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Investing money with PhD stipend.

  1. Feb 17, 2013 #1
    I am a senior undergrad who will be enrolling in a PhD program next semester. I haven't decided yet on the exact program, but the offers that I have received guarantee an average stipend of about $22,000 per year. I believe health insurance is also included in most packages (although I will likely pay $100 deductibles each month for a prescription).

    I am fortunate enough that I will have zero debt after I graduate. Now that I am about to enter graduate school, I have started thinking about ways to manage my future budget and maybe even invest my money. Although the stipends are low, I have heard that a little bit goes a long way when you begin investing early. I am sure that I will also need a savings account to draw from when conference travel and textbook expenses come up.

    When you account for tax reductions, the possible costs of rent, transportation, groceries, and other expenditures, there isn't exactly a ton of money to spare with this living stipend. I am wondering if other grad students have experienced success at creating savings accounts or investing in the stock market while living on a PhD stipend.

    Although I would love to learn more about stock trading, it seems like a time consuming practice which may not be practical for my lifestyle. It also costs money to seek out expert advice. Has anybody else found a good balance? Or am I doomed to break-even for the next five years of my life? I don't expect to get rich in grad school, but it would be nice to have some assets.
  2. jcsd
  3. Feb 17, 2013 #2


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    It is always a good idea to have an emergency fund (6 to 12 months worth of living expenses) before investing any surplus. Exception: if you have a 401k or similar retirement fund with employer matching, then invest enough to get the full match. Also, don't put any money in the stock market if you might need it in the next 5 years or so.

    There are a lot of studies that show that stock traders, on average, underperform the stock market indices. So unless you have reason to believe that you will be above average, just by a stock index fund. This has the advantage of requiring almost no time and guaranteeing that you will not do worse than average. Also, don't put all of your investment money into stocks. A 20% bond component will significantly reduce overall volatility without an excessive impact on your return. And it will ensure you have some money on the side to take advantage if (or rather, when) the stock market plunges, as it did in 2008-2009.
  4. Feb 17, 2013 #3
    It probably depends very much on where you are going to school. A stipend goes farther in Urbana-Champaign, Illinois than it does in Madison, Wisconsin, which in turn goes farther than in Chicago,LA, or NYC.

    The best thing to do with your money is to buy an index fund and just let it sit. No expert advice required, and you'll earn the market average. Most investment opportunities don't beat the market (some hedgefunds do, but they claw it back in management fees).
  5. Feb 17, 2013 #4

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    $22,000 is not a lot of money. If you can save some, great. Before thinking about investments, you should probably think about when you will need the money. An index fund that you plan to liquidate when you retire is a better investment than one you plan to liquidate when you graduate. When I was a student, I kept a few thousand in cash (probably $10K in today's dollars) just in case: I didn't want to be in a situation where one C on a test at the wrong time and I would suddenly be out of grad school and homeless.
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