On Investment

Having big boy paychecks poses a question of how to invest money. Paying off student loans is a good “investment” because it’s a zero risk way to get 6.8% return. No investment will return 6.8% with no risk. So all of my excess money was dumped there. My employer also does a 4% match on a 401k, so I have 4% in it. The returns on the account are good, like 15% YTD although it’s been the most prolonged bull market since 1929 and it would have been hard NOT to make money. A lot of people who were long tech stocks doubled their investment in four years by holding AAPL NFLX GOOG FB AMZN +/- MSFT. So the potential is there in the market.

After the student loans are paid off, you’re left with reasonably hefty paychecks that eventually snowball into a sum that shouldn’t just be left willy-nilly in a checking account. So I started buying the stock of my employer (a major retail pharmacy) because we get a 10% discount. If it weren’t for the discount I wouldn’t buy it at all because we’ve slid like 30% of value in the three years I’ve been working here. You have to hold it for a few months so it definitely could slide in value more than 10% so in theory you might lose money. Contributions are capped at 25% salary up to 25k so you can’t fuck yourself over completely with company stock like Enron did to its employees.

So I have a 401k and I don’t recall who manages it but it’s some big Wall Street firm. And I have a Fidelity account just filled with discounted company stock. But I still have more money on hand that I want to invest and it’s really difficult to decide how to invest. Its difficult for me to make a decision, like it took me two weeks to settle on a vacuum and I did a lot of research. That was only a $$ decision, not a $$$$ – $$$$$ decision.

The first step was to choose which online brokerage you want. A lot of them are basically the same. They charge $7 per trade, something like 0.5% for investing in their ETF. (protip: trades are supposed to cost at least $7, anything less and the broker is screwing you somewhere else.) It’s hard to choose because their more advanced and differentiating features are aimed at more serious investors. I ended up with Merril Edge which is attached to my BofA account so it’s a little more convenient. I could also use the Fidelity account but their interface is really difficult to use, it feels more like using enterprise software than client-facing software. Also the whole thing is green. Merril Edge was a bit more modern. I think a lot of people use Vanguard because their funds have low fees and they aren’t trying to nickel and dime you. Apparently the guy who started it just wanted to help people invest.

Then comes the decision of what stock to buy. I still haven’t figured out this part yet to any certainty, so I don’t think I’ll do any serious investing by picking and choosing stocks. It makes more sense to use an ETF and let the fund trade it for you. Maybe I’ll know more in the future as I learn but it doesn’t make sense to think that I can beat the market. So I’m only gonna invest small time in individual stocks. Anyway I bought $2k worth of NTDOY, which is Nintendo.


Student Loans

Student loans weren’t bad in undergrad, at least in my circle of friends. We were all upper middle class and had parents who would foot a significant portion of the bill. So I didn’t have any from undergrad, and neither did most of my close friends including all my roommates from senior year. People who did have student loans, they were low five figures and paid off readily as a few hundred dollars a month, which is hopefully affordable to anyone with a legitimate job.

Pharmacy school was a different beast because it happens in addition to any undergrad loans people might have, including the compounding interest from undergrad that accrues over another four years. It costs over double what undergrad costs. Poor kids don’t get out of paying for the whole stack either because no organization can really afford need-based scholarships. Although I don’t know anyone who was in my pharmacy class I would characterize as legitimately poor, almost everyone was middle to upper middle class.

So everyone graduates pharmacy school with student loans, the average load is something like $150k. Everyone except this one international student because they don’t qualify for loans. I was at about $110k when I graduated because my parents helped. One of my friends went to a 6-year private school for a combined degree and he’s in the hole $350k, another friend put all of undergrad and pharmacy school on loans, he’s down $250k. So it takes a while to pay that off, like half your paycheck for a couple decades. You’re still better off than most of the US but servicing that much debt makes it hard to buy a house or do anything that accrues even more debt.

It took me 2.5 years to pay it off, I was picking up extra shifts and not splurging much on anything. You get a nice deduction on your taxes for student loan interest, which is money you can use to pay down more student loans. I had loans at 6.2 and 6.8% interest. I had a small loan at 5.2% from my first year but that was the year Obama and the Democrats got rid of subsidized loans for professional students.