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Small-Scale Question Sunday for February 9, 2025

Do you have a dumb question that you're kind of embarrassed to ask in the main thread? Is there something you're just not sure about?

This is your opportunity to ask questions. No question too simple or too silly.

Culture war topics are accepted, and proposals for a better intro post are appreciated.

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I believe the default course of action would be to buy index or mutual funds. I've been eyeing the S&P500.

Yup. It really is that simple. I hold VFFSX, although there are a number of similar low-to-zero fee large-cap US stock indices that are all "S&P500".

Even if you think you could beat the market, you have to decide if it's worth the stress/effort. I think it's very much not. Surely, if optimizing for dollars, your effort is better put into advancing your medical career. Similarly, if you find yourself cleaning toilets at home, either a) capitalism is fundamentally broken or b) you should hire a housekeeper.

Some mix of VFFSX + safer or anti/un correlated asset classes makes sense if you are either particularly risk averse or particularly concerned with timescales shorter than 10-15 years. But, this leaves expected value gains on the table, and requires more thinking, so I'd advise mildly against. See e.g. Butterfly Portfolio.

Beyond that, two notes:

  1. Obviously pay off debts that are higher than expected returns (~8% in nominal dollars) before investing
  2. Rent vs buy is nontrivial. Do not assume buy is the better answer, even if you are certain you will never move. Owning is a headache and a risk. The reasons it has historically been better to own are: a) laws that have driven up house values, but could change; b) people are too stupid to invest the cashflow saved by renting, whereas owning forces you to invest (in a single asset class!), making owning correlate with net worth (amongst many reasons)

Surely, if optimizing for dollars, your effort is better put into advancing your medical career.

Sadly the NHS mostly operates on assigned hours put in = seniority = more money paradigm.

As a trainee, I get predictable and fixed yearly increments, which are nice enough, especially since I could get away with spending less than half my monthly salary if I wasn't so fond of takeout.

Speaking broadly, in most other places, doctors, especially in surgical fields, can double or triple their salaries if they put in the hours. This is much harder to do if you're an early-stages trainee. Completion of training would take about 6 more years, and that's when the opportunity to work private and make bank begins.

I've also missed the glory days when locum roles weren't grossly over subscribed, and you could rely on picking up an odd 3 or 4 shifts a month to almost match your base pay. There are too many underemployed fresh grads and international medical graduates like yours truly clawing at the door.

If I were to attempt to "beat the market", it would likely take the form of buying tech stocks.* And I wouldn't put more in than I could afford to lose! I doubt I'm going to be forced to liquidate anytime soon, so I would have little issue with holding a dip.

*You can't really price-in a technological singularity, and unless everything goes sideways, I expect broad slices of the market to soar and not just MANGA.

On the topic of renting or buying, the only real reason I'd buy is if I was convinced I wanted to tie myself down geographically (and had a family), especially since you point out that re-investing the difference between rent and home loans would obviate most of the difference. It's too early to make that call, and I prefer my money relatively liquid.