggestions between the two or others?

I'm just getting started in all this (just started reading The White Coat Investor) and would appreciate any help you could offer!

Just an FYI, but unless you have a job with income, you wouldn't be able to contribute to an IRA. I would fund the IRA if able, and then use the rest to help you pay for school or living expenses in addition to having an emergency fund. That is something that many students wouldn't have and if you needed it you'd be glad you had it.

If you insist on investing, I'm partial to VTSAX (Total Market Index Fund).

 

[bostonbean]

Just an FYI, but unless you have a job with income, you wouldn't be able to contribute to an IRA. I would fund the IRA if able, and then use the rest to help you pay for school or living expenses in addition to having an emergency fund. That is something that many students wouldn't have and if you needed it you'd be glad you had it.

If you insist on investing, I'm partial to VTSAX (Total Market Index Fund).

Thanks for the advice. I'm near the end of my second gap year working in clinical research. I guess I can still max out a Roth IRA for 2019 and do the same for the 2020 cycle as well. I'll also take the advice of limiting my loans by not opening a taxable account and living frugally for the next 4+ years.

 

[ThoracicGuy]

Thanks for the advice. I'm near the end of my second gap year working in clinical research. I guess I can still max out a Roth IRA for 2019 and do the same for the 2020 cycle as well. I'll also take the advice of limiting my loans by not opening a taxable account and living frugally for the next 4+ years.

Indeed. Even though the tax deadline is moved, I've not seen anything about IRA contributions, so I'd get that in ASAP if you haven't already for 2019. If you don't have an IRA set up anywhere, I would recommend Vanguard. I would sit that money into VTSAX and forget about it.

 

[Trogghunter]

Thanks for the advice. I'm near the end of my second gap year working in clinical research. I guess I can still max out a Roth IRA for 2019 and do the same for the 2020 cycle as well. I'll also take the advice of limiting my loans by not opening a taxable account and living frugally for the next 4+ years.

I will take the opposite view regarding the above advice for a few reasons, assuming that you're less than 35 years old. Don't contribute to retirement, the relative value of your 20k now is considerably more than 20k when you're an attending. Probably 7-10x more and even more than when you retire. You should be enjoying your experience in school as much as possible, and worrying about retirement is pointless. Mental health is more important than financial health. Don't take out as few loans as possible. The difference in taking full amount for living expenses vs $3,000 less per semester does not make much of a difference, IMO, relative to what your total loan burden will be. At current interest rates, you'll probably be at or over $450,000 by the time you are half way through residency. Accept that now and move on. Nothing that you do is going to change that unless you hit the lottery. Maybe you'll get lucky with loan forgiveness. Maybe you'll be in a high paying specialty and can pay off the balance in a few years.

Going forward, yes, I would be investing the money that you have especially given the current market decline. I was in a similar situation and started med school in 2010 around the trough of the market, and I had a few thousand dollars that I put into index funds and contributed to in school (I worked as a scribe) and by the time I finished residency, I was sitting on a nice fat chunk of money still in my 20s. You could even invest your loan money if that is allowed. The market beats your loan interest on average and in some years significantly. Last year, an average tech mutual fund would have beaten it +42% vs -7%. Won't happen every year, but you get the idea. This is not advice, just bringing it to your attention. I would not invest in risky equities, just stick to mutual funds and do what you want with that money. Start a Fidelity, Vanguard, etc trading account and start learning about investing now, because it'll help when you're making attending money and can put your money to work.

This all depends on your situation, your risk tolerance, your time frame, etc. I personally never understood the need to max out 2+ retirement accounts if you're young and planning to stay in medicine for a long career. Invest in your health, guarantee your revenue stream(don't get kicked out of school, get own occupation disability insurance after residency) and enjoy the process. Money WILL come later, but there is no reason why you can't make some along the way and there is no reason to have a poor quality of life, just don't be frivolous.

Another point to remember, and this is very important, despite your accomplishments and intelligence. With investing, you must accept that you don't know jack **** about the market, and don't think that you've found some risky investment that will beat the market.