For those with a little money saved up before medical school.

[p9142]

My parents are giving me a good chunk of change as a present for graduating from graduate school. I am trying to figure out if it would be better to pay that towards the first years cost of attendance, or invest the money and use Staffords to pay for school. If I used this money I could pay for all of the cost of attendance as long as I took out the $8500 in unsub Staffords. However, that seems like a real waste of money considering the fact that the interest on my Medloans will only be 6.5% of simple interest, as opposed to compounding interest. The real issue is that I am weary of putting money into the market right now, and I am definitely not going into real estate. Is there any safe way to beat 6.5%? Actually it could be a little lower due to the compounding issue. I can't find any money market accounts that pay over 5.5%. Any of you financial gurus have any ideas?

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[etf]

yeah, quit being afraid of the stock market. it's possibly the single most powerful creator of wealth the world has known.

 

[p9142]

yeah, quit being afraid of the stock market. it's possibly the single most powerful creator of wealth the world has known.

My issue is that I am only going to be in for 4 years. I will need that money at the end of medical school. I have become addicted to watching MSNBC while I work out every morning, and many of the talking heads say the market is due for a massive correction. Maybe I could go with mutual funds, but I have no idea how to pick one. In the past, I've used a broker and he put me in some piece of crap fund that managed around 6% (I think he got some kind of fees out of steering me to this fund.)

Anyways, looking at your handle you are probably a trader or something. How does someone purchase mutual funds on their own without dealing with a broker. Also, do you have any funds you would recommend?

 

[Twitch]

My parents are giving me a good chunk of change as a present for graduating from graduate school. I am trying to figure out if it would be better to pay that towards the first years cost of attendance, or invest the money and use Staffords to pay for school. If I used this money I could pay for all of the cost of attendance as long as I took out the $8500 in unsub Staffords. However, that seems like a real waste of money considering the fact that the interest on my Medloans will only be 6.5% of simple interest, as opposed to compounding interest. The real issue is that I am weary of putting money into the market right now, and I am definitely not going into real estate. Is there any safe way to beat 6.5%? Actually it could be a little lower due to the compounding issue. I can't find any money market accounts that pay over 5.5%. Any of you financial gurus have any ideas?

Liquid money market accounts and even CD >5.5% are hard to come by. Also the rate will depend on your tax bracket - are you married and your spouse works? If so you'll have an income coming in and your APY will not be 5.5% if you consider taxes. I guess you're planning to rent, though (re-?)consider. It depends on how property prices are doing in the area where you're thinking of attending school. Forget what those idiots say on MSNBC. They may give you general trends but you need to know what's going on in your specific area. Also consider there is bound to be some degree of turnover at your school when kids graduate (assuming they don't all stay on in the same area for PGY). A residence shelters your income both on FAFSA and 1040 and may also provide tax incentives (depends if you have a spouse and she works).

If you're tax indifferent, but risk averse you're options are personal home or liquid accounts/CDs. Best case you break even or maybe make a little, worst case you're out a little bit <1% (with compounding due to time value of money). Most ppl school is pretty time consuming - do you want to mess around with this for hardly any ROI?

What I would do with the $$$:
1) See if you can qualify to contribute to a IRA or Roth IRA.
2) Buy a house - if your local area is relatively stable
3) Investments - will depend on your particular situation. Need more info for this.

 

[etf]

My issue is that I am only going to be in for 4 years. I will need that money at the end of medical school. I have become addicted to watching MSNBC while I work out every morning, and many of the talking heads say the market is due for a massive correction. Maybe I could go with mutual funds, but I have no idea how to pick one. In the past, I've used a broker and he put me in some piece of crap fund that managed around 6% (I think he got some kind of fees out of steering me to this fund.)

Anyways, looking at your handle you are probably a trader or something. How does someone purchase mutual funds on their own without dealing with a broker. Also, do you have any funds you would recommend?

yeah, 4 years is too short a timeframe for you to be investing in equities, so i guess you're right - keep it short term. i'd suggest opening an account at fidelity or vanguard and putting some of it into a decent bond fund, and some of it in money market. if you've got the stomach for it, put a little into a high-yield bond fund.

 

[MJB]

I'd either go IRA type stuff...or a money market.

 

[bbaker]

Two thoughts:

1. I just opened a 10-month cd at world savings for 5.51% APY, they are currently offering a 10 month cd at 5.46% (if done online) and 9 month at same rate if done at a location.

2. I use emigrant.com. This is an online savings account, tied to your main account, that earns 5.05% APY. To maximize the little bit of money I have. I transfer the money into the account, earn the interest, transfer it back at the end of the month to pay bills. Works awesome! Usually about 3 days for transfer. Yes, FDIC insured. Great bank. I have about 15 friends using the same service.

If you have any specific questions, just PM me.

 

[p9142]

yeah, 4 years is too short a timeframe for you to be investing in equities, so i guess you're right - keep it short term. i'd suggest opening an account at fidelity or vanguard and putting some of it into a decent bond fund, and some of it in money market. if you've got the stomach for it, put a little into a high-yield bond fund.

It sounds like there is no way to beat 6.5% with a money market, but maybe a bond fund could beat it. What kind of return does one usually expect from a bond fund? I am single and will have no income except summer work while in medical school. I think that means I won't pay any taxes on the investment income because I will be below the standard deduction.

Do you have any bond funds that you recommend?

 

[etf]

It sounds like there is no way to beat 6.5% with a money market, but maybe a bond fund could beat it. What kind of return does one usually expect from a bond fund? I am single and will have no income except summer work while in medical school. I think that means I won't pay any taxes on the investment income because I will be below the standard deduction.

Do you have any bond funds that you recommend?

like i mentioned earlier, i think the first step would be to open an account at fidelity or vanguard - i use fidelity. there are all sorts of bond funds that apply to situations - you might put some of it into something like a ultrashort term/short term/bank loan fund, like fidelity floating rate high income (FFRHX) or fidelity ultrashort bond fund (FUSFX) and put some of it into a junk bond fund like Fidelity High Income fund (SPHIX). personally the only money i have in fixed income are some individual ford/gmac junk bonds that yield a little over 9%, but i'm willing to lose that money, so it makes sense for me.

incidentally, if you're willing to take a little risk, you can sign up for an account with ford interest advantage
http://www.fordcredit.com/interestadvantage/
current yields is about 5.76% for under $15k, with up to 6%. basically what you're doing is making a loan to ford motor company, so it's like a bond, but with the daily liquidity of a money fund. however, if ford goes bankrupt, you will probably lose most, if not all, your investment.