Newbie seeking investment advice

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Topic Author
catsonix
Posts: 8
Joined: Sat Jun 20, 2015 12:52 pm

Newbie seeking investment advice

Post by catsonix »

Hi all, I am an investing newbie and would appreciate some advice! I came here after reading The White Coat Investor book (his blog posts usually go over my head), and I'm currently reading The Bogleheads' Guide to Investing.

I am in the final few years of an MD/PhD program. On the positive side, I have no tuition fees, zero debt, own a modest home (all paid off; worth $110-120K), earn an annual stipend of ~$25K (plus about $1-$1.5K I earn through other means), and live frugally/below my means (I'm an avid couponer!); on the negative side, I've done practically no investing.

My money management plan for the last five years or so has been very simplistic - my monthly stipend gets deposited into my money market account (worth a little over $50K now with 0.8% interest), and I keep about $1K at a time in a checking account for daily purchases, bill payments, etc. I have a few credit cards that are paid off in full every month. Last year I opened a Vanguard Roth IRA and maxed out my annual contribution ($5.5K).

Emergency funds: lumped into the $50K money market; no special account for them
Debt: Zero
Tax Filing Status: Single
Tax Rate: 15% Federal, 5% State
State of Residence: Midwest
Age: 28
Desired Asset allocation: 75% stocks / 25% bonds
Desired International allocation: don't know

Current retirement assets:

Taxable
near 100% cash

Roth IRA at Vanguard
~$5700 in a Vanguard Target Retirement 2030 fund - 75% stocks, 25% bonds (picked for the stock/bond mix - I figure I'll be retiring more around 2040-2050)
- also I plan to contribute another $5500 to this account for 2015, and for every year thereafter. I presume that my annual income as a physician, and thus my taxes, will exceed my current values, so that's why I've gone with a Roth over a traditional IRA.

Given that I'm considered a "student," I don't have the option right now of employer-matching for a 401k, 403b, etc.

My financial goals:
1. Saving for retirement
2. Building an investment portfolio, ideally in a low-maintenance way (mutual/index funds that I purchase and let sit for years and years)
3. I will be selling my current home in a few years. During/after residency (5-10 years in the future), I want to be able to purchase a modest home wherever I'm practicing (not a doctor McMansion!). Since I plan to be academic physician, I realize I'll have to live in a metropolitan area, so even a modest home will probably cost a lot more than my current home. So, let's say, with $100-150K down, I'll be looking at a mortgage of $150-$250K.

Questions:
1. Besides maxing my annual Roth IRA contribution and contributing to a 401k/403b up to employer matching once I'm a resident and have that opportunity, how should I be saving for retirement?
2. How much of my cash should I be investing in non-retirement accounts like non-IRA mutual funds/index funds? What are some good mutual funds to invest in?
3. How much of my cash should I be keeping in more liquid assets like a money market account? (And in general, what percentage of your cash assets do you all keep in money markets/CDs/savings accounts vs. invested in retirement accounts, stocks, bonds, etc.?)
User avatar
StormShadow
Posts: 1005
Joined: Thu Feb 09, 2012 5:20 pm

Re: Newbie seeking investment advice

Post by StormShadow »

catsonix wrote:My financial goals:
1. Saving for retirement
2. Building an investment portfolio, ideally in a low-maintenance way (mutual/index funds that I purchase and let sit for years and years)
3. I will be selling my current home in a few years. During/after residency (5-10 years in the future), I want to be able to purchase a modest home wherever I'm practicing (not a doctor McMansion!). Since I plan to be academic physician, I realize I'll have to live in a metropolitan area, so even a modest home will probably cost a lot more than my current home. So, let's say, with $100-150K down, I'll be looking at a mortgage of $150-$250K.

Questions:
1. Besides maxing my annual Roth IRA contribution and contributing to a 401k/403b up to employer matching once I'm a resident and have that opportunity, how should I be saving for retirement?
2. How much of my cash should I be investing in non-retirement accounts like non-IRA mutual funds/index funds? What are some good mutual funds to invest in?
3. How much of my cash should I be keeping in more liquid assets like a money market account? (And in general, what percentage of your cash assets do you all keep in money markets/CDs/savings accounts vs. invested in retirement accounts, stocks, bonds, etc.?)
Sounds like you're off to a terrific start! MD/PhD programs are a sweet deal (i.e. paid tuition).

1. I think you'd be ok with just sitting still with the extra cash in the money/market to live off of while increasing your 403(b) contribution rate as a resident/fellow. If you're lucky, your residency may even have a roth 403(b) option. Mine did. =)
2. Some would argue that you don't have to put any into non-retirement equity accounts. But if you did, I'd set aside 6 months worth for emergencies (such as an interest savings account) and use whatever was left-over to buy vanguard funds. Since you're so early in training, I think splitting up the amount between Vanguard Total Stock Market (VTSMX) and Vanguard Total International Market (VGTSX) would be appropriate. If you wanted to decrease your risk somewhat, you could sprinkle in a little bond exposure with Vanguard Intermediate-Term Tax-Exempt Fund (VWITX).
3. Again, 6 months worth is pretty safe to have as backup for emergencies. Longer duration CD's probably yield the highest return but they aren't as liquid as a savings account. I personally prefer "high" interest savings account for an emergency funds.

Also, not sure if you have a significant other and/or thinking of getting married in the near future. If you are and you're pretty healthy, its not a bad idea to look into locking down a low rate+long duration (20-30 year) term life insurance policy.
Topic Author
catsonix
Posts: 8
Joined: Sat Jun 20, 2015 12:52 pm

Re: Newbie seeking investment advice

Post by catsonix »

Thanks StormShadow! I'll look into the Vanguard funds you listed. Hopefully my residency will have a Roth 403b or some kind of decent, low-overhead retirement matching!

I have no short-term plans for marriage or taking on dependents - maybe during residency/fellowship at the earliest.
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