Forum Mailbag: Choosing A Medical School, Trying To Beat The Market, REITs and Ex-Div Dates, And More!

There is so much great information on personal finance forums. I regularly participate on several message boards, including Bogleheads, White Coat Investor, and Rockstar Finance. Here are some of the discussions happening around the internet.

1. White Coat Investor: Choosing A Medical School

Question: PRS Doc is a premedical student who poses the hypothetical scenario of being accepted to the following three schools:

1. A good school with a full tuition with a monthly stipend,
2. A top-ranked school with full-tuition, and
3. A middle-ranked school with only half-tuition, but in a great (i.e. sunny) location

WSP’s Take: This would be a pretty amazing, but rare situation to be in. However, I think many pre-medical students experience a situation where they can attend either a more prestigious, more expensive private school, or a lower-prestige, less expensive school.

To answer PRS Doc’s hypothetical scenario, I would pick the top-ranked school first, then the good school with full tuition and monthly stipend, followed by the middle-ranked school in a good location. I believe the top-ranked medical schools give their medical students a boost in residency applications, and their match lists are typically filled with top-ranked programs.

Anyone from any U.S. M.D. school can get into any residency or specialty in the country, but it is much harder if you don’t go to a top-ranked school.

For the more general scenario of picking a state school over a more expensive private school, it’s about the value that the private school provides. I think most people would choose Harvard or Johns Hopkins over their local state school, but what about a school ranked #15? How about a school ranked #25? My personal cutoff would probably be to attend a more expensive school ranked in the U.S. News Top 15, depending on the difference in tuition. But everyone’s cutoff school will be different.

2. Rockstar Finance: Trying to Beat the Market?

Question: Stock_Street wants to know whether forum members are expecting to beat or underperform the market this year.

WSP’s Take: I don’t even look at my investments very often anymore. They teach you in residency to not order a test if it won’t change your management. The way I invest won’t change based on how it’s performed recently. I do know my investments have gone up this year — the S&P 500 went up in a straight line in 2017, but I don’t know whether I’m beating the benchmark or not.

3. White Coat Investor: Sharp Fall in REITs

Question: Erockin is concerned that REITs took a large tumble overnight, and is wondering why this happened.

WSP’s Take: As others in the thread have noted, many REITs went ex-dividend last week. Most REITs are required to distribute 90% or more of earnings to investors in the form of dividends. They typically announce a dividend on one day, go “ex-div” on another day, and then actually pay the dividend on a third day.

If you own the stock before the ex-div day, then you will receive the dividend. If you buy the stock on the ex-div day or later, then you will not get the dividend. Therefore, on the ex-div day, the stock falls by the amount of the announced dividend, but holders of the stock will get the difference a few days later on the dividend payout date.

In this case, the popular Vanguard REIT VNQ had a dividend announcement day of 12/14, ex-div date of 12/19, and a dividend payout date of 12/22. While the trading share price of VNQ declined on the morning of 12/19, holders of VNQ stock received the difference on 12/22.

This highlights why I don’t believe you should purchase dividend stocks strictly for the dividend. The value of a stock does not increase because it paid out a dividend. It is simply a redistribution of the share price from the stock to the dividend.

4. Bogleheads: FUSVX or FSTVX in Fidelity 401k?

Question: Zback is deciding between FUSVX (S&P 500) or FSTVX (Total Stock Market) for his 401k and is asking for opinions from the Bogleheads community before he makes his elections.

WSP’s Take: There’s no significant difference in returns between the two indices. FSTVX is slightly more diversified because it has the mid-cap and small-cap shares. It will also potentially have a slightly higher expected return (with more volatility) because it contains the small-cap shares.

Since it’s in a 401k, it actually doesn’t matter which fund you pick initially. Unlike a taxable account, you can change your allocation without tax consequences in a 401(k). I have both S&P 500 index funds and Total Stock Market index funds in my Fidelity accounts.

Wall Street Shares: 5 Articles To Read This Week

1. Rogue Dad, M.D: The Financial Folly of the U.S. Healthcare System — Even physicians have trouble navigating our byzantine healthcare system.
2. Millionaire Doc: Multifamily Investing Part 1 –This M.D. describes the many different ways you can invest in multi-family properties.
3. White Coat Investor via Passive Income, M.D. — Multiple Streams of Income — In this post in 2011, WCI writes about developing alternative income streams, including from blogging.
4. The Retirement Manifesto: Living Life at the Limits — I’m inspired to do something outside my comfort zone after reading this story from Fritz.
5. My Curiosity Lab: Best Future Career: Doctor, Engineer, or Plumber? — Dr. Curious runs the numbers, and finds that while doctors have a late start, they easily can surpass the engineer or plumber over a lifetime. Kids, start studying for the MCAT.

What do you think? Do you agree or disagree with any of my responses? What’s your take on the topics in this week’s forum mailbag?