Best way to invest to get ~7% return every year?

[omnibee]

I'm only a medical student right now, but I will be facing approximately 400k loans (private school + high cost-of-living) once I graduate. These are unsubsidized and grad PLUS loans, so the interest is 6-7%.

I'm hoping for the best that PSLF works out, but with the huge possibility PSLF may get dissolved, I'd like to plan ahead. I'm thinking about paying the minimum balance in hopes of PSLF working out and investing leftover funds. Best case scenario my loans are forgiven, and worst case the invested money hopefully return something close to 7% so I'd still be able to pay it off.

Is there a smart way to invest funds to get 7% return (or close to that) every year?

[Hatton]

No guarantees ever.  I would invest in vtsax.  Vanguard’s total market fund.

[Peds]

Good luck, but prob not. 100% stock would be it.

That other post though....waaaat?

[Shamwow]

Only guaranteed ~7% return I know is to pay off your loans....

Historically on average the stock market barely beats that, but certainly not over EVERY 10 year timeline while you are waiting for to see if your loans are forgiven.  There is a significant risk that you would make less than this or lose money over this relatively short timeline.

Another factor is: will you be working for an employer that "counts" towards PSLF after residency?  Pretty hard to predict at this stage of your training - and I don't think you should limit your job search to only those that do.. You may find more lucrative offers elsewhere even taking the loan forgiveness into consideration.

It would also be a good idea to run the numbers and see how much you could save if you refinanced to a lower interest rate.  Just to be able to compare all options.

Repaye is another consideration while in training - WCI has some good blog posts about all of this!!

[Dreamgiver]

As said above, only guaranteed 7% return is to pay the loan off and that is what I would do.

Sure, the market has been doing really well and some of my funds are up 24% for the year, but there is no guarantee whatsoever and I would not risk it.

Plus in order to net 7% the return has to actually be higher (i.e., inflation and taxes take a chunk out of it every year). Best thing you can do now is live very frugally and keep your living expenses super low. Find a roommate, develop a tight budget, and such. Good luck!

[Zaphod]

Choose a high paying specialty.

Live like a resident.

Save like crazy, the earlier the better.

Heavy equity allocation.

Dont worry about returns, stocks/investing is a long term (multi decade) game, it wont happen overnight.

For your loans, you have to switch your thinking to how much can you not spend to pay them down. This is reliable and good.

Learn about investing, personal finance. Time value of money, simple vs. complex interest, etc...

[Jaqen Haghar MD]

I guarantee you could get a +7% return, or a +25% return or a -50% return, or somewhere around there.  We are actually about due for a -50% return, but who knows?   I agree that a guaranteed 7% return would be to pay down the loans.

[PhysicianOnFIRE]

The best way to ensure you can pay off the loans is not to get a guaranteed return, but to build up a balance in a taxable brokerage account equal to your outstanding balance on your loans.

Over the long term, stock funds tend to better than bonds and bond funds, but over the short term, it's anyone's guess. @Zaphod offers great advice. Crixus tends to have contrarian views, so I wouldn't be alarmed by the seemingly conflicting advice above. People are trusting Vanguard with a total of $4.4 Trillion of their dollars. Others are burying gold bars. Do as you wish.

[Craigy]

I would call BLM Investment Securities, LLC.  Best company for guaranteed returns.

[hightower]

@OP 

At this stage in the game you should not be thinking about how to invest.  You first have to make money.  And to make money you need to get through school, residency, +/- fellowship etc.  All of those things are vastly more important than worrying about investing right now.  The only thing you can do right now is minimize debt.  Live way way way below your means. 

It's good that the 400k in loans is worrying you a little though.  

Focus on getting excellent grades and more importantly board scores, then focus on getting yourself into top notch training programs and land yourself a high paying job. I would assume PSLF doesn't exist and plan on the real possibility that you'll be required to work and earn 400k in after tax dollars to pay back those loans.  If, by some miracle, you do get your loans forgiven, you'll be that much more ahead of the game.  But, stop worrying about money now and start studying!

 

[VagabondMD]

@OP After you discover the 7% guaranteed return, please find the Fountain of Youth and the Holy Grail next.

[The White Coat Investor]

Crixus wrote:

Avoid ETFs and vanguard funds like the plague. Don’t chase yield. Wait for the impending liquidity events. The circuit breakers kick in at 10% so this drop could take several sessions to unfold then you can start building positions in owner-operated companies in which the owner really has skin in the game and the company is not a vanity project. Start watching/listening to RealVision videos/podcasts, Macrovoices, and there are others. There’s a wealth of knowledge that the MSM financial media ignores.

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Wow. That's extreme advice. I think maybe you should consider putting your asset allocation in your signature so people know where you're coming from.

[adventure]

Crixus wrote:

The circuit breakers kick in at 10% so this drop could take several sessions to unfold

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These limits are actually something to keep in mind.

[Dont_know_mind]

Crixus wrote:

Avoid ETFs and vanguard funds like the plague. Don’t chase yield. Wait for the impending liquidity events. The circuit breakers kick in at 10% so this drop could take several sessions to unfold then you can start building positions in owner-operated companies in which the owner really has skin in the game and the company is not a vanity project. Start watching/listening to RealVision videos/podcasts, Macrovoices, and there are others. There’s a wealth of knowledge that the MSM financial media ignores.

Click to expand...

Talk like that can get people into active trading and blowing themselves up.

By all means, listen to Macrovoices podcasts but don't be under the illusion that you have any edge.

In terms of original question - guaranteed returns - Bernie Maddoff had 1% per month. That's the only guaranteed return I know of.