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Investing Disposable Income

When it comes to investing extra cash it’s easy to freeze in your tracks due to an overabundance of options. The money stays in cash and you hurt your portfolio’s growth potential.

Early on in our careers cash flow tends to be weak. With all the attention our jobs demand it’s easy to ignore investing. This could make us miss out on some amazing long-term portfolio returns.

ETF’s, index funds, CD’s, treasuries, bonds, or real estate are just a few options which can make your head spin. However, I have never regretted getting that cash into the market.

Whenever I have held onto cash it has created minimal returns and actually lost value. Even worse, at times I have wasted it because it was easily available.

  • Which fund should I go with?
  • Should I invest it all at once or slowly over time?
  • But don’t I need bonds in my portfolio?
  • Isn’t the market about to crash?
  • What if I lose all my money?
  • I don’t want to lose access to the money. Just in case.
  • Maybe I should save the money for a real estate investment.


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Which Investment To Choose

You aren’t locked into an investment forever. I don’t favorably mention high-risk investments on this blog. I can imagine a time and place for them but for the time-pressed healthcare professional, they are rarely good options.

You can restructure your wealth whenever the time is right.

In the meantime, just start! Open a brokerage account and choose a passive index fund with low fees that represent a broad market that suits your understanding.


Don’t Bail On Your Investments

Financial investors don’t get you super high returns – that’s not their job. But they prevent you from cashing out at the wrong times. They prevent you from making multi-thousand dollar mistakes.

If you are going to invest then it’s good to understand that the markets will go up and they will go down. They will spend more time going up and less time going down. In a long enough time horizon the markets will behave in your favor.


Stocks Or Bonds?

Stocks (equities) are what provide you with the main profits. Bonds are there to ease your mind. Bonds can make the dips less painful but they will mute the highs as well.

On forums like Bogleheads you can read until your ass starts itching as to why bonds are horrible. Or why you should have a lot more bonds. Or what the ideal asset allocation is. It’s what men do when they get bored – they compare their portfolio sizes.

But there is no blue pill for your portfolio or asset allocation. Just start investing extra cash. Overcoming the barrier is critical.


Asset Allocation

The topic of asset allocation (how much to have in stocks versus bonds) usually comes up a lot when the market has gone through a major change or an anticipated shift is around the corner.

My asset allocation is in the 80/20 range. It took me years to even come up with an asset allocation. The best thing I did was to start investing in 2012. You can always figure out your AA later.


Risk of Losing It All

If your lose ‘all’ your money that’s invested in public securities then your least worry will be the loss of your investment.

The only way you’re going to lose it all is if the world economy completely collapses. This has never happened since publicly traded securities became mainstream.

During a total global meltdown even your cash stashed in a bank would be lost. There would be no currency to speak of. And there would be no insurance companies to pay you whatever was guaranteed by whomever.


I Want Access To My Money Just In Case…

From my observations, the healthcare professional almost never has a financially legitimate reason for needing access to their investments before they mature. The purpose of an investment is to grow and produce wealth.

In order for wealth to grow it needs:

  1. a controllable risk
  2. time

The risk is controlled by the masses being invested in this publicly traded security. The time is completely up to you. If you cut the time short by “wanting access” then you’ll only shortchange yourself.

There are numerous ways to have access to money in case you really need it. Hopefully you have an emergency fund. Or your can hit up a friend or family member. You can get a personal loan. Or you can get a cash advance from a credit card.


If You Prefer To Invest In Real Estate

There is enough data out there to show that real estate investing is nothing like investing in securities when it comes to the time commitment. Because they require more management, their returns are often a bit higher than securities.

If you are saving for a down payment for a rental income property then you are in fact investing. It’s just that you are investing in the first leg of the overall investment – the saving. So, stash your cash in a savings account until you find that ideal piece of real estate.

But don’t stand on the sidelines too long because you didn’t find the right deal. If you’re a legit real investor and your investment concept is sound then every market should present an opportunity.

If you are still too green to recognize the right opportunity then it’s best to hold off on real estate investing. Invest the extra cash in some passive index funds instead and return to the RE when you have more capital and more time.


I Invested $2,913 Today

I logged into my Vanguard brokerage account today and transferred $2,000 from my checking account into it. I used this money to buy more of my VTSAX index fund. 

I had another $913 sitting in my account from my dividend income which I also used to buy more of the same fund. In total I invested $2,913 with one click. At $63 per share, I purchased 46.24 shares.

Who cares that it’s at an all-time-high price point! It will drop down and then come back up to triple digits in my lifetime. That’s how publicly traded securities work.

So each individual share will appreciate in the future.

Each of these shares increases my future dividend payout.

If I did nothing else but keep purchasing more of this same fund with my money then I would capture a healthy portion of the overall US stock market.

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