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Common percentages of investments/savings

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  • Common percentages of investments/savings

    What is a common/accepted way to invest your money.

    Say you have 300k income after fully loading 401k, and roth IRA. Now, you want to invest 100k of that yearly, then live in 200k a year.

    Okay, so how do most people invest 100k? I know common things are high yield savings accounts, index funds, REIT etc. But, I assume you don't want most of your money in just one specific way. Or is there really no "this is recommended and what you should be doing"?

  • #2
    Read the financial bootcamp for your answers

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    • #3
      Originally posted by ConfusedMan View Post
      What is a common/accepted way to invest your money.

      Say you have 300k income after fully loading 401k, and roth IRA. Now, you want to invest 100k of that yearly, then live in 200k a year.

      Okay, so how do most people invest 100k? I know common things are high yield savings accounts, index funds, REIT etc. But, I assume you don't want most of your money in just one specific way. Or is there really no "this is recommended and what you should be doing"?
      Not sure of your exact question
      Save enough in HYSA for emergency fund / cash flow
      Assuming you don't have any other tax-advantaged accounts available (401k etc), then the rest you put in taxable brokerage account
      What to invest in the brokerage depends on your IPS and desired asset allocation

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      • #4
        Ask 100 people and you’ll get 100 different answers. There is no general consensus
        A lot people on this site however believe in index fund investing. But even among the indexers there’s a lot of variation in terms of what percentages go to stocks/bonds/cash
        I definitely recommend you start doing a lot of reading/learning to determine for yourself where you will fit in to meet your own individual needs/goals.
        Bogleheads has some great resources in addition to what you’ll find here

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        • #5
          20% of gross income for retirement savings, not just available retirement accounts.
          Easiest is then a taxable brokerage account, probably how most start out investing.

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          • #6
            don't forget about taxes

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            • #7
              You are asking an honest if naive question. You really would do well to either take the WCI course or read his book (cheaper and faster but less in depth). First answer is that you should not think about this $100k separately from the money in your 401k and Roth. Remember, the accounts are trucks. The investments are the cargo you put in the trucks (or choose your metaphor). So, you want to make an asset allocation plan across all your accounts - tax free, tax deferred, and taxable. Second, make a plan that covers all your saving and investing goals. Third, difficult for anyone here to answer you because we don’t know your age or goals (saving to retire? Put kids through college? Etc.)

              All that said, you asked for common approaches. 1) 3 months expenses in cash or near cash (e.g., a money market fund or HYSA) for emergencies. 2) 80-20 (or 70-30 if a bit older) of Vanguard total stock market index fund to the Vanguard total bond index fund. 3) Bias bonds to tax deferred, and highest risk (e.g., total stock market) only in Roth. 4) variations on a theme - add international stock index fund in tax deferred (up to 1/3 your stock allocation): add a REIT index fund to tax deferred (up to 5-10% of total). 5) If saving for college, set up 529 account(s) for each kid and plan to reach $100k -$150k for each when the hit 18. Most folks use stocks until the kids hit 15. I was more conservative.

              These are general ideas. Read the book or take the course, then take some time to make a plan before embarking on implementation. Good luck.

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              • #8
                Figure out your tax burden.

                Figure out your expenses (include future big ticket items).

                Everything else should be savings and investments with some buffer.

                Investments don’t need to be exotic. A general 2 fund portfolio of total stock and total bond fund is not a bad place to start. 80% stocks/20% bonds is pretty common. To start you could go 100% stocks but it may be a bumpy ride.

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                • #9
                  I'm actually just a second year med student. But, I am trying to be more financially literate so I can basically retire by late 40s, then practice part time how I want. Looks like I need to do myself a favor and read the book, though.

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                  • #10
                    Originally posted by ConfusedMan View Post
                    I'm actually just a second year med student. But, I am trying to be more financially literate so I can basically retire by late 40s, then practice part time how I want. Looks like I need to do myself a favor and read the book, though.
                    The best use of your time is to study hard and do as well as possible on Step 1 and Step 2. That will make a difference of hundreds of thousands of dollars each and every year in your working career.

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                    • #11
                      Read his books and read the blog. That is a very cheap/free way to get a good financial education. Even if it takes you the next couple of years to really learn everything you will still be ahead of most.

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                      • #12
                        I read Ric Edelman’s Truth About Money book when I was still in college and it gave me a good foundation to understand the importance of starting retirement savings early and aggressively. Time and compound interest are on your side. That book is probably a little dated now though.

                        I’d highly recommend both of the WCI books. If you read nothing else, you should read those, and that will set you on the right path in residency and afterwards. Both are quick reads and inexpensive, but well worth your money.

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                        • #13
                          My advice to a med student would be to 1) minimize debt while a student 2) consider income in picking a specialty - don’t pick a specialty based on income, but don’t ignore it either 3) pick a resident location that is reasonably affordable 4) learn about student loans 5) don’t buy a house in residency and 6) understand that you need a budget.

                          I would spend your final year of training learning about investing and develop an IPS.

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