Savings Vehicle While in Residency...

[TysonCook]

Hello,
I was wondering if any of you have thoughts on what type of investment to put $ into while in residency if I need to get it out in about 3 years.

I've got about $1000/month extra that is just sitting in a bank. I'll need access to it when deferrment ends as I have some loans at about 6% when I go back into repayment that I want to pay off ASAP.

Any advice on CD's vs. Money Market Accts vs Mutual Funds for a vehicle knowing that I'll zero it out in about 3-4 years? Any ones in particular?

Thanks,
Tys

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[Bobblehead]

"In general" if you're going to need the money that fast you should just leave it in a savings account. Emigrant Direct pays one of the top rates in the nation currently. You need to link it to your existing checking account. Their current rate is 5.15% with no fees or minimums.

https://www.emigrantdirect.com/EmigrantDirectWeb/index.jsp

 

[Stroganoff]

I love Emigrant Direct. I've had it since May, and it's my best savings account.

But if you're pretty sure you won't need the $$$ in the 3-4 years of residency, stash it in higher yielding CDs:

http://www.bankrate.com/brm/rate/high_home.asp

Find what works for you at the time and with the amount you have. 5.15% in a good savings account still can't beat 5.7% in a CD.

TysonCook, do you have all the money upfront, or is this a monthly thing? You could do a mix of CDs and Savings instead.

 

[etf]

i always recommend the same thing - open a fidelity account and put it into a money market fund. the yields grow faster than savings accounts while rates are going up (and they will be going up)

 

[Bobblehead]

i always recommend the same thing - open a fidelity account and put it into a money market fund. the yields grow faster than savings accounts while rates are going up (and they will be going up)

Can you post some numbers? The Fidelity Cash Reserves (FDRXX) money market fund has a 0.45% expense ratio and currently lists a YTD cumulative total return of 2.60%. There is a $12 small balance fee if your balance is below $2,000. Minimum initial investment is $2,500. I am not familiar with the other fees that Fidelity charges for accounts.

I'm not sure I see the advantage of this money market fund compared to a no-fee, no-minimum savings account such as Emigrant Direct.

 

[TysonCook]

Hello,
Thanks for the great advice. I currently have around $10,000 total in all my accounts, and after paying taxes, mortgage etc, I have around $1500/mo left from my salary.

I just wanted to invest about $1000 of that per month in something higher yielding than BOA's 0.5% savings acct.

CD's are great but I would need to buy them at one time, instead of setting up a direct deposit into the MM Account.

Maybe that's the way I should go.

My loan stuff is rediculous. I have 5 different loans for med school (2 consolidated (staffords), 1 perkens, 1 from my school, and 1 residency relocation), and on top of that a Mortgage. It makes my head spin just thinking about it.

 

[etf]

Can you post some numbers? The Fidelity Cash Reserves (FDRXX) money market fund has a 0.45% expense ratio and currently lists a YTD cumulative total return of 2.60%. There is a $12 small balance fee if your balance is below $2,000. Minimum initial investment is $2,500. I am not familiar with the other fees that Fidelity charges for accounts.

I'm not sure I see the advantage of this money market fund compared to a no-fee, no-minimum savings account such as Emigrant Direct.

i think that you're right, that the emigrant direct, hsbc direct, and ing type accounts do yield higher than the fund. there would be no small balance fee because i was assuming that the money fund would be your "core" account, which they don't charge a fee on. also, i was going by 7-day yield, which for fcash is around 4.92%, which is obviously lower than emigrant. i personally give up that difference to have the convenience of the fidelity account - for one thing, you can buy brokerage cds (from a wide variety of banks so there's more competition) for free, as well as buy us treasury bills/notes/bonds at auction for free - anywhere else will charge a minumum of $45 for that.

personally if i was in the other person's situation - and knew i wouldn't be withdrawing for 60 days, i would put the money into fidelity floating rate high income (FFRHX), or maybe another floating rate fund from another firm (Franklin-Templeton comes to mind). The 30-day yields are approaching 6.5%. however, if you must have the safety of fdic insurance, i agree that emigrant and its friends are the way to go.

 

[Bobblehead]

Hello,
Thanks for the great advice. I currently have around $10,000 total in all my accounts, and after paying taxes, mortgage etc, I have around $1500/mo left from my salary.

I just wanted to invest about $1000 of that per month in something higher yielding than BOA's 0.5% savings acct.

CD's are great but I would need to buy them at one time, instead of setting up a direct deposit into the MM Account.

Maybe that's the way I should go.

My loan stuff is rediculous. I have 5 different loans for med school (2 consolidated (staffords), 1 perkens, 1 from my school, and 1 residency relocation), and on top of that a Mortgage. It makes my head spin just thinking about it.

Make sure you have about 6 months worth of living expenses in an emergency fund, especially since you have a mortgage which I assume means you have a house or condo. If you want to save up to pay off the loans as soon as they come out of deferrment and you know that this will happen in 3 years a savings account or money market account would be the safest way to "invest" the money. You could also take the remaining $500 and put it into the 401k/403b at work if there's matching or max out your Roth IRA if there isn't.

 

[TysonCook]

Make sure you have about 6 months worth of living expenses in an emergency fund, especially since you have a mortgage which I assume means you have a house or condo. If you want to save up to pay off the loans as soon as they come out of deferrment and you know that this will happen in 3 years a savings account or money market account would be the safest way to "invest" the money. You could also take the remaining $500 and put it into the 401k/403b at work if there's matching or max out your Roth IRA if there isn't.

my hospital will match $.50/dollar up to 5% of my check, so I'm starting w/ 6% this year, and will bump it up to 8% and then %10 in the following years. My fiance makes around $50,000/yr on top of what I make, so we will be okay as far as emergency funds etc.

Realistically I'm not worried about having enough funds, it's the opposite, I have a lot of excess $ and want to put it to work for me. I guess that I'm not that "starving" resident that I always thought I'd be.

Guess that I don't really have expensive tastes Or taste at all for that matter!

 

[whopper]

One thing I did--

I get 0% credit card offers all the time. I got great credit.

So what I did was I maxed out a few credit cards, good for 0% interest for several months and put it in a savings account.

Then when the 0% is about up-I pay off the credit card debt, then just max out the credit cards again at 0%--they pretty much offer another 0% offer when there's been no activity in the card for awhile.

Warning--its not a true 0%. There's transaction fees for several of them--but in the big picture I usually only got charged 0.25 to 0.5% interest. (e.g. they'll charge a 3% transaction fee, but that fee has a max of $50. If I take out $10,000, $50 is only 0.5%!) Not bad considering I was getting 5% a year in the savings account.

Talk about a virtual no risk investment!

 

[etf]

i always thought about doing this, but I figured it must affect your credit in some way...

 

[mshheaddoc]

my hospital will match $.50/dollar up to 5% of my check, so I'm starting w/ 6% this year, and will bump it up to 8% and then %10 in the following years. My fiance makes around $50,000/yr on top of what I make, so we will be okay as far as emergency funds etc.

Realistically I'm not worried about having enough funds, it's the opposite, I have a lot of excess $ and want to put it to work for me. I guess that I'm not that "starving" resident that I always thought I'd be.

Guess that I don't really have expensive tastes Or taste at all for that matter!

I'd find other vehicles other than your hospital plan to invest in. Usually most investors would tell you to match up to the amount that your hospital will match you, max out your roth (in your name AND your future wife's name) and then move into other IRAs, mutual funds, etc.

Congrats on not being the starving resident!

 

[mshheaddoc]

i always thought about doing this, but I figured it must affect your credit in some way...

Credit wise isn't too bad if you already have good credit and you have multiple cards already. If your percentage of revolving balance isn't above total usage of 50% you're probably set. Also, since credit reports vary by month, it could take a month or two for that new balance to even hit your credit report. Opening a few new accounts won't hurt you if you don't do extremely often. I wouldn't suggest applying for 5-10 new cards all at once!

 

[whopper]

That's what I did. The strategy I mentioned only works if you get multiple cards. When there's no activity on the card for awhile, several credit cards offer a 0% "reintroduction" approach.

So you need to do it on a few cards while keeping other cards inactive.