How to allocate income?
Long time stalker but first time poster here.
I'm starting out as an analyst at a MF this year and was hoping to get some advice on how I should invest my salary and bonus (Assume 85-90K for both). Fortunate enough to not have any student loans or debt (thanks to financial aid). Don't come from the wealthiest family so I'm a pretty frugal person but putting my salary to work in the market is something new to me.
I've already maxed out my Roth IRA with my signing bonus and plan to max out my 401K. Not sure where to go from there in terms of picking stocks/ETFs in order to maximize my growth over the next XX years.
Would love any advice.
Thanks
Certainly for analyst years, I would say live off salary and bank the bonus. Try to remain level headed and don’t get sucked into the world of spending a lot of money on stupid things (bottle service, flashy dinners etc), if you’re going to spend big focus on things you’ll get more than one night of use from.
For allocation, think through what you’re saving for and plan accordingly. If it’s all to fund 2 years of bschool in 4-5 years time, I’d focus on capital preservation rather than growth given where valuations are. If it’s longer than this, I’d go all equity. Your firm most likely has strict rules on what you can invest in given it’s access to material non public info so you’ll be limited to ETFs. Go for index funds with the lowest management costs.
More specifically, look into opening a 529 account for yourself. Any time you can save on taxes helps.
a 529 only has tax benefits if the investments grow in value, which is at odds with the idea of capital preservation
if you're going for growth, 529 for sure
if cap preservation, just keep it in your name
if I were you, I'd favor liquidity over tax savings, with rates where they are and the short time, it appears to me to be pennywise and pound foolish
I think it would depend. My state has a couple different options for investments, ranging from index funds to fixed income funds to TIPs/cash equivalents. If you know for sure you're going to bschool and can predict that it won't be sponsored by a firm, I don't see why it would be a bad idea (assuming you have nothing else to save for [down payment for a house, emergency fund, etc.]).
This is all great advice above. Only thing I’d add to think about is carving out some additional capital for co-invest. Depending on your firms program and credit line, timing and size out these outflows from you will vary. Maybe someone else knows a better way but I just effectively have year 1+ staggered investments in very liquid index funds that I sell out of in order to fund. This might make you try to bank a little bit more of your salary (don’t live in a cardboard box). Co-investing your levered equity into an already levered LBO is great. You should take advantage.
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in a similar situation, what platform would you recommend for doing all of this (savings, investing, automated investing...)?
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