Amy Batterstein, 25, has a one-word refrain: Save! Though the West Coast medical student has adopted a few other choice philosophies that govern her financial life, the one at the top of the list is simple: Don’t spend it all.

Ms. Batterstein only earns about $25,000 a year from a part-time job and as a medical student, but she still manages to invest $1,000 a month – which she puts into a Vanguard S&P 500® index fund.

“I do not check my balances frequently. I do not want to convince myself to make frantic decisions,” says Ms. Batterstein, who also established a $50,000 cash account for herself during the two years before medical school, when she worked as a consultant.

For the two years between college and med school, she also invested in a 401(k), putting aside the maximum possible to get the full match her company offered.

Ms. Batterstein’s strategies for saving and investing come from her close reading of investing books and from her father, an investment banker in New York.

She’s able to afford to invest so much because she funds most of her living expense with education loans, which she expects to pay off rapidly when she’s earning $350,000 a year as an orthopedic surgeon. She also lives fairly simply.

When she’s tempted to spend more, she tells herself, “I’ve had luxuries before, and I will again. Right now, my goal is to live within my budget and give myself less expensive treats — a manicure, not a massage; a new sweater, not a new Burberry coat.”


Ms. Batterstein wins high marks for establishing an emergency fund, a 401(k) and an investment portfolio, because many twentysomethings don’t.

Putting aside at least 10% of income at this stage of one’s life is a great opportunity, says certified financial planner Ted Snow of Dallas, Texas, because the earlier one starts saving, the longer the deposits have to earn compound returns.

Even if she never adds to it again, the $12,000 Ms. Batterstein put into her portfolio this year will grow to more than $46,000 over the next 20 years, if she is earning 7% a year and reinvesting the returns.

She’s also doing the right thing by steering away from tempting but too-risky strategies. Advisors find Ms. Batterstein’s fiancée’s idea about investing not-so-wise. His plan: place virtually his entire savings portfolio in Apple stock, which he studies closely as an MBA candidate at a top New York school. He’s saved over $150,000 in four years since graduating from college. That choice is too speculative, even though Apple is, for now, a high-flier.

“Avoid temptation to buy speculative investments, at 20 or at any age,” says John K. Ritter, a certified financial planner in Cincinnati. “Investing heavily in stocks is not the same as putting all your money in one instrument or in something speculative.”


Ms. Batterstein is also wisely developing a pool of assets outside her retirement account. Though it’s great to rack up the returns in a tax-free account, she can use the more liquid portfolio to hew to her goals to build a family, buy a house, survive and thrive.

Ms. Batterstein also wins points for investing on a regular schedule.

“The smart thing about doing this is, yes, she’ll sometimes be putting money in when the market’s higher, but she’ll also capture the lows. This is commonly referred to as dollar cost averaging,” says Mr. Snow.

In addition, the index fund she’s chosen, Vanguard’s, is a low-cost option, though an ETF from Vanguard might have even lower fees. The Vanguard S&P 500 Index Fund (VFINX) has an expense ratio of .17%; the Vanguard S&P 500 ETF, VOO, has an expense ratio of .06%.


What Ms. Batterstein isn’t taking into account is the question of diversification. Her portfolio is diversified among U.S. equities through the Vanguard S&P index fund she is using, but in a world in which stocks are highly correlated, moving in unison on global news events, that’s not much diversification at all. (For a fuller discussion of diversification, see the Upfront Blog’s post How Jim Cramer’s Made Money Diversification Is An Idea Gone Astray.)

True diversification comes from adding other asset classes – a growing challenge for individual investors, says Alan Zafran, founding partner of registered investment advisor Luminous Capital.

“It’s more difficult than ever to find non-correlated assets,” he says.

Traditionally, investors added bonds as ballast to their portfolios. Mr. Zafran suggests buying U.S. Treasuries, because they are not correlated to equities and are regarded as a risk-free asset.

The advent of ETFs means that investors now have the option to add all the asset classes that institutions and the wealthy have long used to diversify their portfolios, including U.S. Equities, Emerging Markets Equities, Foreign Equities, Natural Resources, Real Estate and Bonds.

Mr. Zafran cautions, however, that investors should carefully research the underlying holdings in those ETFs or other kinds of tools investors eye to diversify their portfolios.

“Done well, adding those assets can be helpful,” he said. “Done poorly, they can be harmful.”


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The Wealthfront Team believes everyone deserves access to sophisticated financial advice. The team includes Certified Financial Planners (CFPs), Chartered Financial Analysts (CFAs), a Certified Public Accountant (CPA), and individuals with Series 7 and Series 66 registrations from FINRA. Collectively, the Wealthfront Team has decades of experience helping people build secure and rewarding financial lives. View all posts by The Wealthfront Team