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  • Complete newbie - please help

    Hello all,

    Well user name says it all. I am an intern (senior resident...what a horrible typo) and just got to this website. Have read some investment books but still feel confused

    Is there any consice resource or a "book list" that answers/guides me to:

    1. What are the different types of retirement accounts: 401k, IRA etc and difference between them?

    2. What are their tax implications?

    3. Basic tax 101

    4. Asset allocation: Basically I have a fidelity account but have NO clue where to put money or how to split it up

     

    Thats is all that is coming to mind but I suppose a good 5 would be how to be an entrepreneur etc

     

    Thank you all! (now back to searching this website for nuggets)

  • #2
    I think White Coat Investor's book is a great primer. You can also take a look at his "recommending reading" section here.

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    • #3
      I was a newbie this time last year and still have a ton to learn. Start with WCI classic blogs, his book, and some of the bogleheads guide to ... books.. that gave me the best base going forward. Good luck!

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      • #4
        To answer your questions:

        1&2) Both a traditional IRA and 401k/403b are "tax deferred" retirement accounts, meaning you get a tax deduction now when you contribute to them, but will eventually have to pay taxes on them when you taken money out of the account. 401k/403b accounts are employer-sponsored while IRA are exactly that: Individual Retirement Accounts. A Roth IRA's tax implications are slightly different. You are not allowed deduct any taxes when you contribute to it, but when the money comes out in retirement, it is tax-free. You can contribute up to $18k/year to a 401k/403b and $5,500/year toward an IRA

        The general consensus for the type of account to which you should contribute while in residency is as follows: 401k up to your employer match (ie free money) --> Roth IRA --> 401k (portion that your employer doesn't match) --> taxable account.

         

        3) This is too vague a question to answer, but I think the best tax book is JK Lasser's Your Income Tax. Honestly, when you have few assets (ie residency), you taxes are quite simple. Just use TurboTax which will walk you through the process step by step.

         

        4) I'd stick with low-cost, passively managed index mutual funds from investment companies like Vanguard. The Three Fund Portfolio is a great place to start.

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        • #5
          Thanks Gas_doc! precisely what I was looking for.Will follow the links.

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          • #6
            welcome and congrats on finding this place.

            - read the WCI book: https://www.whitecoatinvestor.com/the-book/

            - read the bogleheads wiki:  https://www.bogleheads.org/wiki/Main_Page

            - read mike pipers tax book: https://www.amazon.com/Taxes-Made-Simple-Income-Explained/dp/0981454216

            - ask lots of questions.

            (for fun, its actually Individual Retirement Arrangements. but everyone says accounts and it doesnt matter.)

            - simple plan:

            - 401k to match, then Roth IRA (never traditional as you will need backdoor in future), then back to 401k to max

            - this should save some taxes as well.

            - post your fund options but usually at fidelity if you have access to the SPARTAN funds or freedom INDEX funds then youre set.

            Comment


            • #7
              Welcome!

              WCI started a back to basics series.

              Bogleheads is a great site and active forum.

              I wrote up a 20 Step DIY guide with quite a few links to books and resources.

              When you've got it all mastered and are ready to start a blog of your own, you're going to want a new handle.

              Cheers!

              -PoF

              Comment


              • #8
                When I was a resident (in the early 1990s), I read several books.  One book that I have relied on as an easy to read reference on investing basics is "The Wall Street Journal Guide to Money & Investing" (1993 edition).  My edition does not have anything on "Exchange Traded Funds", but the newer editions do.  Over 20 years later, I am now a professor in academic medicine, but I still refer to this book to get my "bearings". I also enjoy books written by Roger Lowenstein, William Bernstein and of course James Dahle's WCI.  I try to emphasize the importance of developing one's money management skills early in their careers to residents and fellows, but regrettably I'm afraid few of them follow-through.  Perhaps its the stress of training, being too focused on loans or a feeling that "retirement" can be addressed at a later time, I'm not sure.

                You will read many blogs and books on investing throughout your career.  This along with actual investing is the only way you will develop the skill set to manage and build your wealth.  You will also make mistakes.  However, it is likely that what will set you apart from your peers 20 years down the road will not be how you allocate your investment portfolio, but rather how well you develop a consistent aggressive savings plan and stick to it.

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                • #9
                  I think the first thing you should do is learn to carefully budget your monthly expenses and start saving ~15% of your paychecks.  Also, save up an emergency fund (3 months living expenses at least).  That will get you into the right habits you'll need when you start working as an attending.  The other stuff will make more sense with time and reading.

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                  • #10
                    It's not common on this forum or site; however: there is such a thing as bad advice out there, both from professionals and amateurs (I'm guilty, too).  Anytime anyone tells you something, look it up and check it out.

                    This forum is good for bouncing ideas off people; it's a pretty decent mix of net worths and experience.

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                    • #11
                      Before you rush off to investing take a look at your income and spending habits. Track it for a month or two, or longer.

                      Find put what loans you have and at what interest rates. Do you have emergency fund?

                      The only thing to not lose is employer match on your 401K, if available. The rest can wait till you figure things out.

                      Read the books mentioned above in the interim period to educate yourself.

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                      • #12
                        Thank you guys!

                        I do track my expenses and income. Have good handle on debt managment and have already refinanced loans at a good rate.

                        Here is my allocation on Fidelity. I must admit I just went something like  Small and Large cap: growth, index, value and some REIT. Not sure how to do an attachment...thus just copy pasting

                         





































































































                        HEARTLAND VAL PLS IS  (HNVIX) Stock Investments Small Cap
                        ROYCE PA MUTUAL INST  (RPMIX) Stock Investments Small Cap
                        FID 500 INDEX IPR  (FXAIX) Stock Investments Large Cap
                        MFS VALUE R6  (MEIKX) Stock Investments Large Cap
                        EAGLE SM CAP GRTH R6  (HSRUX) Stock Investments Small Cap
                        FID CONTRAFUND K  (FCNKX) Stock Investments Large Cap
                        FID INTL INDEX PR  (FSIVX) Stock Investments International
                        COHEN & STEERS RLTY  (CSRSX) Stock Investments Specialty
                        INVS INTL GROWTH R6  (IGFRX) Stock Investments International

                         

                         

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                        • #13
                          Looks like you've kind of got a "Coffeehouse Investor" portfolio going on, except with expensive actively-managed funds.

                          Rule of thumb is to use passive low-cost index funds (like FXAIX and FSIVX) instead of higher-cost actively-managed funds since the active funds don't beat the indices over time, but your 401k/403b provider might not have those available.

                          HNVIX - Small-cap US Value, 0.90% ER, Morningstar 1* - ditch this imo, ER too high, lousy return
                          RPMIX - Small-cap US Blend (slight growth tilt), 0.81% ER, Morningstar 2* - ditch it imo, ER too high, lousy return
                          FXAIX - classic S&P 500 index fund (large-cap US blend), 0.02% ER - this should be the mainstay of your large-cap US stocks
                          MEIKX - Large-cap US blend, slight value tilt, 0.50% ER - it's not quite value-y enough to get you a good value tilt imo, and ER is p high, not sure what you're getting out of this that you're not getting out of your S&P 500 fund
                          HSRUX - Small-cap US Growth, 0.67% ER - this would be a good holding for the small-cap US stock portion of your portfolio, but ER is quite high. If there are any small-cap alternatives with lower ERs, consider switching
                          FCNKX - Large-cap US growth, 0.61% ER - this is a pretty solid fund as far as active ones go, but again with a higher ER than you should want to pay. It's not beating the S&P 500 fund by enough to make it worth that ER, imo.
                          FSIVX - classic International index fund, 0.12% ER - this should be the mainstay of your international stocks
                          CSRSX - REIT, 0.98% ER - a decent REIT fund as it pertains to earnings; however its ER is massive. REITs tend to follow the stock market as it is (this is debatable), so *if* there isn't a good REIT holding available in your 401k/403b, you might want to consider a lower-cost holding in your IRA.
                          IGFRX - Large Int'l Growth, 0.89% ER - decent returns, but not sure it's beating FSIVX enough to make the expense worthwhile.

                          IMO, keep FXAIX for your US large-cap and FSIVX for your international, consider switching HSRUX for a lower-cost US small-cap fund and consider switching CSRX for a lower-cost REIT fund or rolling it in with your small caps. I don't think you need the complexity of growth vs value tilt, etc at this point (if you're an intern I'm suspecting your overall portfolio is p small, unless you had a first career or something).

                          I agree with no bonds if you're still very early on.

                          The amount of international holdings recommended varies quite a bit; I use 25%, and I've seen anywhere from 15-33% recommended. Totally up to you how much exposure you want to int'l (they've had some rough years lately, but that's recall bias). Further, the ratio large to small US stocks is up to you; "total stock market" index funds usually use 80% large, 10% mid, and 10% small. If you only have large and small available, consider splitting it 80/20.  Small caps have out-earned large/S&P 500 over time, so you may want more exposure to them.

                          So, for you, ***solely for the sake of example***, you *could* choose a simple allocation of 100% stock, 75% US, 25% int'l. Of that 75% US, you chould choose 60% large (FXAIX) and 15% small (HSRUX or a lower-cost small cap fund), and have the 25% FSIVX as the international portion.

                          Again - this is solely educational - what I've said *might* be a good plan for you, but you may want something slightly different based on your account's options. It is very debatable what is "best" and I don't think any expert necessarily has a better argument over any other when it comes to using passively-managed low-cost index funds with diversified exposure to large, small, domestic, international, stock/equity, and bonds (if appropriate in your situation).

                          This is one of the nice things about using an IRA for some of your overall portfolio (which obv you should do once you can save enough to fund one each year, after maximizing employer match): you pick whatever holdings you want, since it's individual.

                          Here are a few simple explanations of some models you might want to follow for your portfolio:

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                          • #14
                            Wow. Thanks DMFA! Can't believe you took time out to explain and write all of that. Really really appreciated. I'll shift to low funds.

                            Yea mostly I was just "diversifying" without thinking about expense ratios that much. What you said makes sense, and i'll switch out the funds. I have 403b so some very low expense funds are not available and thus unfortunately I have to take some hit, but the gestalt makes sense. Heck I have to re-read what you wrote several times to have it sink in.Thanks a bunch (you should start a blog?)

                            Have a great day

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