4 Reasons I Don't Buy Individual Stocks

Investing in stocks has become increasingly popular over the last few years. Many people love the thought of owning part of their favorite companies/ Mobile apps such as Robinhood, Stash, and Acorns have made doing so seamless and easy. Although buying, selling, and trading stocks in the hopes of making a profit can be captivating, it may not be the smartest thing to do financially. Here are 4 reasons I don’t purchase individual stocks:

1. There are too many companies to choose from. There are thousands of different publicly traded companies in the world. This means there are many different stocks in a variety of different industries from which to choose. With so many options and a limited amount of money to invest, how do you choose which companies to invest in? Many people simply choose to invest in the industries and companies they have heard of the most. However, just because a company is well-known doesn’t mean it’s a good investment. There are too many options and many of the companies we have heard of may not be a the best investment. This brings me to my second point…

2. It is difficult to predict which companies will do well and which won’t. As the common investment saying goes, “Past behavior doesn’t predict future performance.” Just because a company has done well in the past, does not mean it will continue to do well in the future. You make money investing by purchasing stocks from companies that will continue to grow and make money over time. Although popular companies may continue to increase in value over time, it is also possible that some of these companies may have already hit their peak. If you make the mistake of purchasing stock in a company that doesn’t grow much over time, then you will have spent money on the stock without getting much in return. If you purchase the company stock and the company actually goes down in value, then not only have you not made any money, but you also may have lost money, which is the exact opposite of what you want to do when investing.

My point is that there are very popular companies that may go down in value in the next few years and there are also relatively new companies you may have never heard of that could increase in value over the next few years. It can be difficult to predict how each of the thousands of companies with stocks for sale, will do in the future. This brings me to my third point…

3. Useful and timely information that could serve as clues, is hard to find. Since predicting which companies will do well in the future can be challenging, large investment firms on wall street, like Goldman Sachs, Morgan Stanley, Barclays Capital, etc have hired entire teams of people in their “research” division to find information that could serve as clues about a certain company or industry. They do different types of extensive analyses in order to predict how well a certain industry will do in the future. For example, they may conduct surveys, talk to various industry experts, and examine behavior patterns to make investment recommendations that will increase their odds of making a profit and decrease their risk of losing money. Many people in the general public who like to invest try to do the same thing. They may read the Wall Street Journal and glean information from a variety of news sources to also get clues on which companies to invest in and which not to invest in. The problem with this information is that it isn’t always timely, which means it isn’t always useful.

Oftentimes, the investment firms on wall street, with their large research divisions and teams of experienced investors, have access to key information about various industries and companies long before it is published or spoken about in news sources that people in the general public have access to. In fact, there is a common thought among investors that by the time information is given to the general public it is “too late.” In other words, by the time you and I find out about a certain company that is struggling, many experienced investors have already sold their shares of those stocks. By the time you and I find out about an up and coming company, investors on wall street have already purchased those stocks at the lowest price and made their own profits. Investment information is just not as readily available to members of the general public to allow us to make the best investment decisions at the best times. This brings me to my last point…

4. Purchasing individual stocks can decrease investment diversity and increase risk. Even if you did have access to timely information, purchasing individual stocks is still risky. Human behavior isn’t always rational so our rational predictions about what items people will purchase over time and which companies will grow as a result don’t always line up. In fact, many people who have investment portfolios that are actively managed by investors at the biggest wall street investment firms still lose money. Only one third of actively managed funds (in which investors pick certain stocks for their clients to purchase) actually beat the market index. This means most funds that are managed by experienced investors at the largest investment firms who have access to lots of information still do not out-perform people who simply invest in index funds.

An index is a group of many different companies in a variety of industries. An index fund is an investment fund that follows an index. In other words, instead of picking and choosing which individual stock to purchase, an index fund will simply purchase all the stocks in that index, which includes hundreds or thousands of different companies. By investing in an index fund, you are a partial owner of all the stocks in that index. There are many different types of index funds such as the Total Stock Market Index Fund (that includes all of the major stocks in the United States) and the Total International Stock Index (which includes all of the major stocks around the world). The benefit of purchasing an index is that you are a partial owner of almost all of the stocks. if one stock does really good then your investment increases in value but if another stock does poorly you have not lost that much money since you have so many other “good” stocks that can cushion the blow. In other words, index investing creates diversity (since you are invested in so many different companies) which protects investors from the risk of losing too much money. Purchasing individual stocks is the opposite of that. Buying individual stocks decreases the diversity of your investments (since you have a larger portion of your money tied up in the stock from one company instead of having that money distributed among many different companies).

My point? I don’t purchase individual stocks because I don’t have a crystal ball. I can’t predict the future or accurately tell which companies will do well and which won’t. The safest way to invest and still make money when you can’t predict the future is to limit your risk. You limit risk by purchasing a piece of all the stocks, that way if one company does poorly the other companies can help mitigate the risk and the make up the difference.  

5 Financial Moves to Make This Fall

As you continue to mature you may begin to think about money in a different way. Instead of viewing money as something you can use to buy the things you want, you may start to consider the opportunities that money affords you and start thinking of ways to accumulate more. Here are 5 things you should consider doing this fall to take your finances to the next level.  

1. Start investing in the stock market. Whether you are in your early 20s and just got your first salaried job, or are about to reach your 10 year work anniversary, investing in the stock market is something everyone should consider doing at all stages of life. Many people have opportunities to invest in the stock market through their jobs via a 401K or 403b retirement plan. Some companies may even offer a retirement “match” to incentivize you to invest through these venues. You should make it a goal to invest at least 10% of your income in index funds through your 401K, 403b or IRA retirement plan. If you’re able, consider investing even more money into your Roth IRA or using some of the money you have left over each month to invest via apps Robinhood, Acorns, or Stash. Investing in the stock market by purchasing index funds through retirement plans or brokerage accounts will allow your money to make money (aka “interest”) and after awhile, that interest will begin to make even more money for you (aka “compound interest”). One of the best things you can do for your financial future is invest your money and let the magic of compound interest work in your favor.   

2. Reconsider what car you drive. Another decision that can have a huge impact on your finances is what car you choose to drive and more importantly, how you choose to pay for it. Many people love to purchase brand new cars. They love the new car smell, updated features, and the peace-of-mind in knowing they have reliable transportation for many years to come. Despite these benefits, there are downsides to buying a new car. One of the main drawbacks of buying a new car is that it loses its value fairly quickly in the first few years. This means it will continue to depreciate (or lose value with time). Thus, you end up spending a lot of money and having pretty hefty car payments for many years on a car that will lose value. If you are trying to invest money for retirement, spend money on other things, or save money for future trips and vacations, having a $500 car payment for the next 5-6 years may preclude you from doing so.

Other people choose to lease cars. They like being able to drive a different car every few years and don’t want to pay the full price of a car that will lose value over time. However, the downside of leasing a car is that you will still have a monthly payment each month of several hundred dollars for the next 3-5 years. When your lease is finally up, you will have to give back the car, and take out a new lease with a new set of monthly payments so that you can continue to have transportation. The most sound decision to make is to pay cash for a slightly used car. Cars that are 2-4 years old tend to still be aesthetically appealing, reliable, and are more reasonably priced. Paying for a slightly used car in cash can also prevent you from having a big car payment each month. Because the car is cheaper, you can get a much smaller car loan with much smaller car payments that you can pay off quicker, even if you didn’t have all the cash you need to pay for the on day 1. My point? Car payments can be a rather large monthly bill, so reconsider what you drive and think of ways you can reduce this payment or prevent yourself from having the payment in the first place.  

3. Prioritize paying off your credit card debt. Credit card debt can negatively impact your finances in numerous ways. It charges you extreme amounts of interest each month if you don’t pay back the money in a timely manner. Since many people are unable to pay back all the charges in one month, they keep accumulating interest, on top of what they already owe. By the time they finally pay off the credit card, they have paid hundreds if not thousands of extra dollars in interest payments. If you are spending money paying off credit card debt, and the interest you owe on that debt, that’s less money you have to invest. One of the best things you can do for you finances is make a plan to pay off your credit card debt as soon as possible and try to avoid accumulating more.

4. Think twice about your living situation. Buying a house is a major goal for many people, especially young families. The idea of having something of your own to build memories in is quite alluring. In contrast, living in a high-rise apartment is extremely attractive for many young professionals who live in the city, especially if they do not have children. The convenience of being able to walk to bars and restaurants and having short commutes to other forms of entertainment can be quite attractive. While there’s nothing inherently wrong with your desires about where to live, it’s important to remember that where you choose to live, and how much you decide to pay each month for housing, can have a big impact on your financial future.  Be wary of buying a house that is too large or too expensive. Be wary of renting an apartment with rent that is too high. Housing is one of our largest expenses each month. How much you choose to pay for a mortgage or rent can have a big impact on how much money you are able to save, invest, and spend on other things in your life.

5. Set up automatic savings. One of the best things you can do to ensure you meet your financial goals is to set up automatic savings. This means having a set amount of your paycheck automatically sent to a different savings account. Ideally, this savings account would be separate from the checking account that the rest of your paycheck goes into. By having it automatically deposited into a separate account you essentially “pay yourself first” and protect yourself from spending the money you were supposed to be saving. Doing this will help you build your savings each month which will increase your net worth over time and allow you to save money for an emergency fund, upcoming vacations, and other large purchases like a home, wedding, or college fund for your children. 

What do you think, which of these 5 financial moves do you plan to make this fall?

Should you turn your starter home into an investment property?

Contrary to popular belief, not all homes make good investments. An ideal real estate property will provide you with extra cash in your pocket each month or allow you to increase your net worth in a tax-efficient manner. Some homes have both of these benefits, but many homes have neither. You can evaluate where your starter home falls on this spectrum by asking yourself these 6 questions:

1.Do the numbers make sense? Before you list your home as a rental property you must “run the numbers.” The first calculation you should make is the “cash-on-cash return.” The cash-on-cash return helps you determine how much money you’ll make on the investment based on how much money you spent to buy the investment. In other words, it will help you see whether investing money into this starter-home-turned-investment-property is more lucrative or less lucrative than putting your money into something else like index mutual funds. The second thing you need to calculate is your monthly cash flow. Computing the monthly cash flow will help you see how much money this rental property will put in your pocket each month after you pay the mortgage and account for repairs and other taxes and fees. Some properties have a high cash-on-cash return and positive cash flow. Others do not. Run the numbers for yourself to see if your home provides an ideal cash on cash return (at least 10%) or enough monthly cash flow to make it worth your while.

2.Are you planning to make expensive aesthetic changes or upgrades? If you purchase a home and pay the mortgage each month, you will build “equity” or value in that home. However, the more money you spend on upgrades and costly aesthetics, the less equity you may keep. Don’t get me wrong, there are certain upgrades that may add value to a house, but oftentimes when we purchase things that are more aesthetically appealing, we do so for our own self-gratification. As a result, many of the upgrades people make to their homes (modern cabinets, renovations to a basement, the addition of a pool, etc.) cost more money than they add in value to the home. Increasing expenses (through costly upgrades) without an identical increase in home value, decreases the overall profit you could gain from using the home as an investment property. 

3.What is the housing market like in your area? Before you purchase a starter home with the intention of using it as an investment property, look at local housing market trends. Have houses been going up in value or down in value? Is it sellers’ market, in which houses are being sold for more than they are worth? Or, is it a buyers’ market in which the supply of homes exceeds demand, so houses are being sold for less than they are worth? Purchasing a home in a sellers’ market makes the home more likely to be a cash-flow negative investment property. Purchasing a home in a buyers’ market makes the home more likely to be a cash-flow positive investment property.

4.Will you be able to secure (and afford) two mortgages? In an ideal world, you’d rent out your starter home to a reliable tenant and use that rent money to pay down the mortgage. You may even ask the bank for a second mortgage to purchase a larger home for yourself in the meantime. Unfortunately, life doesn’t always go as planned. Asking the bank to loan you money for a second home when you haven’t paid off the first home and may also have a significant amount of student loan debt may be more challenging than you realize. Plus, it may take a few months to find a reliable tenant and there’s a good chance this starter home will have an occasional vacancy between renters. Do you have enough money to cover costs during these transition periods? Can you afford to pay the mortgage on the starter home while you find a tenant AND pay the mortgage on the other home you live in? If the answer is no, then planning to maintain two houses may not be financially feasible.  

5.Can you or someone you trust effectively manage the property? Managing a rental property as someone’s landlord is no small feat. You have to be diligent about collecting the full rent on the due date. You also have to be available to receive and coordinate maintenance requests at inopportune times. Do you think you have the time, experience, or energy to do this yourself? If not, you may want to consider hiring a company to do it for you. Keep in mind that paying for a management company may significantly decrease your monthly cash flow. 

6.Have you already maxed out less-cumbersome investments? If you’ve never owned a rental property, let me be the first to let you know, it’s a lot of work. Securing responsible tenants who will make on-time payments requires more background work than you may realize. Spending hours negotiating the buying price and loan terms with real estate agents and loan officers can last a lot than you may have anticipated. Unless your return from this investment is significantly better than what you could get elsewhere, it may make more sense to max out other investments (like your employer retirement accounts and Roth accounts) first.

The decision to turn your starter home into a rental property should not be taken lightly. For some people, renting out their home may be a lucrative investment strategy. For other people, renting out their home may require more time and money than they can provide. Thoroughly evaluate whether turning your starter home into an investment property is the right decision for you.

5 Things I learned After Paying Off My Credit Card Debt

1. It is much easier to get into debt than it is to get out of it. I racked up a significant amount of credit card debt during my years as a graduate student. I moved to a city I couldn’t afford, accepted a job that didn’t pay well, and used credit cards to make up the difference. Needless to say, I accumulated debt pretty quickly. It’s not like I was “balling out of control” taking fancy vacations or living some lavish lifestyle but the cost of basic expenses in a high-cost-of-living area took its toll. Although it was fairly easy to rack up this debt, I had to make some hard sacrifices to pay it back.

2. Paying off debt takes a lot of sacrifice and behavior change. I delayed paying off credit card debt when I got into medical school simply because I couldn’t work during that time and was already living on student loans. Once I graduated and started working as a physician, paying down that debt was one of my top priorities. The interest rate on my credit card was about 12% and although that’s great for a credit card, the longer I kept this debt the longer I was going to be paying at least 12% more for the things I purchased years ago. In order to pay it off as soon as possible, I literally threw money at this debt. Each month for the first 6 months I was a physician I had a chuck of money automatically sent to the credit union that issued my credit card. Every month I saw money that I could have spent on a nicer apartment or a fancy vacation go to pay back debt I had accumulated well over 6 years ago. I was jealous of my classmates who ate at restaurants all the time or were always traveling to nice places when I was essentially living like a broke college student trying to back this debt. Trust me, it was tough.

3. The temptation to avoid paying it off can be hard to resist. There were so many times where I’d want something (like a nice lamp for my apartment, a fancier bed spread, or a newer cellphone) and I realized that I could probably purchase those things easily if I didn’t have so much money going toward paying off my credit card. I contemplated delaying paying off the card by a few months in order to experience some gratification now. While doing so may not have totally derailed my financial goals, it would have created a dangerous habit that could cost me even more down the line: delaying debt repayment to purchase material things. I’m a firm believer that the habits, mindset, and discipline needed to pay down debt are the exact same traits needed to save, invest, and build your net worth. Delaying gratification is never easy, but learning to do so had such a positive impact on my finances and ability to build wealth.

4. The debt was costing me more than I realized. I decided to prioritize paying down my debt because I realized I was paying drastically more for things that I purchased years ago. In other words, the credit card company was charging me monthly interest of over 12% per year on the total balance of the card. The longer I delayed paying it off, the longer I would be paying interest. When I started learning more about personal finance, I realized the debt was costing me even more than extra interest payments. It was also delaying my ability to build wealth. Every dollar I was spending on this credit card debt, was a dollar that wasn’t going into retirement accounts to be invested in a way that actually earned me more money. Instead of EARNING 8% per year on money invested in retirement accounts, I was actually PAYING 12% more on debt. The sooner I paid off this credit card, the sooner I could get more money invested and start earning interest instead of paying it.

5. Paying down the debt improved my quality of life. Now that I’m credit card debt free, I’m so much happier. I no longer have a large chunk of money going toward a bill I accumulated years ago. Instead, I’m investing more money into retirement accounts and saving more money in my emergency fund. I’m also planning a couple international vacations that will be paid for in cash. To be able to live my life without relying on credit cards is such a freeing feeling. Plus, it took so much sacrifice to get it paid off that I literally never want to go back.  

5 Things To Do Financially In The Month of July:

July 1st is a big day in the medical world. It’s when graduating medical students start their first day as doctors, and experienced resident physicians get “promoted” with more responsibilities and a pay raise to match. Whether you’re in the medical field or not, the start of July marks the halfway point of the year and can be a great time to re-evaluate your finances and make any necessary changes. Here are 5 things we should all be sure to do in July:

1. Create a spending plan. For the interns who are now getting paid, the residents physicians experiencing a salary increase, or the attending docs that have more money than they ever have before, now is the time to create a spending plan. Going from barely having any money to a steady [large] paycheck can be exciting. However, if you don’t manage your money wisely, you may find that your money is gone sooner than you think or realize that you wasted it on things you didn’t need. Having a spending plan can help prevent this from happening. It’s having a basic outline of the things you need to purchase and reserving money for other things that may be important to you, without going overboard. It’s determining which bills and other costs you need to cover each month (rent, electricity, internet, car insurance, etc) and thinking about how much money you also need to set aside for other things like groceries, gas, personal grooming, etc. The goal is to figure out the max amount you can afford to spend on certain items each month so that you never have an issue paying your bills and have also managed to save money for other priorities and still have some money left over to enjoy.

2. Make sure you have insurance. You can try your best to plan for certain life events and expenses, but you can’t predict everything. For large expenses that we can’t predict, we need to have insurance in place to cover those costs. Although signing up for insurance may not be the most exciting task to complete, it’s absolutely essential. We all need some form of medical insurance to cover basic health expenses, prescription costs, and any hospital bills. We also need long term disability insurance so that we have income security in case we get diagnosed with an illness or get an accident that precludes us from working at our full capacity. Lastly, those with families or other people who rely on their income also need term-life insurance so that their families have a means of financial support if they happen to die before they have become financially independent.  

3. Get a handle on your student loans. Many people have student loans. Physicians who are in residency or young professionals who work for non-profit hospitals and public institutions may qualify for public service loan forgiveness (PSLF) or some other type of student loan forgiveness plan. In order to sign up for this program or ensure that your payments over the last 12 months were properly counted, it is essential that you complete the employer certification form each year. Anyone with federal student loans may also want to consider signing up for an income driven repayment plan like PAYE or REPAYE so that your monthly payments are based on your income instead of a much higher amount that you may not be able to afford. Those who are already enrolled in an income driven repayment plan must complete the mandatory annual recertification to remain in the same plan each year. Once you determine a repayment plan and re-certify any forms, it may also make sense to have your monthly payments automatically withdrawn from your bank account. Many loan servicers will even lower your interest rate if you sign up for these automatic payments.  

4. Pay down your debt. For those who want to build wealth and become less reliant on each paycheck, it’s imperative that you prioritize paying off your debt. Many people accumulated credit card debt in their early twenties or have used credit cards to cover moving expenses, furniture costs, or previous vacations. Other people may have taken out car loans or borrowed money from other sources to make ends meet. Although it may not be feasible to pay all of our debt off instantly, it’s important to come up with a feasible payment schedule to get rid of the debt sooner rather than later. Simply paying the minimum amount each month will cause us to pay a lot of extra money in interest and may really impede our ability to build wealth and financial security. Making a goal of having at least one of our credit cards or loans completely paid off within the next 12 months might be a decent place to start.

5. Start investing. Part of adulting means setting aside money for retirement, creating a savings account and investing money in a way that helps build your net worth. Many people have elaborate investment plans or try to play the exhausting game of picking individual stocks to purchase. While that may work for them, investing doesn’t have to be complicated. You can start by funding your employer-sponsored retirement account and a Roth IRA (or backdoor Roth IRA). Simply choose a percentage of your income you want to contribute towards retirement (ideally, you’d want to start off around 10%) and choose to invest the money in various index funds or a target retirement fund that invests your money in thousands of different stocks and bonds. When I started residency, I prioritized paying off debt and only contributed about 5% to retirement. Once I paid off the debt, I drastically increased that percentage and started fully funding my emergency fund and other savings.

My point? If you want to ensure you’re on the road to financial stability and independence, start by completing the 5 steps above.

4 Reasons You Should Choose Financial Independence

Financial independence (F.I.) is when you have accumulated so much wealth or resources that you are no longer dependent on your job for money. While some people may feel like financial independence is an unrealistic pipe dream, I’d argue that its possible for many of us and definitely something we should all strive for. Here’s why we should all care about and choose F.I.:

1. It can decrease [financial] stress in your life. Although money can’t “buy happiness” a certain baseline level of resources can certainly decrease stress. Many Americans live paycheck-to-paycheck and barely have enough money to cover all of their monthly expenses. Others of us may be a bit more financially stable but still wonder how we will repay all of our student loan debt, afford rising health care expenses, or fully fund our retirement. These worries can cause stress and decrease the quality of our lives. Saving money from our main jobs, investing in appreciating assets, and establishing multiple streams of income can help ease this worry. It allows us to become less dependent on each paycheck and establish the financial independence that decreases these financial stressors.  

2. It gives you more control over your life. Another perk of being financially independent is the ability to have more freedom in your life. When money is not the main objective, you can be more selective with the jobs you take and the work you do. You no longer have to feel burdened by the need to work a decent-paying job that you don’t like. You now have the freedom to select work that fulfills you, regardless of how much it pays. You can also have more control over your daily schedule and more autonomy with your work commitments. When you are able to work a job that you actually enjoy, one that fulfills you and allows you to contribute to society in a meaningful way, you also create more happiness that can have a lasting effect. Establishing financial independence can help make this a reality.

3. It lets you have more meaningful experiences with the people you love. One of the benefits of having your finances in order with a fully funded retirement account and little dependency on your next paycheck, is being able to enjoy your wealth. Although buying possessions and having more “stuff” can bring us temporary pleasure, lasting happiness often comes from spending quality time and having meaningful experiences with the people we love. Think about how happy you could be if you could travel to anywhere in the world with the people closest to you. Or, if you could do the thing you like most around the people you love most. Having the ability to spend more time with your children, go to work each day doing what you enjoy, visit your family and friends frequently, relax often, or travel the world can result in more sustainable levels of happiness and increase the overall joy we have in our lives.

4. It gives you the chance to have a bigger impact in the world. Although you don’t need money to make a difference, having money allows you to make a bigger impact and do so in a way that doesn’t jeopardize your own well-being. When you no longer have to make the choice between helping your family members and paying your own bills, its much easier to help others. When you no longer have to choose between financing your children’s education and contributing to charity, it much easier to give. When your financial matters are taken care of and you are less dependent on your paycheck, it becomes a lot easier to contribute to others and oftentimes you can give to even more causes, organizations, and people than before. Having the ability to improve lives and outcomes can drastically increase your own life satisfaction and create an inner peace and happiness that lasts longer than you can imagine.

How to Invest Money from your Side Gig

There are many different ideas for a side gig and several different options for what we can do with money from our side gig, but what about investing it? There are 4 ways I’ve considered investing the money from my side gig and each have their own pros and cons. They are:

1) Put the money into a Roth IRA. This allows me to invest in index mutual funds in a way that’s tax free and will gain interest overtime. When I take the money out in retirement, I can do so tax-free. Plus, if I happen to need this money before that to put a down payment down on a home, pay off some of student loans, invest in real estate, or pay some unexpected medical expenses I can do so without any penalties.

2) Increase the money I contribute to my job’s 401K. Technically you can’t put your side income into a work 401K but you could open up a solo 401K or increase the percentage of money you contribute to your work 401K up to the $19,000 yearly limit. The benefit of this is that you are still investing toward retirement in a way that’s tax efficient and you don’t have to worry about managing another retirement account with different investments. Plus, if you have federal student loans like I do and are on an income-driven repayment plan going for public service loan forgiveness, increasing the percentage you contribute toward your 401K actually lowers your monthly student loan payments which may leave even more money in your pocket each month.

3) Open a taxable “brokerage” account. If you have already contributed the max amount to your retirement account or Roth account but still want to invest in stocks and index funds, open up a brokerage account. This will allow you to invest in the stock market in a way that will gain you interest over time but isn’t tied to your retirement. This means if you happen to need the money for home renovations, better car, or a lavish vacation you can have your broker sell some of your stocks and get the money you need when you need it. Opening up a taxable “brokerage account” isn’t the most tax-efficient account since you will pay taxes on the profits you make but it gives you easier access to your money when you need it.

4) Invest in real estate. One of the main ways many American’s build wealth is through Real estate. Not only can it help you get higher returns on your investments which increase your profits, but it also allows you to do so in a way that’s tax-efficient and even tax-free. If you already have a decent chunk of money in your work retirement plans invested in index mutual funds perhaps you may want to diversify your invests a little and get started in real estate. You could start buying rental properties to increase your monthly cash flow and become an active investor who can write off taxes from your day job, you could start investing in crowdfunding deals or real estate syndications with other investors who focus on making money from apartment deals as a more passive investor, or you could simply start buying smaller properties and renting them out over time, or even just invest in some Real Estate Investment Trusts (REITS) which are like index mutual funds for real estate deals. There are many options available.

My point? The correct option may differ for each person. If you are young, haven’t maxed out your retirement accounts, and don’t need the extra cash on hand, perhaps putting the money into a Roth IRA or extra money in your job’s 401K may be the best option. If you’ve already maxed out your retirement accounts or think you might need this money before you turn 55, then perhaps opening up a brokerage account may be the best move. Although you pay a little more in taxes it may provide the flexibility you need to take the money out if an emergency arises. If you already have a good chunk invested in the stock market perhaps you should consider other investment vehicles like real estate. Contrary to popular belief, you don’t have to be rich to invest in real estate and there are many different options that may suit your lifestyle and risk tolerance best. Right now, I’m putting extra money into retirement accounts, but I plan to invest a lot more into real estate once I finish my residency training. Look into the different types of investment options and choose the one that may be best for you, keeping in mind that it may vary based on your life circumstances and net worth.