Just started residency, need some portfolio advice

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Just started residency, need some portfolio advice

Postby brokemedstudent » Sun Jun 30, 2013 10:38 pm

Hi everyone,

I just started pediatric residency and have been offered to participate in my hospital's 403b plan. I was hoping to receive some guidance from fellow Bogleheads, as I still have some questions after reading the Bogleheads' Guide to Investing and All About Asset Allocation books.

Emergency funds: $10k
Debt: $300k, interest rates vary between 6.8% and 7.9%. I anticipate a couple inheritances (~$50-100k) in the near future that I will put towards paying this down.
Tax Filing Status: Single
Tax Rate: 25% Federal, 5.25% State
State of Residence: MA
Age: 26
Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 20% of stocks

Anticipated Asset Allocation Breakdown: Once my portfolio is established, this is the allocation that I hope to maintain.
1) Equity (80%)
• Total U.S. Equity Market 40%
• Small Cap Value 10%
• International Equity 20%
• REIT 10%

2) Fixed Income (20%)
• Total Bond Market 15%
• TIPS 5%


Current Retirement Assets:

Taxable
30% McDonald's common stock (MCD)
30% Intel common stock (INTC)
10% Cash

His 403b at Fidelity
0% (just enrolled, see below)

His Roth IRA at Vanguard
30% Vanguard Total Bond Market Index Fund (VBMFX) (0.20%)

New Annual Contributions (anticipated):
$10,000 his 403b (no company match)
$5,500 his Roth IRA
$0 taxable

Available Funds:

Funds available in his 403b at Fidelity

JPMorgan SmartRetirement 2010 Fund (JSWIX) (0.77%)
JPMorgan SmartRetirement 2015 Fund (JSFIX) (0.80%)
JPMorgan SmartRetirement 2020 Fund (JTTIX) (0.84%)
JPMorgan SmartRetirement 2025 Fund (JSNIX) (0.88%)
JPMorgan SmartRetirement 2030 Fund (JSMIX) (0.92%)
JPMorgan SmartRetirement 2035 Fund (SRJIX) (0.96%)
JPMorgan SmartRetirement 2040 Fund (SMTIX) (0.99%)
JPMorgan SmartRetirement 2045 Fund (JSAIX) (1.01%)
JPMorgan SmartRetirement 2050 Fund (JTSIX) (1.03%)
JPMorgan SmartRetirement Income Fund(JSIIX) (0.75%)
American Century Investments Mid Cap Value Fund (AVUAX) (0.81%)
Fidelity Contrafund Fund Class K (FCNKX) (0.63%)
Fidelity Growth Company Fund Class K (FGCKX) (0.77%)
JPMorgan US Equity Fund (JMUEX) (0.68%)
MFS International Diversification Fund Class R4 (MDITX) (1.10%)
Fidelity Spartan Total Market Index Institutional Fund (FSKTX) (0.07%)
PIMCO Total Return Fund Administrative Class (PTRAX) (0.71%)
American Funds New Perspective R6 Fund (RNPGX) (0.46%)
Columbia Dividend Opportunity Fund Class Z (CDOZX) (0.85%)
Fidelity Low-Priced Stock Fund (FLPKX) (0.76%)
Fidelity Small Cap Discovery Fund (FSCRX) (1.07%)
Franklin International Small Cap Growth Fund (FKSCX) (1.20%)
Goldman Sachs Small Cap Value Institutional Fund (GSSIX) (1.04%)
ING MidCap Opportunities Fund Class Institutional (NMCIX) (1.01%)
Janus Triton Fund Class I (JSMGX) (0.79%)
Oppenheimer Developing Markets Fund Class Y (ODVYX) (1.03%)
Fidelity Spartan 500 Index Advantage Fund (FUSVX) (0.07%)
Fidelity Spartan Extended Market Index Advantage Fund (FSEVX) (0.07%)
BlackRock Global Allocation Fund Institutional (MALOX) (0.88%)
Fidelity Strategic Income Fund (FSICX) (0.70%)
Lord Abbett Short Duration Income I Fund (LLDYX) (0.39%)
Fidelity Spartan U.S. Bond Index Fund (FSITX) (0.17%)
Fidelity Retirement Government Money Market Fund (FGMXX) (0.42%)

Questions:

1. Obviously just from looking at the choices I have, it seems to behoove me to go with the Spartan funds due to their low ERs. That being said, would I be better off starting to slice and dice from the get-go by investing in both the Fidelity Spartan 500 Index and Extended Market Funds, or should I just go with Total Market?

2. I am living a very frugal lifestyle right now so I can pay down debt and save for retirement. I am currently doing the income-based repayment plan and thus I'm not required to pay anything for the first six months after my grace period (the IBR uses your previous year's income to calculate payments for the next year, and I had no income from being in school). As I mentioned above, I know I will be getting a couple of windfalls in the near future from inheritances, which will go a long way towards helping me pay down this debt. With this in mind, and knowing my salary currently as a resident is around $50-55k, I hope to put away roughly 20% of my income for retirement between my Roth and the 403b. Is this doable?

3. The McDonald's and Intel common stock were gifted to me. I have both in an account at ETRADE, and I figure I'll switch to a low-cost index fund once the rest of my account allocations are decided. Assuming I go with the Spartan market funds in my 403b, what asset class would be the next most tax-efficient that I could replace the common stocks with?
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Re: Just started residency, need some portfolio advice

Postby letsgobobby » Mon Jul 01, 2013 1:44 am

Your proposed allocation looks good. What's preventing you from switching from your actual (heavy overweight in two individual stocks) to your proposed allocation now?

If between windfalls and IBR you expect not to have to repay most of your loans with earnings, I would max a Roth IRA first, then as much toward a Roth 403b if your employer offers it, else a 403b.

You probably want to own the Fido US bond index in your 403b and stocks in your Roth IRA and taxable accounts.
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Re: Just started residency, need some portfolio advice

Postby mrwalken » Mon Jul 01, 2013 4:38 am

Which income-based repayment program are you on (IBR, PAYE, PSLF)? If your residency qualifies for PSLF, I would consider going that route, in which case I would save/invest the inheritances and all other income.
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Re: Just started residency, need some portfolio advice

Postby Cash » Mon Jul 01, 2013 7:14 am

brokemedstudent wrote:1. Obviously just from looking at the choices I have, it seems to behoove me to go with the Spartan funds due to their low ERs. That being said, would I be better off starting to slice and dice from the get-go by investing in both the Fidelity Spartan 500 Index and Extended Market Funds, or should I just go with Total Market?


Use the total stock market fund. No point in splitting between 500 and extended market. The U.S. bond index is the only other fund in your 403(b) that looks good. I'd split between those two and use your IRA and taxable for your international allocation (which I would recommend increasing to 40-50%).
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Re: Just started residency, need some portfolio advice

Postby LowER » Mon Jul 01, 2013 7:55 am

White Coat Investor just published on this very topic this morning.
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Re: Just started residency, need some portfolio advice

Postby brokemedstudent » Mon Jul 01, 2013 7:18 pm

letsgobobby wrote:Your proposed allocation looks good. What's preventing you from switching from your actual (heavy overweight in two individual stocks) to your proposed allocation now?


I suppose I could free it up to add to my Roth IRA, but at Vanguard the funds I would want require $3k minimum investments and I can only contribute $2.5k more for this year.

Cash wrote:
brokemedstudent wrote:1. Obviously just from looking at the choices I have, it seems to behoove me to go with the Spartan funds due to their low ERs. That being said, would I be better off starting to slice and dice from the get-go by investing in both the Fidelity Spartan 500 Index and Extended Market Funds, or should I just go with Total Market?


Use the total stock market fund. No point in splitting between 500 and extended market. The U.S. bond index is the only other fund in your 403(b) that looks good. I'd split between those two and use your IRA and taxable for your international allocation (which I would recommend increasing to 40-50%).


So sell the Vanguard bond index fund in my Roth in exchange for the international allocation? I guess the 0.03% difference in ERs is tempting.

LowER wrote:White Coat Investor just published on this very topic this morning.


Thanks for the tip! I read White Coat Investor when I can, and I didn't see there was a new post today.
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Re: Just started residency, need some portfolio advice

Postby brokemedstudent » Sun Apr 20, 2014 6:23 pm

Hi guys,

Just thought I'd post an update on my portfolio status. I think I'm in a little bit of a rut right now with too much international in my portfolio. Trying to decide what best to go with next:

Emergency funds: $10k
Debt: $300k, interest rates vary between 6.8% and 7.9%. I anticipate a couple inheritances (~$50-100k) in the near future that I will put towards paying this down.
Tax Filing Status: Single
Tax Rate: 25% Federal, 5.25% State
State of Residence: MA
Age: 27
Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 20% of stocks

Current Retirement Assets: ~$13,000

403b at Fidelity
17% Fidelity Spartan U.S. Bond Index Fund (FSITX) (0.17%)
40% Fidelity Spartan Total Market Index Institutional Fund (FSKTX) (0.07%)

Roth IRA at Vanguard
43% Vanguard Total International Stock Market Index Fund (VGTSX) (0.22%)

New Annual Contributions (anticipated for June 2014-June 2015):
$10,000 his 403b (no company match)
$5,500 his Roth IRA
$0 taxable

Available Funds:

JPMorgan SmartRetirement 2010 Fund (JSWIX) (0.77%)
JPMorgan SmartRetirement 2015 Fund (JSFIX) (0.80%)
JPMorgan SmartRetirement 2020 Fund (JTTIX) (0.84%)
JPMorgan SmartRetirement 2025 Fund (JSNIX) (0.88%)
JPMorgan SmartRetirement 2030 Fund (JSMIX) (0.92%)
JPMorgan SmartRetirement 2035 Fund (SRJIX) (0.96%)
JPMorgan SmartRetirement 2040 Fund (SMTIX) (0.99%)
JPMorgan SmartRetirement 2045 Fund (JSAIX) (1.01%)
JPMorgan SmartRetirement 2050 Fund (JTSIX) (1.03%)
JPMorgan SmartRetirement Income Fund(JSIIX) (0.75%)
American Century Investments Mid Cap Value Fund (AVUAX) (0.81%)
Fidelity Contrafund Fund Class K (FCNKX) (0.63%)
Fidelity Growth Company Fund Class K (FGCKX) (0.77%)
JPMorgan US Equity Fund (JMUEX) (0.68%)
MFS International Diversification Fund Class R4 (MDITX) (1.10%)
Fidelity Spartan Total Market Index Institutional Fund (FSKTX) (0.07%)
PIMCO Total Return Fund Administrative Class (PTRAX) (0.71%)
American Funds New Perspective R6 Fund (RNPGX) (0.46%)
Columbia Dividend Opportunity Fund Class Z (CDOZX) (0.85%)
Fidelity Low-Priced Stock Fund (FLPKX) (0.76%)
Fidelity Small Cap Discovery Fund (FSCRX) (1.07%)
Franklin International Small Cap Growth Fund (FKSCX) (1.20%)
Goldman Sachs Small Cap Value Institutional Fund (GSSIX) (1.04%)
ING MidCap Opportunities Fund Class Institutional (NMCIX) (1.01%)
Janus Triton Fund Class I (JSMGX) (0.79%)
Oppenheimer Developing Markets Fund Class Y (ODVYX) (1.03%)
Fidelity Spartan 500 Index Advantage Fund (FUSVX) (0.07%)
Fidelity Spartan Extended Market Index Advantage Fund (FSEVX) (0.07%)
BlackRock Global Allocation Fund Institutional (MALOX) (0.88%)
Fidelity Strategic Income Fund (FSICX) (0.70%)
Lord Abbett Short Duration Income I Fund (LLDYX) (0.39%)
Fidelity Spartan U.S. Bond Index Fund (FSITX) (0.17%)
Fidelity Retirement Government Money Market Fund (FGMXX) (0.42%)


As of right now I have 15% of my paycheck being taken out to contribute to my 403b. 70% of that is going to FSKTX and 30% to FSITX. I feel like I want to reduce my contribution to my 403b (especially since there's no company match) and work on my Roth 2014 contribution by adding Vanguard Total Stock Market Index Fund (VTSMX) to bring my U.S. stock exposure to 40% and international down to 20%. Maybe I'll work on reaching the 5% TIPS goal through my IRA as I mentioned earlier. Thoughts?
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Re: Just started residency, need some portfolio advice

Postby N52570 » Sun Apr 20, 2014 6:42 pm

No advice for you other than I'd check this out, he posts here often and has walked in your shoes.

http://whitecoatinvestor.com
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Re: Just started residency, need some portfolio advice

Postby Calm Man » Sun Apr 20, 2014 6:52 pm

Please do a good job taking care of patients while on duty during your residency and when off, sleep or enjoy yourself !!!!
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Re: Just started residency, need some portfolio advice

Postby LowER » Mon Apr 21, 2014 1:00 am

brokemedstudent wrote:Hi guys,

Just thought I'd post an update on my portfolio status. I think I'm in a little bit of a rut right now with too much international in my portfolio. Trying to decide what best to go with next:

Emergency funds: $10k
Debt: $300k, interest rates vary between 6.8% and 7.9%. I anticipate a couple inheritances (~$50-100k) in the near future that I will put towards paying this down.
Tax Filing Status: Single
Tax Rate: 25% Federal, 5.25% State
State of Residence: MA
Age: 27
Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 20% of stocks

Current Retirement Assets: ~$13,000

403b at Fidelity
17% Fidelity Spartan U.S. Bond Index Fund (FSITX) (0.17%)
40% Fidelity Spartan Total Market Index Institutional Fund (FSKTX) (0.07%)

Roth IRA at Vanguard
43% Vanguard Total International Stock Market Index Fund (VGTSX) (0.22%)

New Annual Contributions (anticipated for June 2014-June 2015):
$10,000 his 403b (no company match)
$5,500 his Roth IRA
$0 taxable

Available Funds:

JPMorgan SmartRetirement 2010 Fund (JSWIX) (0.77%)
JPMorgan SmartRetirement 2015 Fund (JSFIX) (0.80%)
JPMorgan SmartRetirement 2020 Fund (JTTIX) (0.84%)
JPMorgan SmartRetirement 2025 Fund (JSNIX) (0.88%)
JPMorgan SmartRetirement 2030 Fund (JSMIX) (0.92%)
JPMorgan SmartRetirement 2035 Fund (SRJIX) (0.96%)
JPMorgan SmartRetirement 2040 Fund (SMTIX) (0.99%)
JPMorgan SmartRetirement 2045 Fund (JSAIX) (1.01%)
JPMorgan SmartRetirement 2050 Fund (JTSIX) (1.03%)
JPMorgan SmartRetirement Income Fund(JSIIX) (0.75%)
American Century Investments Mid Cap Value Fund (AVUAX) (0.81%)
Fidelity Contrafund Fund Class K (FCNKX) (0.63%)
Fidelity Growth Company Fund Class K (FGCKX) (0.77%)
JPMorgan US Equity Fund (JMUEX) (0.68%)
MFS International Diversification Fund Class R4 (MDITX) (1.10%)
Fidelity Spartan Total Market Index Institutional Fund (FSKTX) (0.07%)
PIMCO Total Return Fund Administrative Class (PTRAX) (0.71%)
American Funds New Perspective R6 Fund (RNPGX) (0.46%)
Columbia Dividend Opportunity Fund Class Z (CDOZX) (0.85%)
Fidelity Low-Priced Stock Fund (FLPKX) (0.76%)
Fidelity Small Cap Discovery Fund (FSCRX) (1.07%)
Franklin International Small Cap Growth Fund (FKSCX) (1.20%)
Goldman Sachs Small Cap Value Institutional Fund (GSSIX) (1.04%)
ING MidCap Opportunities Fund Class Institutional (NMCIX) (1.01%)
Janus Triton Fund Class I (JSMGX) (0.79%)
Oppenheimer Developing Markets Fund Class Y (ODVYX) (1.03%)
Fidelity Spartan 500 Index Advantage Fund (FUSVX) (0.07%)
Fidelity Spartan Extended Market Index Advantage Fund (FSEVX) (0.07%)
BlackRock Global Allocation Fund Institutional (MALOX) (0.88%)
Fidelity Strategic Income Fund (FSICX) (0.70%)
Lord Abbett Short Duration Income I Fund (LLDYX) (0.39%)
Fidelity Spartan U.S. Bond Index Fund (FSITX) (0.17%)
Fidelity Retirement Government Money Market Fund (FGMXX) (0.42%)


As of right now I have 15% of my paycheck being taken out to contribute to my 403b. 70% of that is going to FSKTX and 30% to FSITX. I feel like I want to reduce my contribution to my 403b (especially since there's no company match) and work on my Roth 2014 contribution by adding Vanguard Total Stock Market Index Fund (VTSMX) to bring my U.S. stock exposure to 40% and international down to 20%. Maybe I'll work on reaching the 5% TIPS goal through my IRA as I mentioned earlier. Thoughts?


I've been in your shoes and only wish I wore them nearly as well as you do! As we often said in residency - "Strong work!"

Your biggest ongoing potential threat to financial disaster in life, even if you are a horrible doctor and abysmal investor who never shovels snow off the sidewalk, is divorce. Never forget these words.
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Re: Just started residency, need some portfolio advice

Postby MrMiyagi » Mon Apr 21, 2014 8:46 am

I'm a resident as well so I feel your pain with the education debt. If you aren't getting a match at your 403b, you probably wouldn't bother contributing to that at all. I would just max out my Roth IRA each year.

Sorry to derail your plan, but if you have 300k in debt that is 6.8% and 7.9% interest, you should be putting any extra money you have into that, not investing it into retirement. That debt is not going away (unless you die) and the interest is most likely piling up faster than any investments you'll make.

Also you want to max out that 2500 student interest loan deduction each year. Once you make too much money (I think it's 155k for married, 80k for single?) you get phased out of that and lose that too. Since I am married, I got phased out of that pretty quickly even though I had a lot of educational debt as well (not 300k thankfully). Once you get married or start moonlighting as a fellow, you'll probably be phased out of that too, so you'll want to take advantage of that deduction now instead of just doing the minimum IBR payments.
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