Investing during Graduate School

Discussion in 'Psychology [Psy.D. / Ph.D.]' started by Psychisfun43, Dec 29, 2017.

  1. Psychisfun43

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    I was wondering how people invested during graduate school. Did any of you take side jobs and put in 50 dollars a month in their portfolio? I was looking into doing safe Dividend ETF's so I have don't have to micro-manage it as much. Any suggestions and tips? I have been investing for now 4 years and it's been great, thanks, tech. I am doing some calculations and I can get 7% growth in just dividends if the market is still bullish. Which could be very nice especially during a bearish market. I know this is not the most typical question on here but would be great if anyone has tips or any experience.
     
    #1 Psychisfun43, Dec 29, 2017
    Last edited: Dec 29, 2017
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  3. WisNeuro

    WisNeuro Board Certified Neuropsychologist
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    During grad school, I'd just be thinking about my personal IRA, going into Index funds, preferably a low cost ratio service like Vanguard. I was able to contribute variably through grad school. Contribution limits per year are like $5500 I believe. The vast majority of people in grad school aren't able to max that out and have more to invest. If, by chance, you do, you can always open up a brokerage account through the same services and throw down into some more index funds.

    Are you putting this money away for retirement (30+year window) or looking to have access to this at some point in the near to intermediate future?
     
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  4. PSYDR

    PSYDR Psychologist

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    I did. At $50/month you have to be EXTREMELY careful about fees. I've heard good things about acorn app, which offers free investing at the cost of 24 hold on your money, but I am far above that level.

    If you are using a DRIP strategy, buying ETFs and being concerned about a bullish market are bad moves. DRIP is a safe choice to start.
     
  5. DailyJoy

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    I've been trying to move forward on this as well. I have a TSP from my last job that I should probably roll into an IRA but haven't decided what would be best yet. I also have been putting money into a life insurance policy that I can take money from when I retire or my children go to college. Just not sure about the next step with income this limited.
     
  6. PSYDR

    PSYDR Psychologist

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    If I were in this position I would roll to a Roth IRA, get rid of the term life insurance policy because it’s not a good investment, and get 529 plans for the kids if that applies to that state. Some 529 plans “lock” tuition rates from when you start contributing. That’s like 90% of the value given the rate of increas in tuition.
     
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  7. Ollie123

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    Wish I had thought about this more when I was younger. Didn't even really think about it until post-doc.

    Agree with the above. Some depends on your goals (retirement vs home downpayment). Plus all the usual factors (risk tolerance, financial goals). If I could rewind, I'd personally have opened a Roth IRA. Was taxed at so low a rate in grad school a traditional IRA wouldn't be worth it. I've met my major milestones (e.g. house downpayment) and its unlikely the paltry sum I'd have managed to save in grad school compounded over 5-6 years would have made a difference anyways.

    Beyond that, I'm a fan of the boglehead method. 2-3 index funds should be all you need. Slow and steady wins the race.
     
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  8. LAPsyGuy

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    529s lock up your money in ways that can be deeply unhelpful, especially if your kids don’t pursue education after college.
     
  9. DailyJoy

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    Thanks. I find that most of the students in my program aren't thinking of long term finances yet so it's hard to get good advice. I appreciate it!
     
  10. Psychisfun43

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    I’m thinking for a house down payment. I use Robinhood already love the VOO and SPY. Great long holds! So roughly like 15 Years. Although, we both know that the market won’t continue this run for long which is why I thought low risk Blue chip like MSFT would be a safe bet. I’m trying to read up on how to invest in a bearish market/recession because it needs to correct itself sooner or later.
     
  11. Psychisfun43

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    Could you explain more?
     
  12. PSYDR

    PSYDR Psychologist

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    Basics:

    1)https://www.sec.gov/investor/alerts/ib_fees_expenses.pdf. (They sent me a caution, so I assume they know what they’re doing... true story)

    2) Broad strokes: you can divide stocks into those that provide growth and those that provide dividends. The latter sacrifices growth to pay a dividend. Coca-Cola is a pretty good example. If they want their stock to rise they need to increase the number of people buying coke products, decrease the cost of production, or whatever. Alternatively, they can say “we don’t think we can find more opportunities, so we can pay our investors a percentage. Sure we’re not gonna grow as rapidly, but they’ll be happy.”.

    On AVERAGE one assumes that the market will return 10%, while inflation will average 3%, so the real returns are 7%. That’s where that number comes from. This excludes MLPs, REITs, etc. tax basis on dividends is only 15%, which is why the ultimate psydr holding company only pays out in dividends.

    DRIP = dividends reinvestment. It’s literally a drop down option for every investment house I’m in. KO pays a dividen, the IRS takes their cut, and the account automatically buys however many share the remainder will afford. Because dividends are not as quick as the market (board gotta maintain investor confidence), the dividend isn’t exactly a percentage of the share price at the date they declare the dividend is being paid. when the share price goes down, and you’ve set your account up to reinvest your dividends buy more shares. If you have a long position (ie, you intend to hold onto this stock for a long time), this is a good thing. For example, I bought a few hundred shares of a stock at $18/share. It went up to $38 for a few years. Now it’s down. I fundamentally believe in their business model and holdings, so I don’t care it’s down. The dividends are just buying me more shares which will mean when it goes back up to $38, I’ll have more shares paying me whatever.

    As for the safe thing: you’re not gonna get rich at 3% interest. But if you select a brokerage wisely, in 5-10 years you can use that first account to use as leverage in an options account. This is literally a hedge fund.
     
  13. rerope

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    I feel a little dumb asking this but aside from the basic financial literary skills (budget, use cash, don't take on debt, fully funded programs and opportunities all the way, and have emergency fund) I'm having a hard time understanding investing. I do get the importance of a RothIRA and was thinking TDAmeritrade (already have accounts with TD) or CharlesSchwaab but looking for other suggestions. Beyond that should I be looking into ETF's (still don't understand how this is different from a mutual fund) or Index Funds? Then would a service like Vanguagrd make more sense as it provides all of these services (RothIRA, Indexfunds, etc). Sorry if this was confusing and thanks from a bumbling grad student!
     
  14. WisNeuro

    WisNeuro Board Certified Neuropsychologist
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    I'd recommend one of the Boglehead books or the White Coat Investor. Both explain general finances and investing in a very digestible way.
     
  15. PSYDR

    PSYDR Psychologist

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    Mutual funds and etfs are both pools of stocks/bonds that have a single share price.

    Differences:

    Mutual funds’ prices do not change throughout the day. They only change at close of market. Usually mutual funds charge several fees (ie loads) to cover their analysts picking the combination of assets. They also charge a percentage based upon performance. Regulations indicate that when these fees or commissions are lower than like 1%, they can say they are no-load, no-commmison. At these timeframes, 1-3% can be devastating to your retirement. Usually trading is a bit slow because of how the price is set (and some ownership stuff). There is usually also a minimum buy in for mutual funds.

    Etfs change throughout the day based upon demand, which usually mirrors the performance of the value of the pool of assets. Typically the fees are MUCH lower than mutual funds. Trading is much more rapid, so if you want to get rid of some shares you can accomplish that ASAP. There’s some increased volatility but some better tax stuff for etfs. There are also many many more small etfs with varying degrees of legitimacy.

    Index funds can be mutual funds or etfs. They just buy the stocks that make up whatever index. SPY is an etf index fund that has stocks in every company listed in the s&p500, which is a type of index of how the market is performing. Vanguard has some funds that follow the Dow Jones industrial index which is another index of how the market/economy is performing. (Dow Jones “weighs” some industries and uses 30 companies more than others while the s&p doesn’t weight stuff but uses 505 companies.).

    In general, the stock market will go up 10% per year ON AVERAGE during a 30 year period, but inflation will average 3% per year. This is where the 7% real returns figure comes from.

    Bonds are basically when a company asks for a loan from you. Typically bonds pay a set interest rate which are bad if the company is a well established one, because they can get money from other sources at higher rates. When the stock market goes down, bonds initially go down but then go relatively way up.

    The basic advice is to have holding in an index fund for US stocks, an bond fund, and an index fund for international markets.

    Vanguard is a favorite for most because they literally got sued because their fees and commissions were so low that other firms thought it wasn’t fair. They also tend to do as well or better than other firms.
     
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  17. LAPsyGuy

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    I also recommend InvestTech or something like it. They use a segmented S&P strategy, and even a small portfolio can be diversified as such. They’re also good at safety based market timing. Even though buy and hold will work over a long time, getting out before the larger, longer drops is very helpful.
     
  18. PsychPhDStudent

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    My grad school strategy was similar to some others here: max out Roth IRA, then invest if possible. I consulted with my bank's financial advisor. Ended up with index funds.
     
  19. rerope

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    Thank you both! I'm burnt out from the end of the semester and apps for outside funding so digestable is appreciated.

     
  20. PSYDR

    PSYDR Psychologist

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    That’s a really bad investment strategy. One cannot time the market, period. If one could, they wouldn’t have a fund because they would be the wealthiest person in modern history. Even if one could know when the market will drop, selling is an inefficient way to handle this. You could use options, margins, etc and literally make your capital exponentially better.
     
  21. LAPsyGuy

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    We’ll have to disagree. There are market indicators, they’re not 100%, but they give option to manage positions and diversification, and they’ve served me well.
     
  22. WisNeuro

    WisNeuro Board Certified Neuropsychologist
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    I'm gonna go ahead and second the idea that market timing is generally a terrible idea. Infinitely more terrible for anyone but an expert investor. You may get lucky once or twice, but over the span of your retirement investment window, usually 30+ years, you will lose out much more than you win. Any competent financial advisor will tell you the same thing. If they tell you otherwise, I'd look extra careful at what they're trying to sell you.
     
  23. LAPsyGuy

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    Oy, exhausting. Instead of asking questions, you two just proclaim expertise. I’m not suggesting to build a portfolio on market timing. My suggestion, if you bothered to read it was to use a segmented S&P strategy. So instead of using a standard S&P mutual fund or ETF, you’d use and tje S&P segment ETFs ( plus reasonable non stock diversification). There are indicators for moving funds out of more volatile segments. Investech specializes in a safety based approach to market indicators. So, yes, I agree market timing is bad bad idea. Nobody knows what will happen, but things like bubbles and overvaluation can be tracked. Try asking questions. It actually makes you look smart.
     
  24. WisNeuro

    WisNeuro Board Certified Neuropsychologist
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    Try reading other posters posts, that may make you look like you can actually read. They were obviously asking about novice strategies. These are people who are looking for a set it and forget it type of method. At least until they can understand how some of these investments work and plan for tax efficiency in retirement.
     
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  25. LAPsyGuy

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    The strategy is simple. Set it and forget it is irresponsible.
     
  26. WisNeuro

    WisNeuro Board Certified Neuropsychologist
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    Yes, I'm sure most people would consider Warren Buffet an irresponsible investor. For the majority of novice investors, it's the best strategy there is. Most financial advisors not trying to sell on commission will say the same thing. If you don't know, or want to do the research to know more, investing in diversified index funds, with slight tweaks every 5ish years or so to rebalance based on age-based risk is the way to go.
     
    #24 WisNeuro, Jan 2, 2018
    Last edited: Jan 2, 2018
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  27. Sanman

    Sanman O.G.

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    Set it and forget it is not irresponsible when you are paying a fee to buy and sell stocks. If market timing were so easy, the majority of actively managed funds with professionals at the helm would mostly outperform index funds. They don't because it is not that easy.
     
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  28. Psychisfun43

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    I decided to use wealthfront. They will help you invest your assets for free for the first 15,000. Afterwards is .25 percent per year fee. It is a robo-advisor and they put your money in diversified ETF's across most sectors depending on your level of risk. Many friends of mine are up 8-11% overall on average. One friend reached 22% growth on high risk but he's crazy ;)! The owner is a famous very famous investor and the company rakes in 200million a year. Would suggest to check it out! They have 529, Roth IRA's, Taxable accounts and more!
     
  29. WisNeuro

    WisNeuro Board Certified Neuropsychologist
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    The S&P did right around 22% last year, any index fund would have done that or slightly better, generally speaking. The fees are higher than most of Vanguards, especially the Admiral shares. How well does wealthfront do on 5, 10, 15 year returns compared to investing in broad index funds?
     
  30. Ollie123

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    Agreed. I'm up 22.5% in a Vanguard Target Retirement Fund (.09 ER). Roughly 50 domestic stock, 35 international stock, 15 bond.

    That said, it is my 403b so ER is likely lower than achievable in other settings (unless you have a large amount to commit).

    That said, I'm just delighted to see folks saving. We can nitpick strategy all day, but its irrelevant for the astronomical number of people (even high-income professionals) who don't save anything. Considered including some financial literacy and more nuanced financial measures in my screening battery. My clinical observation certainly suggests living beneath your means is associated with better mental health...
     
  31. WisNeuro

    WisNeuro Board Certified Neuropsychologist
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    The Vanguard total stock market index fund admiral shares which I own, fairly low 10k min, has an ER of 0.04%. Even if you don't have the 10k initially, you can do the non admiral shares until you do at ER of 0.15%. They both returned 21-22% last year.
     
  32. Psychisfun43

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    The Returns vary but on average, for the past year the average investor got 8.3% overall based on the users risk.

    Here's a link and a review

    Wealthfront - Planning & Investing Made Easy
    Wealthfront Review 2018 | Investor Junkie
     
  33. WisNeuro

    WisNeuro Board Certified Neuropsychologist
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