$8000 as a med student. What would you do?

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I will be starting as a M1 this fall, and I am trying to figure out how to use the $8000 I saved up working as a nursing assistant.

I think I 'll need about 52 grand for tuition + everything first year. I am getting 42k from stafford and 8000 from grad plus, and a little bit from working a sweet job in library where you can just sit and study while getting payed.

I am debating whether to use my money instead of taking grad plus loan, or invest the money. Do you think its reasonable to expect a higher return than whatever the current interest rate is for grad plus using the following method?

I'll just join those huge public groups at virtualstockmarket.com where you can look at everyone's portfolios. What if I look at the top 10 profit guys every week (usually around +100% - +300+%) and pretty much copy their portfolios in the real stock market. I would do this every 2-3 days and never hold a single stock for more than a week. I know this is risky because these super profitable stocks tend to be VERY VERY volatile but I would pick and choose 5-8 different stocks out of all the most profitable ones so that way I wont lose everything if one of them goes under. This probably won't even be very time consuming cause I would just directly invest in the most profitable ones for the last couple of days instead of completely researching all the companies and examining their long term potential. It might take me 2-3 hours a week tops.

When you invest you need to evaluate risk as well as reward. You are proposing a system with extremely high risk (and extremely high transaction costs). This is versus a zero risk option of getting an enviable 7.9% return by spending the money and not taking out gradplus loans.

Friendly suggestion: put 3 months worth of non-tuition COA (books, rent, etc) into a savings account, as a buffer against emergencies, and use the rest to pay off (or not take out) loans.

Originally Posted by VVSHT

I will be starting as a M1 this fall, and I am trying to figure out how to use the $8000 I saved up working as a nursing assistant.

How much income have you made in 2012 from your nursing assistant and other job(s)? You don't have to answer publicly, but contributing some of that $8000 to a Roth IRA will set the ball rolling for your future. The 2012 limit is $5000 (or less than that if you made less than $5000 this year).

Also, how is your emergency fund? Do you have one? I realize students rely heavily on Stafford, GradPlus, and other loan programs, but what if your car breaks down or any other random small or large emergency?

If you have $0 or a small emergency fund, throwing the remaining $3000 into one should give a lot of peace of mind.

I realize this advice is crazy boring, but hey, it's rock solid basics.

Originally Posted by VVSHT

I am debating whether to use my money instead of taking grad plus loan, or invest the money. Do you think its reasonable to expect a higher return than whatever the current interest rate is for grad plus using the following method?

I don't think it's realistic at all to expect a higher return on investing the $8000 or any money for that matter. A general rule of thumb is to not invest money that you need, especially short-term, and especially money you need to live on. Investments are for long-term goals (long horizons) like retirement or children's college funds.

Originally Posted by VVSHT

I'll just join those huge public groups at virtualstockmarket.com where you can look at everyone's portfolios. What if I look at the top 10 profit guys every week (usually around +100% - +300+%) and pretty much copy their portfolios in the real stock market. I would do this every 2-3 days and never hold a single stock for more than a week. I know this is risky because these super profitable stocks tend to be VERY VERY volatile but I would pick and choose 5-8 different stocks out of all the most profitable ones so that way I wont lose everything if one of them goes under. This probably won't even be very time consuming cause I would just directly invest in the most profitable ones for the last couple of days instead of completely researching all the companies and examining their long term potential. It might take me 2-3 hours a week tops.

1) What you're leaving out is you're already behind the curve by chasing the top performers on that website. They already made those insanely high returns. It's not guaranteed that those share prices will maintain their upward trajectory. In other words, just because those stock(s) skyrocketed last week doesn't mean that they will skyrocket next week after you put in your money.

2) Short-term capital gains rates. Your taxes will be really high on any (if at all) profit you make.

3) Churning fees. By rapidly buying and selling like a maniac, you may encounter front-end loads, back-end loads, and a dozen other fees that will eat up your returns.

4) You can't time the market, and you could lose everything you invest. This would not only leave you with nothing to live on to pay for food, rent, and school (and you'd have to ask your school for emergency loans if those exist), but it could affect your sanity, sleep, health, and grades.

I understand the daydreams that go through one's head about choosing some awesome portfolio and striking it rich, but with a little more studying about investing, reality kicks in. Better to learn now before you've invested real money rather than make the mistake with your own money.

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That being said, you can still simulate your plan without using real money. Put your plan into practice on a virtual/fantasy stock website. Pick the 5-8 stocks that you were planning on buying and see how your fake money does the following week.

But with real money? Just get the GradPlus and focus on studying your tail off and dreaming about getting a good night's sleep.

don't invest that money - max your retirement options - then put the remainder into a 5 yr CD as an emergency back-up... you can always withdraw it from the CD (and risk losing some of the interest gained)...
do not invest...

My personal opinion is that as a medical student and as a resident is that you're going to be cash poor for some time. It's going to be difficult to save, and my guess is that you don't have an emergency fund. Hence, having a liquid asset available to you is important.

I wouldn't count on a return higher than what you're going to be paying as interest on your student loans regardless of your investment, and even if you were going to get that, it wouldn't amount to much money on just $8,000 savings, particularly in-line with what you're going to be making down the road.

If it were me, I'd stick the money in a short-term bond fund in a ROTH IRA and be done with it. It can serve as your emergency fund (you can draw the money you invested in a ROTH IRA tax free; just not your profits). Just put in 5k the first year, maybe put the rest in a money market account, and then transfer it all into the ROTH in your second year.

The reason that I said a short-term bond fund is that bonds are generally lower risk but are going to take a hit when interest rates eventually rise. Short-term bonds tend to avoid this risk, though offer lower return. The purpose of bonds is stability. You can go with stocks if you want, but realize you could take a hit if the market tanks. It also is not really a wise investing strategy to have your emergency fund tied up in stocks. You could perhaps do 50/50 stocks and bonds here if you really wanted to chase yield. Maybe buy a Total Stock Market or Dow Jones index fund with a low expense ratio. If you use a ROTH as your emergency fund, it can take 3-4 business days to get your money. Just keep a credit card handy if you need money that very day and then pay yourself back with ROTH money if you have to use it.

Another option here would be to invest in US savings bonds. They offer some yield and do offer protection from inflation. You can't spend them for the first year, so I'd only put in maybe half of your money per year, but after that, they're almost as liquid as cash.

Keep in mind you probably won't get a better return than by paying off your student loans or taking our fewer student loans. The disadvantage to paying them off is that you lose liquidity and are already cash poor.

I had some money before I started medical school.. I invested it into IRAs, and tried minimizing what I borrowed..

The IRAs.. given the way the market went, are worth much less than what I started with in them.


8K is not that much; who knows where medicine is headed money wise, but that will probably be a week or two pay or less in the future.

My opinon: Keep 4K in an interest bearing account as a cash emergency fund. The other 4K, I would take a REALLY nice vacation either now, or between 1st and 2nd year....

No matter what you do with that 8K today.. its going to honestly have little impact on the big picture. An awesome pre-med school vacation is something you will always remember...


Good Luck.

Hold onto your cash.
Save the blow money for the vacation for when you really need it. Think internship or graduation present to yourself.

Definitely do not invest that money. You can't day trade with an account under $15,000. That means you have a maximum of 3 (I'm fairly sure) transactions per week. If the portfolio you are following suddenly goes south, you won't be able to get out of your trade. Secondly, trading virtual money and trading real currency are completely different. Trading virtual money you tend to take risks that you wouldn't take with real money. Also, I'm almost 100% sure that the people achieving 300% weekly returns are hacking the system. On average, the best traders in the world can consistently achieve 20%. These traders on virtual portfolios appear to be earning over 15,000% per year. It appeared to be dated, so i'm entirely sure it's possible. Third, transaction fees will destroy small amounts of money along with any return they may produce.

My advice is to either save the money, use the money to pay off loans if they have high interest rate, or invest very conservatively. Wait until you have a lot of disposable cash to experiment with trading.

research your local housing market. If you have enough for a down payment then get a 3 bedroom house and rent out the other 2 rooms to other students.

$100,000 house
5% down = $5000
monthly mortgage on 95,000 loan including taxes and insurance is around $750/month
rent from 2 roomates: $900 / month
you are making $150/month on a $5000 investment (35% return on investment)
plus if you hold the house long term you can expect some appreciation.

If your local housing market will not support these numbers then stash it in a ROTH IRA. When you are out of residency and making more money you won't be able to put money into a roth. I know I wish I had put more into my roth in my early years.

100% keep it liquid whatever you do. Between emergency funds and residency applications, board exams etc. there are expenses that are not readily built into financial aid.

Residency and Relocation loans when I looked into them carried an atrocious interest rate with no grace period. If you plan on doing something competitive or plan on applying to competitive programs in non competitive specialties, prepare to shell out some serious dough for that.

Originally Posted by SpineBound

research your local housing market. If you have enough for a down payment then get a 3 bedroom house and rent out the other 2 rooms to other students.

$100,000 house
5% down = $5000
monthly mortgage on 95,000 loan including taxes and insurance is around $750/month
rent from 2 roomates: $900 / month
you are making $150/month on a $5000 investment (35% return on investment)
plus if you hold the house long term you can expect some appreciation.

If your local housing market will not support these numbers then stash it in a ROTH IRA. When you are out of residency and making more money you won't be able to put money into a roth. I know I wish I had put more into my roth in my early years.

Probably impossible to get a mortgage without a job. You are a year too late for this plan. Relying on renters or student loans to pay your mortgage is not kosher in the banking world. Maybe in 2007 this would have worked.

First establish an emergency fund of at least 3-4k. Your transmission will go. Your laptop will die. You will need a root canal. Unexpected expenses are guaranteed. I would use whatever you have left to minimize grad plus loans. That interest is mad high, and when you start doing some math, minimizing high-interest loans is one of the best investments you can make.

Originally Posted by cpants

First establish an emergency fund of at least 3-4k. Your transmission will go. Your laptop will die. You will need a root canal. Unexpected expenses are guaranteed. I would use whatever you have left to minimize grad plus loans. That interest is mad high, and when you start doing some math, minimizing high-interest loans is one of the best investments you can make.

I couldn't agree with this any more. There's something to be said for having an emergency fund and knowing that an unexpected emergency (it will happen) won't force you to put it on a credit card and get involved with that revolving door of debt.

Do not invest the money.
Just keep it for living expenses and/or emergency expenses during your 1st/2nd years of med school.
It is very unlikely you could make more by investing than the 6 or 8% interest you would pay on taking out 8k more of student loans.