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I am an 30 y/o guy who will start a job as an attending physician this July. Between me and wife who are both physicians , we will have a pretty decent amount to invest with every paycheck. We will get paid every 2 weeks. My plan is to keep 3 months of living expenses in an easily accessible money market account as an emergency fund and save/invest everything we get to keep after taxes/living expenses. We are not looking to buy a house atleast for the next 3-4 years.
I plan to semi-retire at 55.
I am looking for a medium to low risk , long term investing portfolio with a 25 - 30 year plan with an annual before inflation ROR of ~ 8 %. I will have both 401k and 457 plans at my job with a contribution limit of 18k in each if I understand it correctly.
I do have a 401k right now with fidelity but the returns have been subpar. My ROR for this year so far has been 1.04 %..... It's the " fidelity freedom k 2050 fund ".
As you've already seen with the performance of the target date fund, though the long term AVERAGE return of stock market has historically been around 8%, it is DARNED HARD to get that in periods when the economy is out-of-whack.
There are some folks that suggest the various distortions caused by everything from lack of first world countries being involved in domestic wars to shifts in fertility to pace of innovation may make such returns for 'average' mix of stocks unrealistic -- Is the 7 Percent Return for Stocks Extinct? - US News
Especially for high income investors, it is important to understand how TAX EFFICIENCY might be a HUGE boost to your total return on investments -- The Betterment Experiment – Results
My gut says that while the goal of "early retirement by 55" might seem somewhat achievable (given that you have probably more than 25 years to get there...) the degree to which economic headwinds related to unpredictable effects of Baby Boomers / tax laws / pace of technology change are going to favor a better informed investor... Will Retiring Baby Boomers Ruin Future Market Returns?
I do have a 401k right now with fidelity but the returns have been subpar. My ROR for this year so far has been 1.04 %..... It's the " fidelity freedom k 2050 fund ".
Please guide me with this. Thanks.
One piece of advice: Don't get too hung up on what your return is for the last 6 months or the last year. As you said, you are in this for the long run, and the key to being a good investor is to put together a sound portfolio and then let it do its thing for the next 20 years.
I highly recommend visiting the bogleheads (search on it) web site. There are some really smart people on that forum and it has a Wiki set up to walk you through a process for creating a good portfolio. You don't have to follow all their advice (I don't) but it is still very instructive because their approach is pretty logically thought out.
To me, investing is a process as much as buying certain things. Learning the process is the best thing one can do. It puts you in control.
If you haven't read it already, check out the book "The White Coat Investor". The author touches on some of the basics of building a portfolio, but he also covers other financial topics that are just as important, like own-occupation disability, umbrella policies, backdoor Roths, etc. I would pick it up pretty soon, as there are some things that are better (and less expensive) to do as a resident/fellow than as an attending.
If you haven't read it already, check out the book "The White Coat Investor". The author touches on some of the basics of building a portfolio, but he also covers other financial topics that are just as important, like own-occupation disability, umbrella policies, backdoor Roths, etc. I would pick it up pretty soon, as there are some things that are better (and less expensive) to do as a resident/fellow than as an attending.
Excellent advice! The author of the book also has a website under the same name, which is packed full of useful posts.
We are not looking to buy a house at least for the next 3-4 years.
Buy a house as soon as you can and put as low a down payment as you can on it. Mortgage interest and real estate taxes are fully deductible from your gross income if it is less than $166,800 and slightly reduced after that. The benefit does not phase out until mortgage interest reaches $1MM. Many states also allow for a mortgage interest deduction.
A big part of good financial planning is tax planning.
Buy a house as soon as you can and put as low a down payment as you can on it. Mortgage interest and real estate taxes are fully deductible from your gross income if it is less than $166,800 and slightly reduced after that. The benefit does not phase out until mortgage interest reaches $1MM. Many states also allow for a mortgage interest deduction.
A big part of good financial planning is tax planning.
I believe the deduction cutoff is on $1 million in mortgage debt, not $1 million in mortgage interest.
For higher-income investors starting from scratch, in the early years the importance of aggressive savings greatly overwhelms the chase for high returns. Consider: if you have $50,000 now, but can save another $50,000 annually going forward, then the difference between 10% annual return, 0% annual return and -10% annual return is paltry compared to your vigor in savings. But as one progresses in one's investment career, garnering good annual returns comes to overwhelm additional dedication to savings.
So the irony is that being an aggressive investor early in our lives provides comparatively little benefit, but precisely at that time when we're older and more vulnerable and more skittish, those high returns become so important.
Exhibit A is what happened in the 1990s stock market boom vs. the malaise thus far in the 21st century. Those of us presently in middle-age enjoyed great returns in the 1990s, but they benefited us only modestly, because our overall amount of money in the market wasn't large. Now, when we have more money (from two more decades of savings), returns are flimsy, and that's hugely important now.
So the overall advice is to not be particularly concerned with investment-returns in the next 5 years or so, unless of course one is seduced by something very speculative and suffers a huge loss. The difference between an S&P-500 index fund and a bond-portfolio and a target-retirement fund won't be large - NOT because the rates of return are likely to be similar (they may or may not be), but because one's own savings overwhelms whatever the market could do for us. It's in 5 or 10 years that one has to become more careful and judicious about investing.
Buy a house as soon as you can and put as low a down payment as you can on it. Mortgage interest and real estate taxes are fully deductible from your gross income if it is less than $166,800 and slightly reduced after that. The benefit does not phase out until mortgage interest reaches $1MM. Many states also allow for a mortgage interest deduction.
A big part of good financial planning is tax planning.
I think this is horrible advice. Nobody should rush to buy a house right now just because rates are so low. Who says home prices won't drop as rates rise? Some markets are overpriced. People may be better off in 4 years with higher rates but lower prices. People should just buy a house when they're ready and want to buy a house.
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. It's the " fidelity freedom k 2050 fund ".
