Think about making the switch to Schwab Intelligent and general advice

[M2]

Hi all,

I will try to give all the information upfront to paint the picture.  The question we are considering is making the switch from my slice and dice RothIRA and money market e-fund to Schwab Intelligent for both, and also general financial life advice.  Also, we recognize that we are fortunate to ponder such dilemmas.

Overview:  Age 25, 2nd year of medical school, hcol and tuition 60k ; Wife, 24, makes 75k/yr (very demanding job, the "boss" of people >twice her age, gets all the flak none of the credit, etc... worth mentioning primarily because she may very well leave and would likely have to take a significant pay cut).

Assets: 40k e-fund in money market (over 6 months expenses, b/c includes tuition not covered by loans, slush fund for rental prop, and "wife quits" risk),  30k in Roth IRA (90% reasonable slice and dice w/ slight tilt towards Small & Value, 10% stocks b/c I have mental problems).  Rental Property (gift, ~110k, generates 4k/yr after tax and expenses, desperately want to sell but conflicted b/c real estate is good), Debt 45k, Cash 10k.   Projected Net upon graduation is 50k to -50k give or take depending on wife's income over next 2.5 years (Debt stays at 45, Rent property sold to pay final 2 tuitions, e-fund and Roth remain flat).

Roth IRA Question: It is basically aligned (except 10% in stocks [SMG, TSLA, FB, AMZN, GOOG, NKE]) with everything here and a mash up of the 150 better portfolios, however, I am drawn to the simplicity of robo-advisors, as they handle all the rebalancing and allocation and I generally believe that the robo advisors slice and dice is better than mine and that they will execute the tax/rebalance better.  I want to go schwab intelligent, the cash allocation is controversial and would love to here the WCI community thoughts.  Worst case scenario by my calculations it ends up being a .30% fee, on par with the others, best case scenario they are right and its a good defensive asset.  Anyone vehemently disagree with losing 25-40 basis points to a robo advisor in general or specifically with schwabs "free" cash allocating model?  (Schwab portfolios I am considering are 94/6 stock/cash, and 85/7/5/3 stock/cash/bond/gold).     Link to Schwab's defense of cash:  https://intelligent.schwab.com/public/intelligent/insights/whitepapers/asset-allocation.html

E-fund Question:  Currently wasting away in 0.8% money market, want to be more aggressive since we are young and healthy etc and think we have the 20% buffer above need WCI recommends for this strategy.  Again thinking schwab intelligent (60/25/15 bond/cash/stock vs 55/30/15 bond/stock/cash).  The cash allocation seems less offensive in this scenario.  Good idea?

General:  Any big mistakes I am making, or advice other than save, control spending, and don't buy a houseboat?

[VagabondMD]

Lots of questions embedded in the post, but I will answer a few of themes, from my perspective.

Any of the robo-advisors will work, some marginally better than others. The biggest determinant to your success is not which one you choose, not even which allocation you select, but how disciplined you are saving and not wasting money on "stuff". You can have the best allocation, designed by a Bill Bernstein, Nassim Taleb, John Bogle, and Warren Buffet braintrust to maximize the efficient frontier and minimize expenses, but if you blow too much money on a car or house or some widget, it can negate much of your otherwise excellent planning.

Am emergency fund is for emergencies and should be liquid. It's not good to have to tap your "emergency fund" when it is down 30%.

I would also put in a plug for derm or ortho, as specialty choices. I am neither, but in the 20 years I have been in practice, they seem to be the ones with the most control, most entrepreneurial opportunities, best lifestyle, hottest spouses etc.

PS It sounds like your wife has a miserable job and should be actively looking for something else, even if the pay is less.

[The White Coat Investor]

You can buy a houseboat. You just can't buy it now.

I like having emergency money very safe and very liquid, hence why it usually doesn't earn much. It allows you to stay the course with the main portfolio, so don't try to do too much with it. You could go to Ally Bank and get an extra 0.2% with less risk tomorrow though.

I can't quite follow everything you're saying, but in general I would focus on minimizing your loans at this point. If you want to keep investing, I think using a roboadvisor is fine and I think Schwab's version is also fine and agree those aren't the most important fish to fry. What specialty you choose has a far greater effect on your future finances than which roboadvisor you choose to invest a few thousand.

I don't keep cash in my long-term portfolio but I have plenty of cash. But if you want a little cash in your long-term portfolio and a little stock in your emergency fund is it really that big a deal? Of course not. Focus on what matters. At this stage of your career that is:

1) Minimizing student loans - do all you can while avoiding stupidity to do this. I mean, don't pay penalties from some retirement account or miss out on a match etc. But that's where your money should be going right now- being invested in your future earning ability. You'll save more in one month as an attending than you will gain in 4 years of investing in med school.

2) Specialty choice- and I'm not just talking about best paid. I'm talking about best fit for you that will allow you to have a long, enjoyable career. Longevity >> pay. If you burn out of radiology or anesthesia or EM after ten years, you would have been better off in peds or oncology in the long run. But if you love two things equally, choose the one with the best pay and lifestyle.

3) Do all you can to keep your wife in her job until you're done. Rub her feet every night and listen to how bad it is. $75K a year goes a long way to minimizing your debt. If you guys do these next few years right, she can do whatever she wants for the last 60 or 70 years of her life.

By the way, $4K profit out of a $110K property seems terrible. What makes you think that's going to appreciate? Are you sure you can't raise rent? And also, finishing medical school "broke" puts you way ahead of your peers.

[M2]

Thank you both for the response,

To clarify, the Roth savings are from before I began medical school, I haven't been investing while taking out loans.  I think I will go robo for the Roth but leave the e-fund liquid and take the advice to focus on the important stuff of keeping the loans to a minimum and figuring out my speciality.

As for the property:  I charge 1k/mo in rent which is generally in line with 1% of value?  3k a year gets eaten up by taxes/insurance, another 3k by HOA, and 1k for maintenance.  I budget conservatively which is where I got 4k, but looking back at this year, I spent nothing on maintenance so it will be ~6k profit.  Plan to raise rent every 4% every 2 years.  It is in a nicer area, but I have no idea if it will significantly appreciate, it is a nice little 1BR but the median home in the town is 500k.  Most likely intend to sell, as I doubt we will have the capacity/desire to manage it while I am a resident and family is hopefully starting.