MD & DO Investing While/Before Med School

[little_giant]

I'm an incoming MS1 and still have not received student loans yet, and I was interested in investing into stocks (not much, <1k) just so I could get some experience while I have some time.

However, I do have some federal subsidized student loans from college (no interest accruing) and am taking out unsubsidized and PLUS federal loans for this academic year.

Regardless of whether you think investing is a good idea or not, I was wondering this is even allowed? I am making sure it is clear that I am not using federal loans to invest money, instead using my own personal funds, but are people allowed to invest in the market while they take out student loans?

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[SpoiledMilk]

There is nothing illegal about investing in the market with disposable income while you are in medical school, but highly advise against if you do not have experience or a background in the market. The ups and downs of the market will likely be very distracting and take your focus away from your medical studies...

 

[Tenk]

No point in investing in anything outside a retirement account when you have loans at your current point in life. You can also just take less loans. Paying off most med school loans is basically a 6-7% return with 0 risk and no capital gains tax.

 

[little_giant]

Thank you both for your responses. I have no interest in doing day-trading. Just investing a little bit for buy-and-hold for like 20 years to dip my feet in the water so I have experience when I start making a stable income later. Its a very small amount when it comes to investing or student loans so that's why I'm not bothering with paying off my undergrad loans right now that wont accrue interest

 

[JSReed]

On one hand, if you're looking for the financial benefit, I feel like a mutual fund is generally a safer and less time-intensive way to go.

That being said, with the loan interest rates, you'd be better off using that personal money towards your daily expenses rather than investing and hoping to get a pretty marginal gain. Plus the market can be fickle...

 

[ChymeofPassion]

Aside from maintaining my ROTH IRA from college, I intend on doing 60 percent low risk/40 percent high risk investments during medical school for fun/spending money. Nothing wrong with it if you enjoy it.

 

[little_giant]

Aside from maintaining my ROTH IRA from college, I intend on doing 60 percent low risk/40 percent high risk investments during medical school for fun/spending money. Nothing wrong with it if you enjoy it.

are you taking out loans by any chance?

 

[libertyyne]

Thank you both for your responses. I have no interest in doing day-trading. Just investing a little bit for buy-and-hold for like 20 years to dip my feet in the water so I have experience when I start making a stable income later. Its a very small amount when it comes to investing or student loans so that's why I'm not bothering with paying off my undergrad loans right now that wont accrue interest

I realize it is counter intuitive, but paying off the loan is the best investment you can make. If you want to invest in a security that will provide you less return you can buy some index funds. Vangaurd has some good options for roth IRA, etc.
The best thing you could do is probably start reading something like white coat investor, boggleheads, dave ramsey, the little book of investing, a drunkards walk, beating the street etc.

 

[little_giant]

I realize it is counter intuitive, but paying off the loan is the best investment you can make. If you want to invest in a security that will provide you less return you can buy some index funds. Vangaurd has some good options for roth IRA, etc.
The best thing you could do is probably start reading something like white coat investor, boggleheads, dave ramsey, the little book of investing, a drunkards walk, beating the street etc.

thanks!! Yes by stocks I mean nothing risky at all. More of investing in ETFs (since I'm opening a taxable acct) that have ~10% growth per year.

 

[popopopop]

thanks!! Yes by stocks I mean nothing risky at all. More of investing in ETFs (since I'm opening a taxable acct) that have ~10% growth per year.

I really miss the boat after March since markets were all in recovery and a 5 year old could have made money picking any stock.

Earning reports came out yesterday for big tech (google, amazon, apple, fb) so tech is hot right now. If you look at QQQ, a tech heavy etf, 1k into that 4 months ago would have made you a very good return! I scalped $20 in 1 minute off of one share of apple when earning reports were released.

I think safest best would definitely be an ETF like you said, but read as much as you can and explore how you want to trade. $1k is so little to invest with, not sure if the risk is even worth it, but you'll have some skin in the game at least. Our economy is recovering, and most markets are bullish right now. If you want to do your own research, you can swing trade or invest into a handful of stocks and make greater returns. There are some bargain stocks out there right now, look at what AMD did to Intel or how airlines are doing.

 

[little_giant]

I really miss the boat after March since markets were all in recovery and a 5 year old could have made money picking any stock.

Earning reports came out yesterday for big tech (google, amazon, apple, fb) so tech is hot right now. If you look at QQQ, a tech heavy etf, 1k into that 4 months ago would have made you a very good return! I scalped $20 in 1 minute off of one share of apple when earning reports were released.

I think safest best would definitely be an ETF like you said, but read as much as you can and explore how you want to trade. $1k is so little to invest with, not sure if the risk is even worth it, but you'll have some skin in the game at least. Our economy is recovering, and most markets are bullish right now. If you want to do your own research, you can swing trade or invest into a handful of stocks and make greater returns. There are some bargain stocks out there right now, look at what AMD did to Intel or how airlines are doing.

Good point! I'm pretty risk adverse so I am definitely doing a S&P 500 ETF with the lowest ER and maybe one IT like you said. I'm investing way less than 1k so it's a lot littler than little hahaha. Just wanted to have some skin in the game, and wanted to hold these for at least 5 years so I'm a little afraid of investing in non-blue chip stocks. Plus better to learn about this now when I have free time.

 

[popopopop]

Good point! I'm pretty risk adverse so I am definitely doing a S&P 500 ETF with the lowest ER and maybe one IT like you said. I'm investing way less than 1k so it's a lot littler than little hahaha. Just wanted to have some skin in the game, and wanted to hold these for at least 5 years so I'm a little afraid of investing in non-blue chip stocks. Plus better to learn about this now when I have free time.

Sounds good!

 

[ChymeofPassion]

are you taking out loans by any chance?

Yes, but not as much as most. Normally I would recommend paying off loans before playing around in the stock market. However, with a fun amount of money like <1000 dollars, I see no harm. Happy investing!

 

[mm5869]

i think if youre looking at it with a long time horizon, yes, why not invest?

i dont understand the argument that paying down student loans / taking out less loans is better...with a long enough horizon, the growth of the market will likely outpace the interest on loans (not even taking into account the chances of loan forgiveness / the potential evolution of loan forgiveness programs / your future employer helping chip away at your loan / the 0% interest environment) / etc)

further, if you sell after 1 year of holding, then re-buy back in (making it a long term gain, without losing exposure to the market) you can essentially 'pay taxes' (at 0%) every year on 4 years of gains while in school, instead of on the gains due to selling in the future. (assuming minimal income during your time in school)

 

[little_giant]

i think if youre looking at it with a long time horizon, yes, why not invest?

i dont understand the argument that paying down student loans / taking out less loans is better...with a long enough horizon, the growth of the market will likely outpace the interest on loans (not even taking into account the chances of loan forgiveness / the potential evolution of loan forgiveness programs / your future employer helping chip away at your loan / the 0% interest environment) / etc)

further, if you sell after 1 year of holding, then re-buy back in (making it a long term gain, without losing exposure to the market) you can essentially 'pay taxes' (at 0%) every year on 4 years of gains while in school, instead of on the gains due to selling in the future. (assuming minimal income during your time in school)

could you explain the paying taxes at 0%? I thought if you sell after one year you pay taxes on those capital gains regardless of whether you buy back in

 

[mm5869]

absolutely. disclaimer: i dont know the updated precise number for 2020. but for the last taxable year, if you had <39375 in taxable income (assuming you are single), then long term gains (1 year of ownership) are taxed at 0%. double disclaimer: tax laws are subject to change.

applying this: if you buy stock X today at $100 8/1/2020 and sell after 8/1/2021 at $110... when you file taxes for the 2021 tax year, (by april 2022) you'll have $10 of long term gains being taxed at %0 (assuming you have <39375 in taxable income for 2021 while you're a student)

you can use this to your advantage for your 4 years in school. i'm not saying the market will go up all 4 years or anything...but historically the market over a 4 year span has gone up, and we can say there is a probability that it will go up while you're in school.

by selling each year, the goal is to lock in as much of the gains as possible before finishing school.
after graduating, you'll be earning income as a resident, and might not qualify for the 0% LTG bracket. (example. buying stock X today $100 8/1/2020 and selling after in 2025 for $140 when you're a resident earning 55k...then you might be in a tax bracket where you'll pay 15% on the $40 of gains (or more depending on how tax laws change among other factors))

if the market goes down, you have time to hold until it goes up. if it never (for 4-5 years) goes up, wait to sell when youre an attending and can harvest the tax loss.

tldr: so in selling gains every year, you lock in a low tax rate on gains. and in holding losses with a long enough time horizon you can wait for the market to recover (or sell once you have income, and harvest the loss)

 

[mm5869]

i should have also mentioned. if you sell before 1 year, you'll have to pay 'short term gains', which is currently taxed at your regular income level. (which depending on your circumstances, may also be 0%, but has a greater chance of being >0% due to other income sources, etc.

 

[Kardio]

@little_giant

I personally believe that blowing $500 in the market on any financial product, just to test the waters, can be a more valuable experience than $500 spent paying someone to teach you finance.

Just make sure you:
(1) know you may lose all of it
(2) remain mindful that it’s a learning experience
(3) btfd
(4) don’t sell uncovered options
(5) don’t buy physically delivered options, like oil (see: negative oil prices)

 

[little_giant]

absolutely. disclaimer: i dont know the updated precise number for 2020. but for the last taxable year, if you had <39375 in taxable income (assuming you are single), then long term gains (1 year of ownership) are taxed at 0%. double disclaimer: tax laws are subject to change.

applying this: if you buy stock X today at $100 8/1/2020 and sell after 8/1/2021 at $110... when you file taxes for the 2021 tax year, (by april 2022) you'll have $10 of long term gains being taxed at %0 (assuming you have <39375 in taxable income for 2021 while you're a student)

you can use this to your advantage for your 4 years in school. i'm not saying the market will go up all 4 years or anything...but historically the market over a 4 year span has gone up, and we can say there is a probability that it will go up while you're in school.

by selling each year, the goal is to lock in as much of the gains as possible before finishing school.
after graduating, you'll be earning income as a resident, and might not qualify for the 0% LTG bracket. (example. buying stock X today $100 8/1/2020 and selling after in 2025 for $140 when you're a resident earning 55k...then you might be in a tax bracket where you'll pay 15% on the $40 of gains (or more depending on how tax laws change among other factors))

if the market goes down, you have time to hold until it goes up. if it never (for 4-5 years) goes up, wait to sell when youre an attending and can harvest the tax loss.

tldr: so in selling gains every year, you lock in a low tax rate on gains. and in holding losses with a long enough time horizon you can wait for the market to recover (or sell once you have income, and harvest the loss)

This would be the same for if I buy in MS1, hold for 4 years, and sell the tax year before becoming a resident right? So I wouldn't have to sell every year, I could just sell right before my income becomes the 15% tax bracket.

 

[little_giant]

@little_giant

I personally believe that blowing $500 in the market on any financial product, just to test the waters, can be a more valuable experience than $500 spent paying someone to teach you finance.

Just make sure you:
(1) know you may lose all of it
(2) remain mindful that it’s a learning experience
(3) btfd
(4) don’t sell uncovered options
(5) don’t buy commodity-settled options, like oil (see: negative oil prices)

I agree! I am now thinking about investing some extra loan money as well seeing that many other students are investing, but logic tells me thats a bad idea ahaaha

 

[Kardio]

I agree! I am now thinking about investing some extra loan money as well seeing that many other students are investing, but logic tells me thats a bad idea ahaaha

It’s also, almost definitely, against the terms of your student loan (FYI)

 

[mm5869]

This would be the same for if I buy in MS1, hold for 4 years, and sell the tax year before becoming a resident right? So I wouldn't have to sell every year, I could just sell right before my income becomes the 15% tax bracket.

they are almost equivalent but not quite!
if the market drops in year 4, it is better to have sold after year 3 to lock in a gain, and then carry forward a loss that can be harvested.

this first scenario demonstrates it best...
year1 +10, year2 +10, year3 +10, year4 -10 ...if sold after 4 years its +20....but if sold every year its paying 0% on +30 and being able to use the -10 to balance out future gains (so essentially +40 at 0%)

there are also benefits not just for year 4 drop. if the drop is in year 3...
+10, +10, -10, +10...if sold after 4 years its still +20....but if you sell after years 1 and 2, its also +20, but you have immediate LTG status (already held for 2 years, here) and thus more flexibility on the holding going forward (while having already raised your starting point).

tldr...i just try to capture any presented long term gains possible, and hold losses to balance (far) future gains. (these are NOT with individual stocks, where holding losses becomes a riskier play...im just talking about with SPY and VOO (and betting on America in the long term))

edit: but yes, they are equivalent if we knew the market would go up every year. reassessing every year allows you to take advantage when it doesnt (because it likely wont)...which also i should mention that it could be advantageous buy in at multiple time points to really take advantage of these peaks and valleys (be sure your broker allows you to buy and sell specific lots, instead of purely FIFO)

 

[little_giant]

they are almost equivalent but not quite!
if the market drops in year 4, it is better to have sold after year 3 to lock in a gain, and then carry forward a loss that can be harvested.

this first scenario demonstrates it best...
year1 +10, year2 +10, year3 +10, year4 -10 ...if sold after 4 years its +20....but if sold every year its paying 0% on +30 and being able to use the -10 to balance out future gains (so essentially +40 at 0%)

there are also benefits not just for year 4 drop. if the drop is in year 3...
+10, +10, -10, +10...if sold after 4 years its still +20....but if you sell after years 1 and 2, its also +20, but you have immediate LTG status (already held for 2 years, here) and thus more flexibility on the holding going forward (while having already raised your starting point).

tldr...i just try to capture any presented long term gains possible, and hold losses to balance (far) future gains. (these are NOT with individual stocks, where holding losses becomes a riskier play...im just talking about with SPY and VOO (and betting on America in the long term))

edit: but yes, they are equivalent if we knew the market would go up every year. reassessing every year allows you to take advantage when it doesnt (because it likely wont)...which also i should mention that it could be advantageous buy in at multiple time points to really take advantage of these peaks and valleys (be sure your broker allows you to buy and sell specific lots, instead of purely FIFO)

Got it so this is buying at 100. Selling at 110 next year. Then reinvesting 100 (not 110). And this continues for each year until/if the market goes down, in which case I dont sell and instead just keep the money there till the market goes back up. Thanks for this info!

 

[readmypostsMD]

Just watch the presidential election predictions if you do

 

[libertyyne]

I really miss the boat after March since markets were all in recovery and a 5 year old could have made money picking any stock.

Earning reports came out yesterday for big tech (google, amazon, apple, fb) so tech is hot right now. If you look at QQQ, a tech heavy etf, 1k into that 4 months ago would have made you a very good return! I scalped $20 in 1 minute off of one share of apple when earning reports were released.

I think safest best would definitely be an ETF like you said, but read as much as you can and explore how you want to trade. $1k is so little to invest with, not sure if the risk is even worth it, but you'll have some skin in the game at least. Our economy is recovering, and most markets are bullish right now. If you want to do your own research, you can swing trade or invest into a handful of stocks and make greater returns. There are some bargain stocks out there right now, look at what AMD did to Intel or how airlines are doing.

The market is absolutely insane right now, gdp shrinks 33% and the market is hitting a relative high. The only thing high right now is people who think these valuations are reasonable or really represent outlook over the next year or two.