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Investment choices

Discussion in 'Finance and Investment' started by Ilovewater, May 4, 2012.

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  1. Ilovewater

    Ilovewater

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    I was able to save up a decent amount of money before I started med school. I've used some of this money to pay for tuition, so I don't have to take out Grad PLUS loans. There is still have enough for emergency fund as well as an extra $5000 that I would like to invest. What would be good choices for me to look into? This investment would be for retirement, but I don't mind being a little aggressive with my investment.
  2. david0028

    david0028

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    Nice achievement, go for your investment, good luck. :luck:
  3. crimedawg

    crimedawg

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    I would invest in energy - specifically natural gas. It is at historic lows and will more than likely go up in price. I opened a Roth Ira this year and invested all 5k into various company's and funds related to
    Natural gas. But the decision is yours.
  4. Renaissance Man

    Renaissance Man Saving the World Bronze Donor

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    Pick a Vanguard Index Fund - total stock market perhaps? Low fees, no load fee, and no speculation required.
  5. JacobMcCandles

    JacobMcCandles

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    Not this.

    This.

    Pick up Boglehead's Guide To Investing and give it a read.
  6. crimedawg

    crimedawg

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    I agree. If you are investing to grow your money low risk but plan on needing it in the near future - meaning not retirement related, then invest in a vanguard index fund.
  7. Renaissance Man

    Renaissance Man Saving the World Bronze Donor

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    Actually...I would say that the index fund is a wonderful option for growing your money for "retirement related" reasons. Be careful about the advice you receive on the internet. Find a couple of good blogs, The White Coat Investor is one, and buy a few well-reviewed books on Amazon before making decisions with your money.
  8. TexasPhysician

    TexasPhysician Moderator

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    This. Investing doesn't need to be complicated.

    There are plenty of other good investments out there but most require time and effort. Vanguard funds are a good simple way to start.
  9. Ilovewater

    Ilovewater

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    Thanks for all of the replies guys! I will definitely read some investment books after board studying is over! I was definitely looking into a Vanguard Index Fund. I've also read a little bit about Roth IRA. Which one do you guys think it's better to get started on: Vanguard index fund or Roth IRA?
  10. shantster

    shantster Eye protection!

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    All IRAs (including the Roth) are like buckets that you dump your investments (the Index Funds) into.

    The one thing you need to look into is your ability to put money into a Roth right now if you are a student and have no income. In order to contribute any money into one, you need to make at least that amount of money as earned income (either as an employee or through self-employment) because the maximum contribution is your income or $5k, whichever is lower. Therefore, if you will have $2k of earned income on 2012, then you can only do $2k. If you have $10k, then you can only do $5k. If you are a student and don't have any money earned for 2012, then you can't contribute. If you had earned money for 2011, the latest you could have done it was tax day, April 17th, so you are a bit late looking into this.

    The only way around it with no income is if you are married to someone that is making money because you can get a spousal IRA.
  11. crimedawg

    crimedawg

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    I didn't think I would get such a backlash.

    When you guys reference index funds, what funds do you recommend? Vanguard is not the Only company to offer them. That's as open ended as saying to invest in stocks.

    Also just curious to hear your ideas on why investing in natural gas is such a terrible idea.
    Last edited: May 8, 2012
  12. MT Headed

    MT Headed snow, PBR, and bears Lifetime Donor

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    When you commit to investing in index funds (i.e. trying to match the market instead of beat it), the fees associated with investing will be your biggest cost. Vanguard, being basically the only "mutual" fund, that is, owned by the investors themselves and not a for-profit corporation, has the lowest fees you are likely to find.

    As for natural gas, the issue is what are your goals? Are you really going to try to beat the market? Do you have more skills than the collective wisdom of the investment community? Investing in any specific sector can give a high reward but it comes with a higher risk as well. Monitoring specific investments is a skill and it is hard work. Your personal skill set is most likely in a medically related field and your time would be better spent there than trying to time a better market return.

    On a personal level, I know my skills are in computers and studying medicine. This is where I can generate income. Massive amounts of income. By putting my investments in Vanguard for the last twenty years I can ignore the market ups and downs and focus on what's important (financially and non-financially) to me. I created genuine financial independence, which was a goal of mine. I haven't read a financially related magazine or newspaper in years. Yet mindlessly investing in a low cost mutual fund at Vanguard is paying for all of my medical school costs.

    By trying to uncover hidden gems like natural gas you are basically always going to be dependent on tomorrow's issue of the Wall Street Journal. Do you really want to live like that? Is that the best use of your time? If your answers are yes (and there's nothing wrong with that) then by all means gas away. I suspect most of the audience here would rather spend their time with their family, or working as a doctor to generate major $$$.
  13. freaker

    freaker Senior Member

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    Investing in natural gas is not a terrible idea. Unless it is. If you think you can time the market on a commodity, you're not alone. But on the whole, very few people beat the market repeatedly, and most who try to beat it end up losing or underperforming.

    The philosophy behind an index fund is that you don't try to beat the market but try to match it and incur the lowest number of fees possible in doing it.

    Don't think that the Vanguard Total Stock Market index fund is a low-risk investment; it's not. You're buying into the whole stock market, which can be quite volatile. But it's much, much more steady than any single investment. It's certainly less stable than Total Bond Market or a TIPS fund. Or a bank account, CD, or federal treasury note (ie. savings bond). Volatility typically translates into higher returns, but it can also turn out higher losses. Determining your level of risk tolerance is by far the most important decision you will make when investing. Learn what carries risks, your long-term and short-term goals, and then decide.

    Vanguard and other brokerages have different philosphies, but Vanguard was probably the first to come forth and endorse the idea that the best way to maximize your investments was to minimize expenses. Their funds tend to have little turnover in the their stocks to minimize transaction fees, they don't try to pick winners and losers, and instead invest broadly in various asset classes that you can choose to invest in. Hence, "Total Stock Market," "Total Bond Market," or "Total International Market." Fidelity is another brokerage company who has some lower expense funds, including their Spartan funds, though they also have more actively managed funds.

    To use Vanguard as an example, their Total Stock Market Index fund as an expense ratio of 0.18% annually. That compares to the market average of 1.21%. If you invest over $10,000 in that fund, its expense ratio drops to 0.06% Keep in mind that you're paying the "average" investment firm nearly 7-fold what Vanguard charges to manage your fund, and you'll see why they have a following.

    If you want a very active fund manager always out to choose the biggest winners in the market, Vanguard is not your investment firm. If you want people you can meet with face-to-face on a regular basis, they're probably not your brokerage. Just know what you want.
  14. Renaissance Man

    Renaissance Man Saving the World Bronze Donor

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    I wasn't trying to tell you off. I, for one, have no idea if natural gas is a good investment or a terrible one. I don't know what it will do tomorrow or 10 years down the road. I am a 22 year old with a laptop and a background in science, so I don't expect to have the resources or connections to successfully predict the rise and fall of individual stocks or commodities. Considering that something like 90% of actively managed funds don't beat the market over a certain time period (idk the actual numbers), even professionals don't seem to have this ability.

    I think I suggested the Vanguard Total Stock Market Fund to the OP, but I for one use the Vanguard Target Retirement 2050.
  15. JacobMcCandles

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    Investing in natural gas (or other commodities) wouldn't be a terrible idea if it were <5% of one's portfolio. The terrible idea comes from investing in only 1 thing. Diversify.
  16. MT Headed

    MT Headed snow, PBR, and bears Lifetime Donor

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    Oh man those Vanguard Target Retirement funds are like God's gift to investors. They are low cost. They invest in everything. And they shift their asset allocation over time.

    Once I realized that my personal portfolio was duplicating the Target Retirement strategy, I dumped all my funds into a Target Retirement that matched my time frame. Now the amount of time per year I spend on financial matters approaches zero.
  17. The White Coat Investor

    The White Coat Investor AKA ActiveDutyMD Partner Organization

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    You've been given good advice. Good investing is boring investing.

    Honestly, I'd probably put that money into a savings account. Use it for interview expenses, moving expenses, avoiding loans as a student, or when your car breaks. Start worrying (a little) about investing as a resident (and a a lot as a new attending.)
  18. crimedawg

    crimedawg

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    All I am saying about nat gas is that it is at all time lows. In my opinion I believe it is a good investment choice because as a nation, world, we have become so dependent on high density sources of power and we have done very little to decrease our dependency. The united states has the largest reserves of natural gas - arguably - in the world. Power plants all over the country are moving away from traditional sources of power (coal) for cleaner sources such as natural gas. Natural gas is going to play a very large role in our lives.

    I don't think wind or solar energy are capable of producing power at a rate that we require.

    On a side note, I agree that index funds are a great option and so are ETFs.
    Last edited: Oct 25, 2012
  19. crimedawg

    crimedawg

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    I don't know your reasons for wanting to go into medicine, but I can assure you that if they are solely monetary than you are not going in for the right reasons. The massive amounts of income you speak of may not be there. You will always be financially sound and well compensated, but going just for the money sounds like a terrible idea.

    To each there own.

    Also, I wouldn't consider natural gas a hidden gem.
  20. Cooperd0g

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    Or you could try getting your facts straight and stop giving out horrible investing advice for someone who is clearly a novice. Vanguard Total Stock Market Investor Shares (VTSMX) - minimum investment of $3,000 and ER of 0.18%. The Admiral Shares version has a minimum investment of $10,000.

    Natural gas may be at an all time low, but it would still be an investment that would require constant attention unlike index fund investing.

    You are right, you don't know, but you could have looked through his post history to find out and discover that he is a self made wealthy person who has decided to go to med school to become a physician. He also feels that an excess of $180,000 or so per year in income is massive despite being financially independant already.
  21. crimedawg

    crimedawg

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    You are right, I forgot there is only one way to invest - through vanguard index funds.

    I also forgot that people on sdn are experts in investing.
    Last edited: May 15, 2012
  22. JacobMcCandles

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    It doesn't take an expert to give better advice than someone who suggests investing 100% in natural gas. The OP states this money is for retirement. Properly picked index funds (and yes, a majority of Vanguard's will fall under this due to no fees, low ERs, etc.) are the best (and also happen to be the easiest) vehicles for retirement. Sure, there's a chance he could hit it big but there's a much greater chance that he'd be much worse off.
  23. TexasPhysician

    TexasPhysician Moderator

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    I don't think natural gas is a bad investment. Many people I know have some money on gas.

    That said I agree that for the novice investor - Vanguard funds are probably the best. Unless you spend time/effort to learn about a certain investment, you won't beat the boring Vanguard fund.
  24. JacobMcCandles

    JacobMcCandles

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    I didn't say that natural gas itself is a bad investment, however, it's not smart to put 100% of your holdings into it, as it isn't smart to do that with anything.
  25. cookiecutting

    cookiecutting

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    I agree with the general theme that if you have little to no experience in investing you should a) try to learn more with books (Intelligent Investor is a pretty great start) and b) put your money in some kind of index in the meantime. Also, if you are not an expert at market timing, its probably a good idea to dollar cost average in (putting in small amounts at regular time intervals) rather than dumping it all in at once.

    Investing in 100% natural gas may be a pretty high-yield strategy - the oil and gas companies have moved their rigs to oil-rich plays this year, so the production is declining, leading to lower supply and higher prices. In addition, more and more natural gas power plants are being built by power providers to accommodate the new reality of shale technology.

    However it does not seem that the OP would be able to time the exit of this investment - which would occur when oil and gas companies begin shifting the rigs back to gas plays. The reality of the situation is that the supplies of natural gas are so vast that the price of the commodity will remain depressed for a long time, however producers that have low-cost shale plays will benefit from the massive volume.
    As for the U.S. having more natural gas than any other country in the world, that is simply because currently we have the most advanced technology. Russia clearly has more natural gas resources than the United States, but cannot access them because of the lack of adequate horizontal drilling and manufacturing techniques. Once these techniques become ubiquitous, the prices of natural gas worldwide will drop like a rock.

    Back to the OP's question of where to put money right now. I would hesitate to suggest a 100% allocation to even one country, the U.S. The U.S. will likely have slower growth rates than many parts of the world for the foreseeable future. Perhaps more diversification might be wise, say 50% in some U.S. index funds, and the rest in a few other countries with faster growth rates.

    Here is an article discussing four India Funds.
    Here is an article discussing 10 China funds. I would be a little cautious on China in the very near term because they are in the process of unwinding a real estate bubble, but it will probably be the most consistent growth economy in the world this century.
    Also, here are three broad based Africa funds.

    Having exposure to different geographies will help you ride out market waves in certain countries, and give you exposure to some of the faster growing places.
  26. freaker

    freaker Senior Member

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    It requires a 3k investment, not 10k. He could invest in such a fund if he chose.
  27. winkleweizen

    winkleweizen

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    My recommendation? Pay off more of your tuition as opposed to investing the 5000. Paying off your tuition is basically a guarantted 6.8% return. Thats pretty dang good.
  28. strongboy2005

    strongboy2005

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    I agree. Better to invest after all the debt is paid off.
  29. freaker

    freaker Senior Member

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    That's certainly an option. The poster would lose liquidity with that money, which for someone who is cash poor might be more useful at this point in life.
  30. Dumb

    Dumb USMLE Tutor - PM me for info

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    It is good, but not as good as the 5k Roth long-term because of the tax-free growth and withdrawal.
  31. sharingdoctors

    sharingdoctors

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    Roth IRA and put it in an index fund. Hasn't been so good over the last 10 years, but historically you are hard pressed to beat it.

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