Smart Investment Strategies for Medical Residents: Kabir’s Journey with TFSA and RSP
Kabir comes from a family that has done well and highly values education so is one of the less than 10% who was able to complete undergraduate and medical school with zero debt. In addition, his doting grandparents gave him 120K to invest with the sole recommendation that he “speak with a banker”. Although relatively well off, Kabir has no personal experience with financial management so simply put the funds in the bank and asked an advisor in the branch to open a TFSA and “do something with the money”. The advisor told him that the maximum he was eligible to put in a TFSA was 90K and suggested that he start an RSP with the remaining funds.
Kabir agreed and directed his advisor to buy a fund he thought was good with half the money in his new TFSA and leave the rest in cash in that account. He then opened an RSP with the remaining 30K leaving it entirely in cash until he had time to think things over. About a year later, Kabir contacted me for advice about next steps.
Despite his very fortunate circumstances, this young man and his family live very modest lives. He would like to become much more knowledgeable about investing, but at present wishes to concentrate fully on his residency. He asked for help mostly to honour the gift from his grandparents by using it wisely.
We discussed options and much to my surprise, he elected to keep the 45K in the mutual fund his banker had selected in his TFSA and used another 30K in that account to purchase equal dollar amounts of three CND businesses that he admired. The final 15K was left in cash. In his RSP, he decided to buy a US index fund with 20K and left 10K in cash. He explained that he was going to transmit these instructions to his banker and then re-evaluate in 12 months. At that time, he would see how the various choices performed and make adjustments.
This struck me as an unusually bold decision given his lack of experience, but it made sense to him. He felt that it was simple, yet would give him a “feel” for the market and help him decide if he would gradually take more control or, on the other hand, perhaps conclude that this was not a major interest for him and leave it all to professional advisors.
KEY CONCEPTS:
Any financial plan can be like choosing clothing in that only the individual with the funds knows themselves well enough to decide what makes a comfortable fit.
A full-service financial manager works well for many people, but an interested client can still make specific requests if those make sense to them.
Once you do have a plan, there is no need to rush your purchases. Taking time to get a sense of how things work can build confidence to make informed decisions.
Real-Life Insights for Young Medical Residents Kabir's approach provides valuable lessons for young professionals:
Starting Simple: Begin with familiar investment vehicles like mutual funds and index funds.
Hands-On Learning: You can actively manage a portion of investments to gain market insight.
Periodic Evaluation: Regularly review and adjust investments based on performance and personal comfort.
Kabir's journey highlights the importance of thoughtful financial planning even amidst a busy residency. By leveraging his grandparents' generous gift and seeking tailored advice, Kabir made strategic investments that align with his financial goals. His approach, while cautious, reflects a balanced consideration of his career priorities and long-term financial aspirations. Whether you're a resident like Kabir managing a windfall or planning for future financial milestones, taking the time to understand your options and seek informed advice can pave the way for a secure financial future.