CDs/Fixed Income other Low Risk Fixed Income

[Chloroform4Life]

Hey guys, finishing up residency soon and going to be joining the real world after fellowship...finally decided to take some initiative and educate myself on personal finance after being told by an advisor "don't worry about all that stuff, that's why guys like you pay guys like me" (most of my Roth IRA's were put in mutual funds with loads of 5.7% and expense ratios between 1.5-2.6% and nearly all had 12-b1 fees as well)....I read white coat investor then a book by boggle and now I'm reading 4 pillars of investing . I'm still at the infancy stage of finance, but some decisions to make and hoping I could get some advice....

My wife recently left p and g with a profit sharing trust that holds about 45k in a mixture of preferred and common company stock. She is 100% vested. The tax deferred company plan is split between a savings plan and the profit sharing trust. The profit sharing trust has the option of moving the stick into index funds or bonds. The more I read the more it seems like I should do this. Is there any reason not to take all of that money and divvy it up between index funds and short term bonds?

Are there possible advantages to keeping shared of preferred company stock in a tax deferred plan? Seems like all the eggs are in one basket

second question is...where do suggest keeping savings for a down payment on a house?
(I have only about 100k left in school debt at 3.5%)

My wife and I plan on saving for 2-3 years and having at least 20% down to put down on our first home.

Thanks!!!

You may be able to get a house with no down payment. There are plenty of banks nationally that give mortgages to doctors with no down payment. So if your student loans have high interest rates, it may be worthwhile to pay those off instead of saving up for a down payment.

Also, renting is not too bad in the current job climate. Unless your first job is awesome, there is a good chance you could be moving in less than 3 years, in which case, buying is not worth it imo. Im 1 year out and am moving job. I bought a house (no down-payment) and now have to sell it. Probably lose 15 to 20 grand in mortgage fee and realtor commissions.

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[bkell101]

My loans are 3.5%. Plan on renting cheap 3-5 years to save fr a down payment. if you don't put 20% down don't u get killed on interest rates?

Anybody have any thoughts on the profit sharing trust and what to do with the company stock within the tax deferred account? I want to change it to index funds or bonds but am not sure if I'm missing something about preferred company stock shares.

 

[Mman]

My loans are 3.5%. Plan on renting cheap 3-5 years to save fr a down payment. if you don't put 20% down don't u get killed on interest rates?

You can ask around at banks to see what sort of rates they have available under various scenarios. One thing to keep in mind is that your 3.5% student loan interest will not be tax deductible for you because of your high income level, but your mortgage interest will always be tax deductible. So even a 5% mortgage interest rate may be less expensive to you on an after tax basis than the 3.5% student loan depending on your tax rate.

 

[deleted162650]

Virtually all of the super attractive Dr mortgages disappeared with the mortgage crisis and Dodd-Frank. They are slowly starting to come back but not like they used to be due to the new regulations. The zero down options are going to be limited to lower loan amounts do if you are in an expensive market forget about it. There are still a number of options though for 5 or 10% down. Keep in mind that you will also need to have 6, 12, or, 18mo (depending on loan amount) worth of reserves in the bank in addition to your down payment.

 

[Chloroform4Life]

I got a 300k mortgage 6 months ago. No money down, no PMI, 3.9% interest. South State Bank. Closing cost around 6k.

 

[deleted50478]

Some doctor loans have a time limit after completing residency. My loan could only originate within 3 years of finishing training. The rates are good, even with low downpayments, and no pmi. My equity has gone over 20% after a 10% downpayment due to appreciation, but refinancing doesn't seem worthwhile because my interest rate is about as good if not better than my refinance rate would be. And that's all in the jumbo loan category.

If you are in a tight market, saving up for a downpayment could cost you as prices outpace your savings.

If I had waited 3 years to buy, I'd have paid 20% more, I'd have less equity, higher mortgage payments, more years left on my mortgage, and little if any savings on rent/buy costs.

 

[deleted162650]

I got a 300k mortgage 6 months ago. No money down, no PMI, 3.9% interest. South State Bank. Closing cost around 6k.

Wow 300K. I'm jealous. In my neck of the woods you're lucky if 300K buys you a delapidated condo with a bad roach problem:

 

[sevoflurane]

Wow 300K. I'm jealous. In my neck of the woods you're lucky if 300K buys you a delapidated condo with a bad roach problem:

I wonder how recruiting would have gone if the USAP deal would not have fell through.

 

[Noyac]

Lighten up slim.

Really?

 

[deleted162650]

I wonder how recruiting would have gone if the USAP deal would not have fell through.

Well, I don't/didn't work for that group so this is mainly conjecture, but I definitely think recruiting would've taken a hit. I know they were saying they were having a hard time once word got out that a deal was on the table, and I think it would've only gotten worse had the deal gone through. Given the location and their effective monopoly on the area market I don't think there would ever be a shortage of applications, but the quality would go down for sure.

I know that's happened with the group up in the East Bay s/p sellout.

I've since moved on to a different market so I don't really have my finger on the pulse with the happenings down there, but I know there was a lot of internal strife and fallout after that whole fiasco. Be interesting to see what happens in the coming years.

 

[bkell101]

You can ask around at banks to see what sort of rates they have available under various scenarios. One thing to keep in mind is that your 3.5% student loan interest will not be tax deductible for you because of your high income level, but your mortgage interest will always be tax deductible. So even a 5% mortgage interest rate may be less expensive to you on an after tax basis than the 3.5% student loan depending on your tax rate.

I see what you are saying. Sounds like since the mortgage rates aren't very high (even with PMI), buying when I know the job is working out well and we are going to stay in town is the best idea.

 

[bkell101]

Gr

Some doctor loans have a time limit after completing residency. My loan could only originate within 3 years of finishing training. The rates are good, even with low downpayments, and no pmi. My equity has gone over 20% after a 10% downpayment due to appreciation, but refinancing doesn't seem worthwhile because my interest rate is about as good if not better than my refinance rate would be. And that's all in the jumbo loan category.

If you are in a tight market, saving up for a downpayment could cost you as prices outpace your savings.

If I had waited 3 years to buy, I'd have paid 20% more, I'd have less equity, higher mortgage payments, more years left on my mortgage, and little if any savings on rent/buy costs.

Thanks for sharing! this is really helpful...I think you all have changed my mind

 

[BLADEMDA]

Goldman's new GS Bank hit the ground running by offering a competitive savings account rate of 1.05 percent APY. That puts GS Bank at an advantage over some other online banks, including Ally Bank, Discover Bank and Capital One 360 (formerly ING), which currently offer online savings rates of 0.75 percent to 1 percent.

But all of those offers are much higher than the average interest rate on savings accounts nationwide, which is only about 0.08 percent right now, according to Bankrate.com.

http://www.cnbc.com/2016/04/22/online-banks-are-hot-just-ask-goldman-sachs.html

 

[Impromptu]

I am just under 3 years out from residency. I have been putting my savings in the 401(k), roth Conversions, and a VUL using low cost index funds, 40% US, 40% International, and 20% bonds. I had extra money each month so I paid off my student loans as quickly as I could and now am working on my mortgage, which I hope to pay off by July. Once that is paid off, I'll still have that extra monthly money. I could increase my lifestyle and simply spend the money (one of the new virtual reality game systems, fly first class?), but I'd rather grow into this salary slowly.

My plan is two-fold. I will start using my taxable account to continue my low cost index fund investing. I am also going to start a continuous 5 year CD ladder, with $250,000 as my goal investment. 2% will only net me $5000/year, but that is guaranteed. These days there are no low risk investments that pay better than that. A ladder allows me to not lose out if the interest rates increase, because I'll be buying a new one each year with the money that comes out.

Some day I may become a gold and/or silver stacker. I found out about that hobby by watching Youtube videos. People will display their stacks of precious metals and describe them as they do so.

 

[pgg]

Some day I may become a gold and/or silver stacker. I found out about that hobby by watching Youtube videos. People will display their stacks of precious metals and describe them as they do so.

This is the most bizarre thing I've ever read in a SDN financial thread.

 

[BLADEMDA]

 

[BLADEMDA]

I own gold coins. I have them protected in a plastic coin case like the guy in the video. But, my coins are all USA or Canadian based silver and gold minted ones.
These coins are currency for me. No more and no less. I respect those who like to collect old coins or valuable/rare ones but that's not my thing. Instead, I keep gold coins for the doomsday scenario of currency collapse. After all the USA dollar is just fiat currency while gold is real money. Like any form of cash it shouldn't be a large portion of your portfolio as it may not appreciate much over time (let's hope it actually doesn't appreciate much) as the U.S. Dollar remains a stable currency.

 

[BLADEMDA]

http://data.bls.gov/cgi-bin/cpicalc.pl

 

[Mman]

After all the USA dollar is just fiat currency while gold is real money.

"gold is real money" implies you could buy things with it even if the US government collapsed

 

[BLADEMDA]

"gold is real money" implies you could buy things with it even if the US government collapsed

Maybe that's the currency we will all use once again as it was 2,000 years ago. In fact, fiat currency is a recent invention but one all nations now use to their advantage.

 

[BLADEMDA]

 

[Impromptu]

I would really like a Scrooge McDuck vault to swim around in. It would be easier to do with silver than with gold.

 

[Mman]

Maybe that's the currency we will all use once again as it was 2,000 years ago. In fact, fiat currency is a recent invention but one all nations now use to their advantage.

The chances of that are no better than the chances we will go back to living in caves as we did 10,000 years ago. We use currency to our advantage just like we use iphones, wifi, and air conditioning. There is literally no way to go back. The fact that primitive civilizations used it doesn't mean we could go back in the future.

 

[BLADEMDA]

Read the bottom of the note:

 

[BLADEMDA]

 

[BLADEMDA]

 

[BLADEMDA]

1905 Gold Certificate (real money as it was backed by gold)

 

[BLADEMDA]

 

[BLADEMDA]

So, what does this mean for US Currency vs Gold:

1. Gold is real money vs US dollar Fiat currency. A portion of your cash reserves can be held as gold. In my portfolio, gold is 3-5% of the total portfolio.
2. The US dollar is a fiat currency which loses money over time and as such, is not going to grow a portfolio. In fact, it is a drag on a portfolio.
3. CDs or Short term bond funds are better Investments than the US Dollar but still not keeping up with real inflation.

I like Gold but I am not a buyer above $1300 per ounce. Fair Value for Gold is around $1250-$1300 per ounce. Gold should not be more than 10% of anyone's portfolio unless they plan to aggressively trade around their positions.

 

[BLADEMDA]

 

[Mman]

Is this graph trying to imply that inflation is a bad thing? No inflation or deflation is terrible for an economy.

 

[Mman]

2. The US dollar is a fiat currency which loses money over time and as such, is not going to grow a portfolio. In fact, it is a drag on a portfolio.

Cash should never be a large portion of a portfolio. Cash is for short term needs.

 

[Mman]

Read the bottom of the note:

Yes, we used to use a gold standard for our currency. Thankfully we went off it. We will never go back, nor will any other first world country.

 

[pjl]

Show a graph of purchasing power of an ounce of gold please, then overlay it. I tried to find one but failed.
Gold is a hedge against inflation, nothing more. Replacing cash with it is ok I guess, but I prefer to hedge against inflation with productive assets


Sent from my iPhone using SDN mobile app

 

[Mman]

Show a graph of purchasing power of an ounce of gold please, then overlay it. I tried to find one but failed.
Gold is a hedge against inflation, nothing more. Replacing cash with it is ok I guess, but I prefer to hedge against inflation with productive assets

 

[pjl]

Sent from my iPhone using SDN mobile app

 

[BLADEMDA]

Show a graph of purchasing power of an ounce of gold please, then overlay it. I tried to find one but failed.
Gold is a hedge against inflation, nothing more. Replacing cash with it is ok I guess, but I prefer to hedge against inflation with productive assets


Sent from my iPhone using SDN mobile app

I agree that Gold is NOT a replacement for equities. Gold is a partial replacement for the CASH portion of your portfolio or even CDs earning less than 1.0%. As such, it should represent up to 5% of a diversified portfolio. I hold significantly more CASH than Gold but if Gold drops to $1,000 or less I would increase Gold money and decrease US Dollar currency. At this point in my career my portfolio is fairly conservative so I don't expect some of you to fully understand the value of Gold/silver in a portfolio.

 

[BLADEMDA]

Yes, we used to use a gold standard for our currency. Thankfully we went off it. We will never go back, nor will any other first world country.

China may go back on the Gold standard one day and become the reserve currency of the world. But, i wouldn't trust the Chinese so instead, I would just purchase US or Canadian minted gold coins.

 

[ERRES2288]

I agree that Gold is NOT a replacement for equities. Gold is a partial replacement for the CASH portion of your portfolio or even CDs earning less than 1.0%. As such, it should represent up to 5% of a diversified portfolio. I hold significantly more CASH than Gold but if Gold drops to $1,000 or less I would increase Gold money and decrease US Dollar currency. At this point in my career my portfolio is fairly conservative so I don't expect some of you to fully understand the value of Gold/silver in a portfolio.

I think there is a much higher likelyhood of the gold/silver coins being stolen from your house, lockbox, wherever than there is of our country ever using it again as currency.

 

[pgg]

Maybe that's the currency we will all use once again as it was 2,000 years ago. In fact, fiat currency is a recent invention but one all nations now use to their advantage.

All currency is exchanged based on mutual faith that it has value now, and will have comparable value in the future. You can't wish that faith away from gold just by saying "gold!"

You can call the USD fiat currency backed by nothing, but that's not true. It's backed by the economic, political, and military power of a country that has proven quite willing to throw that economic, political, and military power around. The Mexican peso is every bit the "fiat" currency as the USD but let's not pretend they're equally unbacked.

I'm not making an argument in favor of our country's spending or debt, just against this notion that gold and silver are some kind of answer.

I'm also not arguing that there isn't a place for physical PMs and PM equity to diversify a portfolio. There are reasonable arguments that these are unnecessary.

You think we couldn't or wouldn't have fractional reserve lending if a dollar bill was "backed" by an ounce of silver?

 

[BLADEMDA]

I think there is a much higher likelyhood of the gold/silver coins being stolen from your house, lockbox, wherever than there is of our country ever using it again as currency.

Gold is real money and retains its purchasing power. It's not a great investment but is very liquid like cash. Again, Gold should be viewed as an alternative to holding US Dollars in a portfolio and as such, its role is limited for most investors.

I like it below its fair value of $1250 per ounce. Using a 10% discount to fair value Gold is a buy below $1125.

 

[BLADEMDA]

All currency is exchanged based on mutual faith that it has value now, and will have comparable value in the future. You can't wish that faith away from gold just by saying "gold!"

You can call the USD fiat currency backed by nothing, but that's not true. It's backed by the economic, political, and military power of a country that has proven quite willing to throw that economic, political, and military power around. The Mexican peso is every bit the "fiat" currency as the USD but let's not pretend they're equally unbacked.

I'm not making an argument in favor of our country's spending or debt, just against this notion that gold and silver are some kind of answer.

I'm also not arguing that there isn't a place for physical PMs and PM equity to diversify a portfolio. There are reasonable arguments that these are unnecessary.

You think we couldn't or wouldn't have fractional reserve lending if a dollar bill was "backed" by an ounce of silver?

You also can't change the fact that US dollar is worth less over long periods of time. Inflation eats away at the purchasing power of the dollar. So, if you are earning more than inflation on your low risk investments then there is no need for gold. But, if the opportunity presents itself to purchase real money below its intrinsic value (Gold has an intrinsic value in all developed nations) then Gold is the better currency to hold vs US Fiat dollar bills. I hold currency in Gold and US dollars; both are extremely liquid and recognized around the world as a store of value.

 

[Mman]

Gold is real money and retains its purchasing power. It's not a great investment but is very liquid like cash. Again, Gold should be viewed as an alternative to holding US Dollars in a portfolio and as such, its role is limited for most investors.

I like it below its fair value of $1250 per ounce. Using a 10% discount to fair value Gold is a buy below $1125.

To be considered money, gold would have to be able to purchase goods and services for you. It really can't. Taking your 1 ounce gold coin into McDonald's isn't going to get you a cheeseburger. I mean it could, but you are either getting change in $20s or no change at all so you are right back to having dollars. So a $100K worth of gold coins isn't going to buy you much of anything at any point. It's too hard to fractionate to be useful for exchange.

If people are concerned about the government collapsing, they need guns and ammo and their own food/water supplies. That's really it. Gold is of no more use than dollars in that situation.

Now if people want to use gold as a short-med term hedge against inflation as part of their overall savings plan, they should go for it. Just don't plan on it being "real money" if the dollars no longer work.

Inflation is a good thing for an economy, but you need to invest in ways that outpace inflation. Hoarding a bunch of cash is only slightly dumber than hoarding a bunch of gold.

 

[Pooh & Annie]

Goldman's new GS Bank hit the ground running by offering a competitive savings account rate of 1.05 percent APY. That puts GS Bank at an advantage over some other online banks, including Ally Bank, Discover Bank and Capital One 360 (formerly ING), which currently offer online savings rates of 0.75 percent to 1 percent.

But all of those offers are much higher than the average interest rate on savings accounts nationwide, which is only about 0.08 percent right now, according to Bankrate.com.

http://www.cnbc.com/2016/04/22/online-banks-are-hot-just-ask-goldman-sachs.html

Thanks Blade, I just transferred a pretty good chunk from my stale BOA account. The GS account has very reasonable small print too as far as transfer limits and minimum balances.

 

[BobBarker]

The EE bonds are really a good option if you can wait the 20 years to cash them out. 3.5% and no state or local income taxes when you cash them in. If you are 50 years old at the height of your career, putting $20,000 in and turning it into $40,000 for you to use at 70 isn't too bad of a deal. Surely you will be retired and in a much lower tax bracket by then so the fed income tax hit shouldn't be too bad.