Med student asking for portfolio help!

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Topic Author
waltzflow
Posts: 4
Joined: Tue Sep 05, 2017 12:23 pm

Med student asking for portfolio help!

Post by waltzflow » Fri Jan 11, 2019 10:22 am

Hi everyone! This is my first time posting on the Bogleheads forum although I read through the Bogleheads Guide to Investing and have been lurking for a little while. I am a third year medical student looking for guidance on my current allocation and to improve my investing knowledge. Any and all help is appreciated!

Emergency funds: 3 months of expenses
Debt: $0
Tax Filing Status: Single
Tax Rate: 10% Federal, 3% State
State of Residence: CT
Age: 26
Income: 16k

Desired Asset allocation: 80% stocks / 10% bonds / 10% REIT
Desired International allocation: 25% of stocks

Current retirement assets
Size of the portfolio: 32k

Taxable
16.8% Vanguard Total Stock Market Index (investor shares) (VTSMX) ER 0.14
2.5% Pieris pharmaceuticals (PIRS)


401k 3% company match
9.5% Fidelity Freedom 2055 (FDEEX) ER 0.75

Roth IRA at Vanguard (recently moved from wealthfront in-kind)
3.6% ishares Emerging Markets Bond ETF (EMB) ER 0.4
2.8% Ishares Iboxx Corporate Bond ETF (LQD) ER 0.15
8.1% Vanguard FTSE developed markets ETF (VEA) ER 0.07
7.3% Vanguard Dividend Appreciation ETF (VIG) ER 0.08
7.3% Vanguard Real Estate Index ETF (VNQ) ER 0.12
10.2% Vanguard Total Stock Market ETF (VTI) ER 0.04
7.2% Vanguard FTSE Developed Markets ETF (VWO) ER 0.14

Inherited Traditional IRA at Schwab
6.3% Schwab International Index (SWISX) ER 0.06
15.1% Schwab Total Stock Market (SWTSX) ER 0.03
2.9% Schwab US Aggregate Bond (SWAGX) ER 0.04
0.4% Pieris pharmaceuticals (PIRS)

New annual Contributions
My income mostly goes towards living expenses. I contribute 6% pretax to 401k.

Questions:
1. What are your thoughts on this allocation? Areas that I can improve?

2. What is the best way to handle the inherited IRA? I established the account in July 2017 took my first RMD December 2018. Would it be advisable to stretch it as long as possible? Should I try to withdraw over the next few years and move those funds to my Roth/another account?

3. Unfortunately I tried my hand at stock picking and bought shares of Pieris pharmaceuticals 1.5-2 years ago on a tip from a friend. How can I best handle this?

Let me know if you have any questions happy to clarify! Thank you!!

21&lewis
Posts: 22
Joined: Sun Nov 06, 2016 8:42 pm

Re: Med student asking for portfolio help!

Post by 21&lewis » Fri Jan 11, 2019 10:27 am


tenkuky
Posts: 623
Joined: Sun Dec 14, 2014 4:28 pm

Re: Med student asking for portfolio help!

Post by tenkuky » Fri Jan 11, 2019 12:51 pm

Welcome!
Couple of questions that will help answer your questions:
1. Do you have option for Roth 401K?
2. Can you list the funds and expense ratios available in your 401K?
3. Debt ZERO? Please confirm :)

KingRiggs
Posts: 35
Joined: Wed Dec 12, 2018 12:19 pm
Location: Indiana

Re: Med student asking for portfolio help!

Post by KingRiggs » Fri Jan 11, 2019 2:03 pm

You're way ahead of where I was as a third-year. Congrats!

Unless you're trying to do a FIRE approach and retire at age 40-something, your time horizon is loooooonng. Personally, I'd ditch the bonds until you hit 40 or so, unless you just can't stand watching swings in your portfolio. You have huge amount of time on your side.

Biggest advice is that, when you finally finish residency you continue to live the resident lifestyle for about 5 years, saving as much as possible. Since you have no current educational debt, you should have a nice chunk saved by your mid- or late-30's.

Topic Author
waltzflow
Posts: 4
Joined: Tue Sep 05, 2017 12:23 pm

Re: Med student asking for portfolio help!

Post by waltzflow » Sat Jan 12, 2019 9:43 am

21&lewis wrote:
Fri Jan 11, 2019 10:27 am
www.whitecoatinvestor.com

:sharebeer
Yes! Forgot to mention-read through the book now on the blog/listening to his podcasts
tenkuky wrote:
Fri Jan 11, 2019 12:51 pm
Welcome!
Couple of questions that will help answer your questions:
1. Do you have option for Roth 401K?
2. Can you list the funds and expense ratios available in your 401K?
3. Debt ZERO? Please confirm :)
1. Just looked this up, yes there is an option for a Roth 401k.

2. Funds available for 401k are
FID 500 INDEX (FXAIX)02/17/1988 Stock Investments Large Cap 0.015% No additional fees apply.

FID BLUE CHIP GR (FBGRX)12/31/1987 Stock Investments Large Cap 0.72% No additional fees apply.

FID CONTRAFUND (FCNTX)05/17/1967 Stock Investments Large Cap 0.74% No additional fees apply.

MFS VALUE R3 (MEIHX)01/02/1996 Stock Investments Large Cap 0.83% No additional fees apply.

FID EXTD MKT IDX (FSMAX)11/05/1997 Stock Investments Mid-Cap 0.045% No additional fees apply.

FID LOW PRICED STK (FLPSX)12/27/1989 Stock Investments Mid-Cap 0.62% No additional fees apply.

FID MID CAP STOCK (FMCSX)03/29/1994 Stock Investments Mid-Cap 0.61% No additional fees apply.

VRTS C MDCP VAL EQ I (SMVTX)11/30/2001 Stock Investments Mid-Cap 1.02% No additional fees apply.

GLENMEDE SMCP EQ ADV (GTCSX)03/01/1991 Stock Investments Small Cap 0.9% No additional fees apply.

FID DIVERSIFD INTL (FDIVX)12/27/1991 Stock Investments International 0.81% No additional fees apply.

FID EMERGING MKTS (FEMKX)11/01/1990 Stock Investments International 0.96% No additional fees apply.

FID INTL INDEX (FSPSX)11/05/1997 Stock Investments International 0.045% No additional fees apply.

FID BALANCED (FBALX)11/06/1986 Blended Investment* N/A 0.53% No additional fees apply.

FID FREEDOM 2005 (FFFVX)11/06/2003 Blended Investment* N/A 0.49% No additional fees apply.

FID FREEDOM 2010 (FFFCX)10/17/1996 Blended Investment* N/A 0.53% No additional fees apply.

FID FREEDOM 2015 (FFVFX)11/06/2003 Blended Investment* N/A 0.57% No additional fees apply.

FID FREEDOM 2020 (FFFDX)10/17/1996 Blended Investment* N/A 0.61% No additional fees apply.

FID FREEDOM 2025 (FFTWX)11/06/2003 Blended Investment* N/A 0.66% No additional fees apply.

FID FREEDOM 2030 (FFFEX)10/17/1996 Blended Investment* N/A 0.7% No additional fees apply.

FID FREEDOM 2035 (FFTHX)11/06/2003 Blended Investment* N/A 0.74% No additional fees apply.

FID FREEDOM 2040 (FFFFX)09/06/2000 Blended Investment* N/A 0.75% No additional fees apply.

FID FREEDOM 2045 (FFFGX)06/01/2006 Blended Investment* N/A 0.75% No additional fees apply.

FID FREEDOM 2050 (FFFHX)06/01/2006 Blended Investment* N/A 0.75% No additional fees apply.

FID FREEDOM 2055 (FDEEX)06/01/2011 Blended Investment* N/A 0.75% No additional fees apply.

FID FREEDOM 2060 (FDKVX)08/05/2014 Blended Investment* N/A 0.75% No additional fees apply.

FID FREEDOM INCOME (FFFAX)10/17/1996 Blended Investment* N/A 0.47% No additional fees apply.

FID INFL PR BD IDX (FIPDX)05/16/2012 Bond Investments Income 0.05% No additional fees apply.

FID TOTAL BOND (FTBFX)10/15/2002 Bond Investments Income 0.45% No additional fees apply.

FID US BOND IDX (FXNAX)03/08/1990 Bond Investments Income 0.025% No additional fees apply.

FID GOVT MMKT (SPAXX)02/05/19907 day yield as of12/31/2018 2.02% Short-Term Investments N/A 0.42% No additional fees apply.

3. Yes. no debt.

KingRiggs wrote:
Fri Jan 11, 2019 2:03 pm
You're way ahead of where I was as a third-year. Congrats!

Unless you're trying to do a FIRE approach and retire at age 40-something, your time horizon is loooooonng. Personally, I'd ditch the bonds until you hit 40 or so, unless you just can't stand watching swings in your portfolio. You have huge amount of time on your side.

Biggest advice is that, when you finally finish residency you continue to live the resident lifestyle for about 5 years, saving as much as possible. Since you have no current educational debt, you should have a nice chunk saved by your mid- or late-30's.
Thank you! Haven't been through a bear market yet so I've kept some bonds in there. But definitely something to think about given the time horizon!

Appreciate the post-residency advice, it seems like so many new attendings start a lifestyle creep that can make saving and investing tough. Trying to keep that in mind and live like a resident :)

Fishing50
Posts: 295
Joined: Tue Sep 27, 2016 1:18 am

Re: Med student asking for portfolio help!

Post by Fishing50 » Sun Jan 13, 2019 7:28 am

Based on your expected lifetime earnings, I'm guessing 12% tax bracket will be available for a limited time.

Make withdrawals from the inherited to max out the 12% tax bracket every year ensuring $56,675 total income including your earned income. If possible max Roth 401k for $19K and Roth IRA for $6K contributions. Paying 12% taxes on Roth contributions is a bargain if you expect to be in the 22% tax bracket or higher in the future. If you can live on less than $25,675, invest the extra income in taxable. For tax efficiency, keep only total stock market index and total international equity index funds in taxable.

Once your earning increase, you'll pay higher taxes on the required distributions from the inherited IRA. May as well make withdrawals now, especially if you can put money into Roth.
It's perfectly legal, go ask the IRS, they'll say the same thing. I actually feel stupid telling you this, I'm sure you would've investigated the matter yourself. Andy Dufresne

tenkuky
Posts: 623
Joined: Sun Dec 14, 2014 4:28 pm

Re: Med student asking for portfolio help!

Post by tenkuky » Sun Jan 13, 2019 4:48 pm

As Fishing indicates above, and what I wanted to articulate: Only go Roth 401K with your employer right now. Once you separate, you can roll it into your Roth IRA.

I would dump the FDEEX due to the high ER and switch to a simple 3-fund with
FID 500 INDEX (FXAIX)
FID EXTD MKT IDX (FSMAX)
FID US BOND IDX (FXNAX)

Roth IRA keep only VEA and VWO
Keep the Total stock market fund in taxable, can you not qualify for Admiral shares which have al lower ER?

Is the Pieris a gain or loss if you sell tomorrow?

These 3 accounts are one big retirement pot so adjust your AA taking all into account.

You want to keep your inherited IRA light on the stocks if you are going to sell it off in the next 2-3 years to take advantage of your low tax bracket. I agree completely with Fishing there.

Topic Author
waltzflow
Posts: 4
Joined: Tue Sep 05, 2017 12:23 pm

Re: Med student asking for portfolio help!

Post by waltzflow » Tue Jan 15, 2019 2:58 pm

Fishing50 wrote:
Sun Jan 13, 2019 7:28 am
Based on your expected lifetime earnings, I'm guessing 12% tax bracket will be available for a limited time.

Make withdrawals from the inherited to max out the 12% tax bracket every year ensuring $56,675 total income including your earned income. If possible max Roth 401k for $19K and Roth IRA for $6K contributions. Paying 12% taxes on Roth contributions is a bargain if you expect to be in the 22% tax bracket or higher in the future. If you can live on less than $25,675, invest the extra income in taxable. For tax efficiency, keep only total stock market index and total international equity index funds in taxable.

Once your earning increase, you'll pay higher taxes on the required distributions from the inherited IRA. May as well make withdrawals now, especially if you can put money into Roth.
This makes sense. Appreciate the advice I'll make the withdrawals over the next couple years while I'm in a lower tax bracket.
tenkuky wrote:
Sun Jan 13, 2019 4:48 pm
As Fishing indicates above, and what I wanted to articulate: Only go Roth 401K with your employer right now. Once you separate, you can roll it into your Roth IRA.

I would dump the FDEEX due to the high ER and switch to a simple 3-fund with
FID 500 INDEX (FXAIX)
FID EXTD MKT IDX (FSMAX)
FID US BOND IDX (FXNAX)

Roth IRA keep only VEA and VWO
Keep the Total stock market fund in taxable, can you not qualify for Admiral shares which have al lower ER?

Is the Pieris a gain or loss if you sell tomorrow?

These 3 accounts are one big retirement pot so adjust your AA taking all into account.

You want to keep your inherited IRA light on the stocks if you are going to sell it off in the next 2-3 years to take advantage of your low tax bracket. I agree completely with Fishing there.
Thanks for your follow up post! To address some of your points:

1. Roth 401k- I will see about converting from the traditional 401k to a Roth 401k. Then sell the FDEEX and change to the simple 3 fund you outlined.

2. Roth IRA- Will keep VEA and VWO. Should I just go ahead and sell the other funds at once and distribute them among VEA and VWO? Sorry I know this is a beginner question just don't want to mess anything up!

3. Taxable- I have about 6k in the total stock market fund. I think the minimum for admiral shares of VTSMX is 10k so a little short still...

4. Pieris- It is a 45% loss if I sell tomorrow (ouch).

5. Inherited IRA- That makes sense to keep it light on stock. I can see about selling the stock funds and buying up bonds for now while I withdraw funds over the next couple years.

Learning a lot from this thread and finally getting my portfolio more organized. Thanks again for all the help guys!

tenkuky
Posts: 623
Joined: Sun Dec 14, 2014 4:28 pm

Re: Med student asking for portfolio help!

Post by tenkuky » Tue Jan 15, 2019 3:13 pm

waltzflow wrote:
Tue Jan 15, 2019 2:58 pm


Thanks for your follow up post! To address some of your points:

1. Roth 401k- I will see about converting from the traditional 401k to a Roth 401k. Then sell the FDEEX and change to the simple 3 fund you outlined.
Don't convert anything. Just tell HR you want to have salary deductions start going to Roth 401K, not traditional. It is not easy to convert, and first check if your employer will let you. I would just leave that trad in place. Sell the FDEEX and change in the trad. Going forward, do the 3 in the Roth BUT see my response to 5 below.

2. Roth IRA- Will keep VEA and VWO. Should I just go ahead and sell the other funds at once and distribute them among VEA and VWO? Sorry I know this is a beginner question just don't want to mess anything up!
Yes

3. Taxable- I have about 6k in the total stock market fund. I think the minimum for admiral shares of VTSMX is 10k so a little short still...
See below

4. Pieris- It is a 45% loss if I sell tomorrow (ouch).
Sell it tomorrow. The loss is actually excellent as it will let you reduce your other taxable income upto $3000 per year if you don't have capital gains. Look at "tax loss harvesting". Use the proceeds to buy more VTSMX and hope you get over the Admiral hump.

5. Inherited IRA- That makes sense to keep it light on stock. I can see about selling the stock funds and buying up bonds for now while I withdraw funds over the next couple years.
Excellent. If you go all bond there, don't use bonds elsewhere till you get rid of the account then adjust back

Learning a lot from this thread and finally getting my portfolio more organized. Thanks again for all the help guys!
You're welcome

inbox788
Posts: 5764
Joined: Thu Mar 15, 2012 5:24 pm

Re: Med student asking for portfolio help!

Post by inbox788 » Wed Jan 16, 2019 3:22 am

waltzflow wrote:
Fri Jan 11, 2019 10:22 am
Desired Asset allocation: 80% stocks / 10% bonds / 10% REIT
Desired International allocation: 25% of stocks

Taxable
16.8% Vanguard Total Stock Market Index (investor shares) (VTSMX) ER 0.14
2.5% Pieris pharmaceuticals (PIRS)


401k 3% company match
9.5% Fidelity Freedom 2055 (FDEEX) ER 0.75

Roth IRA at Vanguard (recently moved from wealthfront in-kind)
3.6% ishares Emerging Markets Bond ETF (EMB) ER 0.4
2.8% Ishares Iboxx Corporate Bond ETF (LQD) ER 0.15
8.1% Vanguard FTSE developed markets ETF (VEA) ER 0.07
7.3% Vanguard Dividend Appreciation ETF (VIG) ER 0.08
7.3% Vanguard Real Estate Index ETF (VNQ) ER 0.12
10.2% Vanguard Total Stock Market ETF (VTI) ER 0.04
7.2% Vanguard FTSE Developed Markets ETF (VWO) ER 0.14

Inherited Traditional IRA at Schwab
6.3% Schwab International Index (SWISX) ER 0.06
15.1% Schwab Total Stock Market (SWTSX) ER 0.03
2.9% Schwab US Aggregate Bond (SWAGX) ER 0.04
0.4% Pieris pharmaceuticals (PIRS)

New annual Contributions
My income mostly goes towards living expenses. I contribute 6% pretax to 401k.

Questions:
1. What are your thoughts on this allocation? Areas that I can improve?
You don't need all these funds. Just Total US market is sufficient for you for now. It's going to stay invested for decades, so there's no need to make things more complex than necessary. You don't need REIT and you don't even need bonds right now. Even the international funds are optional, but if you want, you can allocate some to VEA or SWISX.
2. What is the best way to handle the inherited IRA? I established the account in July 2017 took my first RMD December 2018. Would it be advisable to stretch it as long as possible? Should I try to withdraw over the next few years and move those funds to my Roth/another account?
The conventional wisdom is the stretch it out as long as possible so it stays invested tax deferred to the maximum period. If you're not maxing out your tax advantaged space, you can take some out and lengthen it even further.
3. Unfortunately I tried my hand at stock picking and bought shares of Pieris pharmaceuticals 1.5-2 years ago on a tip from a friend. How can I best handle this?
Sell it all and if it's a loss, TLH.

BTW, Freedom Fund comes in 2 flavors, and you want the INDEX which has lower costs (FDEWX). Also, there might be even better lower costs options than that if you look carefully. I'm pretty sure there are going to be far better choices. (just noticed, the only good choice and the best choice of them all is FXAIX, so it makes things simple and just go with that. FID 500 INDEX (FXAIX)02/17/1988 Stock Investments Large Cap 0.015%)

Katietsu
Posts: 1718
Joined: Sun Sep 22, 2013 1:48 am

Re: Med student asking for portfolio help!

Post by Katietsu » Wed Jan 16, 2019 6:03 am

I am confused by the 401k discussions. Is this a current employer? You stated that you were a third year med student. In my world that is at least a 90 hour a week commitment with no pay. I ask, because if this is a 401k from a previous employer then you may get different suggestions.

Topic Author
waltzflow
Posts: 4
Joined: Tue Sep 05, 2017 12:23 pm

Re: Med student asking for portfolio help!

Post by waltzflow » Wed Jan 16, 2019 6:30 pm

inbox788-Thanks for your post. Definitely trying to simplify things down...the IRA got complicated because I started at wealthfront and they bought all these funds.

Sold the Pieris stocks today at a loss and those proceeds will go into my taxable so I can hopefully get over the 10k hump and convert my VTSMX investor shares to admiral shares.

Will use inherited IRA to maximize tax advantaged space for now because I am in a low tax bracket (for next couple years),

I'll sell the freedom fund (FDEEX) in the traditional 401k.



Katietsu

401k is current employer. Started there before med school. Worked part-time first and second year. Still there this year on a limited basis (during surgery rotation not at all :happy )

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