vania-janet/multiturn-rag-retrieval-data huggingface dataset:
"First, you don't state where you are and this is a rather global site.  There are people from Canada, US, and many other countries here so ""mutual funds"" that mean one thing to you may be a bit different for someone in a foreign country for one point.  Thanks for stating that point in a tag. Second, mutual funds are merely a type of investment vehicle, there is something to be said for what is in the fund which could be an investment company, trust or a few other possibilities.  Within North America there are money market mutual funds, bond mutual funds, stock mutual funds, mutual funds of other mutual funds and funds that are a combination of any and all of the former choices.  Thus, something like a money market mutual fund would be low risk but quite likely low return as well.  Short-term bond funds would bring up the risk a tick though this depends on how you handle the volatility of the fund's NAV changing.  There is also something to be said for open-end, ETF and closed-end funds that are a few types to consider as well. Third, taxes are something not even mentioned here which could impact which kinds of funds make sense as some funds may invest in instruments with favorable tax-treatment. Aside from funds, I'd look at CDs and Treasuries would be my suggestion.  With a rather short time frame, stocks could be quite dangerous to my mind. I'd only suggest stocks if you are investing for at least 5 years.  In 2 years there is a lot that can happen with stocks where if you look at history there was a record of stocks going down about 1 in every 4 years on average.  Something to consider is what kind of downside would you accept here?  Are you OK if what you save gets cut in half?  This is what can happen with some growth funds in the short-term which is what a 2 year time horizon looks like.  If you do with a stock mutual fund, it would be a gamble to my mind.  Don't forget that if the fund goes down 10% and then comes up 10%, you're still down 1% since the down will take more."
"Here are my reasons as to why bonds are considered to be a reasonable investment. While it is true that, on average over a sufficiently long period of time, stocks do have a high expected return, it is important to realize that bonds are a different type of financial instrument that stocks, and have features that are attractive to certain types of investors. The purpose of buying bonds is to convert a lump sum of currency into a series of future cash flows. This is in and of itself valuable to the issuer because they would prefer to have the lump sum today, rather than at some point in the future. So we generally don't say that we've ""lost"" the money, we say that we are purchasing a series of future payments, and we would only do this if it were more valuable to us than having the money in hand. Unlike stocks, where you are compensated with dividends and equity to take on the risks and rewards of ownership, and unlike a savings account (which is much different that a bond), where you are only being paid interest for the time value of your money while the bank lends it out at their risk, when you buy a bond you are putting your money at risk in order to provide financing to the issuer. It is also important to realize that there is a much higher risk that stocks will lose value, and you have to compare the risk-adjusted return, and not the nominal return, for stocks to the risk-adjusted return for bonds, since with investment-grade bonds there is generally a very low risk of default. While the returns being offered may not seem attractive to you individually, it is not reasonable to say that the returns offered by the issuer are insufficient in general, because both when the bonds are issued and then subsequently traded on a secondary market (which is done fairly easily), they function as a market. That is to say that sellers always want a higher price (resulting in a lower return), and buyers always want to receive a higher return (requiring a lower price). So while some sellers and buyers will be able to agree on a mutually acceptable price (such that a transaction occurs), there will almost always be some buyers and sellers who also do not enter into transactions because they are demanding a lower/higher price. The fact that a market exists indicates that enough investors are willing to accept the returns that are being offered by sellers.
The short answer is if you own a representative index of global bonds (say AGG) and global stocks (say ACWI) the bonds will generally only suffer minimally in even the medium large market crashes you describe.  However, there are some caveats. Not all bonds will tend to react the same way.  Bonds that are considered higher-yield (say BBB rated and below) tend to drop significantly in stock market crashes though not as much as stock markets themselves.  Emerging market bonds can drop even more as weaker foreign currencies can drop in global crashes as well. Also, if a local market crash is caused by rampant inflation as in the US during the 70s-80s, bonds can crash at the same time as markets.  There hasn't been a global crash caused by inflation after countries left the gold standard, but that doesn't mean it can't happen. Still, I don't mean to scare you away from adding bond exposure to a stock portfolio as bonds tend to have low correlations with stocks and significant returns.  Just be aware that these correlations can change over time (sometimes quickly) and depend on which stocks/bonds you invest in.
"1. Interest rates What you should know is that the longer the ""term"" of a bond fund, the more it will be affected by interest rates. So a short-term bond fund will not be subject to large gains or losses due to rate changes, an intermediate-term bond fund will be subject to moderate gains or losses, and a long-term bond fund will be subject to the largest gains or losses. When a book or financial planner says to buy ""bonds"" with no other qualification, they almost always mean investment-grade intermediate-term bond funds (or for individual bonds, the equivalent would be a bond ladder averaging an intermediate term). If you want technical details, look at the ""average duration"" or ""average maturity"" of the bond fund; as a rough guide, if the duration is 10, then a 1% change in interest rates would be a 10% gain or loss on the fund. Another thing you can do is look at long-term (10 years or ideally longer) performance history on some short, intermediate, and long term bond index funds, and you can see how the long term funds bounced around more. Non-investment-grade bonds (aka junk bonds or high yield bonds) are more affected by factors other than interest rates, including some of the same factors (economic booms or recessions) that affect stocks. As a result, they aren't as good for diversifying a portfolio that otherwise consists of stocks. (Having stocks, investment grade bonds, and also a little bit in high-yield bonds can add diversification, though. Just don't replace your bond allocation with high-yield bonds.) A variety of ""complicated"" bonds exist (convertible bonds are an example) and these are tough to analyze. There are also ""floating rate"" bonds (bank loan funds), these have minimal interest rate sensitivity because the rate goes up to offset rate rises. These funds still have credit risks, in the credit crisis some of them lost a lot of money. 2. Diversification The purpose of diversification is risk control. Your non-bond funds will outperform in many years, but in other years (say the -37% S&P 500 drop in 2008) they may not.
This is also the time when any investment that isn't guaranteed safe may potentially be (at least temporarily) unavailable or decline in value. Emergency funds should be 100% government insured. When you have your Roth funded to the point where there's extra money beyond the emergency fund, you can start investing in higher-yielding vehicles: stock or bond index ETFs would be a good start. But then that part of your Roth starts to look like a retirement account and not an emergency fund. If it were me, I'd open a Roth at a stable local bank and just keep it in their FDIC insured money market deposit account. Then if I wanted a slight boost, I might put the ""upper half"" of my emergency fund into short term CDs, but even CDs aren't worth much at the moment."
Tax-free money funds invest in municipal bonds, so you'll want to factor in the likelihood that the issuing government (state, local, etc.) will stiff its bondholders.
"Theres nothing wrong with CDOs or Synthetic ones. What is important is that they are labelled correctly in terms of their risk. You cant be selling risky CDOs as ""safe"" bets.   If the rating agencies and financial institutions rate them correctly then I dont see a problem with it."
You can look the Vanguard funds up on their website and view a risk factor provided by Vanguard on a scale of 1 to 5.  Short term bond funds tend to get their lowest risk factor, long term bond funds and blended investments go up to about 3, some stock mutual funds are 4 and some are 5. Note that in 2008 Swenson himself had slightly different target percentages out here that break out the international stocks into emerging versus developed markets. So the average risk of this portfolio is 3.65 out of 5.  My guess would be that a typical twenty-something who expects to retire no earlier than 60 could take more risk, but I don't know your personal goals or circumstances. If you are looking to maximize return for a level of risk, look into Modern Portfolio Theory and the work of economist Harry Markowitz, who did extensive work on the topic of maximizing the return given a set risk tolerance.  More info on my question here.  This question provides some great book resources for learning as well. You can also check out a great comparison and contrast of different portfolio allocations here.
If you want a concrete investment tip, precious metals (e.g. gold, silver) are on a pretty good run these days, personally I still think they have ways to go as there are just too many problems with modern monetary policy of an almost existential nature, and gold and silver are better stores of value than fiat money. Silver is particularly hot right now, but keep in mind that the increased volatility means increased risk. If the Fed keeps its foot on the pedals of the dollar printing press and we get QE3 this summer, that will most likely mean more people piling into the PMs to hedge against inflation. If the Fed starts to tighten it's policy then that's probably bad news for both equities and bonds and so PMs could be seen as a safe haven investment. These are the main reasons why PMs take up a good portion of my portfolio and will continue to do so untill I see how the global economy plays out over the next couple of years.
The Westminster government said it wouldn't carry out a currency union and the Scottish government said we'd have no liability over the debt if we don't get the assets of the Bank of England. If we reject the debt will that have any realistic consequence on investors?  I thought the number one thing investors loved is an oil rich country with stability.
Bonds are the biggest part of that, since they're lowest risk, but the others play a greater part in producing returns on the investments. The exact mix that would be optimal for you depends on your risk tolerance (I'm classified as a moderately aggressive investor), the time horizon you're looking at before you may be forced to pull money back out of the investments, and some matters of personal taste. I've been averaging about 10%, but I had the luxury of being able to ride out the depression and indeed invest during it. Against that, my mortgage is under 4% interest rate, and is for less than 80% of the purchase price so I didn't need to pay the surcharge for mortgage insurance. In fact, I borrowed only half the cost of the house and paid the rest in cash, specifically because leveraging does involve some risk and this was the level of risk I was comfortable with. I also set the duration of the loan so it will be paid off at about the same time I expect to retire. Again, that's very much a personal judgement. If you need specific advice, it's worth finding a financial counselor and having them help you run the numbers. Do NOT go with someone associated with an investment house; they're going to be biased toward whatever produces the most income for them. Select someone who is strictly an advisor; they may cost you a bit more but they're more likely to give you useful advice. Don't take my word for any of this. I know enough to know how little I know. But hopefully I've given you some insight into what the issues are and what questions you need to ask, and answer, before making your decisions.
"If all of the money needs to be liquid, T-Bills from a broker are the way to go. Treasury Direct is a little onerous -- I'm not sure that you could actually get money out of there in a week. If you can sacrifice some liquidity, I'd recommend a mix of treasury, brokered CDs, agency and municipal securities.  The government has implicitly guaranteed that ""too big to fail"" entities are going to be backed by the faith & credit of the United States, so investments in general obligation bonds from big states like New York, California and Florida and cities like New York City will yield you better returns, come with significant tax benefits, and represent only marginal  additional short-term risk."
I am not interested in watching stock exchange rates all day long. I just want to place it somewhere and let it grow Your intuition is spot on! To buy & hold is the sensible thing to do. There is no need to constantly monitor the stock market. To invest successfully you only need some basic pointers. People make it look like it's more complicated than it actually is for individual investors. You might find useful some wisdom pearls I wish I had learned even earlier. Stocks & Bonds are the best passive investment available. Stocks offer the best return, while bonds are reduce risk. The stock/bond allocation depends of your risk tolerance. Since you're as young as it gets, I would forget about bonds until later and go with a full stock portfolio. Banks are glorified money mausoleums; the interest you can get from them is rarely noticeable. Index investing is the best alternative. How so? Because 'you can't beat the market'. Nobody can; but people like to try and fail. So instead of trying, some fund managers simply track a market index (always successfully) while others try to beat it (consistently failing). Actively managed mutual funds have higher costs for the extra work involved. Avoid them like the plague. Look for a diversified index fund with low TER (Total Expense Ratio). These are the most important factors. Diversification will increase safety, while low costs guarantee that you get the most out of your money. Vanguard has truly good index funds, as well as Blackrock (iShares). Since you can't simply buy equity by yourself, you need a broker to buy and sell. Luckily, there are many good online brokers in Europe. What we're looking for in a broker is safety (run background checks, ask other wise individual investors that have taken time out of their schedules to read the small print) and that charges us with low fees. You probably can do this through the bank, but... well, it defeats its own purpose. US citizens have their 401(k) accounts. Very neat stuff. Check your country's law to see if you can make use of something similar to reduce the tax cost of investing.
I definitely get that, my company has been really big on ILS’s lately, so in a meeting the other day I was looking at ways to short Cat Bonds....   The problem is you’d have to offer a big premium to someone that you sell the risk too since the whole industry is having to do that now. And on risky areas like Oklahoma or California for earthquakes I couldn’t imagine the premium you’d have to pay since the risk is up front and present. If you don’t want to pay the premium and choose some risk that isn’t as foreseen you should probably have a good method of evaluating that risk. Which is the point I have ran into in my quest to short ILSs.
Diversify, diversify, diversify. Gold, USD, Swiss Franc and one thing that hasn't really been mentioned yet: equities.  Yes, they may go down if the recession gets worse but at the end of the day you have a claim to a company. That's a physical asset. It's also a hedge against inflation/devaluation just like foreign currencies and precious metals. Make sure that you invest in companies that actually produce something that will always be needed though. I.e. Siemens, Novartis, Caterpillar etc. NOT the Zyngas and Facebooks of the world!
As one of the answers described, its going to depend on many factors and the environment at the time. But there is no sure way to know which strategy is better, if any are at all. I would say over several hundred years the strategies would be equally as profitable. In a free market the longer dated bonds would be priced lower (higher yield) because they are higher risk. And over a long enough time period that higher risk may end up resulting in that bond being worth less, or maybe nothing at all. In a free market, price discovery would factor all this in, and the two strategies would become equal. The same is true for the price during inversion events Having said that, we dont live in a free market. With central bankers monetizing debt in so many countries, sometimes investing in short term bonds, including US treasuries, is a guaranteed way to lose purchasing power, as these yields are below inflation and sometimes even negative.
As you are 14, you cannot legally buy premium bonds yourself. Your parents could buy them and hold them for you, mind you. That said, I'm not a fan of premium bonds. They are a rather weird combination of a savings account and a lottery. Most likely, you'll receive far less than the standard interest rate you'd get from a savings account. Sure, they may pay off, but they probably won't. What I would suggest, given that you expect to need the money in five years, is simply place it in a savings account. Shop around for the best interest rate you can find. This article lists interest rates, though you'll want to confirm that it is up to date. There are other investment options. You could invest in a mutual fund which tracks the stock market or the bond market, for example. On average, that'll give you a higher rate of return. But there's more risk, and as you want the money in five years, I'd be uncomfortable recommending that at this time. If you were looking at investing for 25 years, that'd be a no-brainer. But it's a bit risky for 5 years. Your investment may go down, and that's not something I'd have been happy with when I was 14. There may be some other options specific to the UK which I don't know about. If so, hopefully someone else will chime in.
For safety. If something catastrophic happens to your bank and your money is in there you will lose any not covered by FDIC. So if you have a very large amount of money you will store it in bonds as its much less likely that the US treasury will go bankrupt than your bank. I also literally just posted this in another thread: Certain rules and regulations penalize companies or institutions for holding cash, so they are shifting to bonds and bills. Fidelity, for example, is completely converting its $100 billion dollar cash fund to short term bills. Its estimated that over $2 trillion that is now in cash may be converted to bills, and that will obviously put upward preasure on the price of them. The treasury is trying to issue more short term debt to balance out the demand. read more here: http://www.wsj.com/articles/money-funds-clamor-for-short-term-treasurys-1445300813
Where you can put the money really depends on your risk tolerance. You could take $50k and put it into a good share class municipal and government bond fund that would likely be tax exempt. In a few years span I don't think you're likely to lose much in a tax-managed bond fund but it's certainly possible! Here is a link for Vanguard tax-exempt bond funds by state of residency: https://investor.vanguard.com/mutual-funds/vanguard-mutual-funds-list?assetclass=bond&taxeff=xmpt These funds have returns well exceeding CD's or standard savings accounts. Risk of loss is real, but returns are possible.
Yes, if you want income and are willing to commit to hold a bond to maturity, you can hold the bond, get the scheduled payments, and get your principal returned at the end. US Savings Bonds are non-marketable (you cannot trade them, but can redeem early) bonds designed for this purpose. The value of a marketable bond will vary over its lifetime as interest rates change and the bond matures. If you buy a 30 year US Treasury bond at par value (100) on September 1, 2011, it yielded 3.51%. If rates fall, the value of your bond will increase over 100. If rates rise, the value will decrease below 100.  How much the value changes depends on the type of bond and the demand for it. But if your goal is to buy and hold, you don't need to worry about it.
Many folks use bonds to diversify their portfolio since bonds rise and fall in value at different times and for different reasons than stocks. Bonds pay interest on a regular basis (usually monthly or quarterly) and so some people invest in bonds in order to match the interest payments to some regular expense they might have. The interest payment does not change (fixed income).  For individual bonds, there is a maturity date at which you can expect to receive the face value of the bond (the issuer's creditworthiness is important here). You can make a little money on a bond by buying it when its value is lower than its face value and either selling later for a higher value, or waiting for it to mature.  Often the minimum investment for a single bond is high, so if you don't have a large enough amount, you can still get the performance of bonds through a bond fund. These do not mature, so you don't have a guarantee of a return of your investment. However, they have access to more bonds than retail investors, so the funds can keep your money more fully invested. If you don't need the income, you can reinvest the dividends and have a little extra capital growth this way.
For the type of market neutrality you desire, free from crash risk, it's best to hedge the shares with covered calls when implied volatility is expensive and puts when implied volatility is cheap with the nearest at the money expirations.  A put only strategy can be very expensive and should only be used with the longest term options available since they can cost many tens of % per year. Securities become almost perfectly correlated during a crash; therefore, market crash risk of one security is essentially equal to the market crash risk, so hedging the security itself makes a position market neutral for crash risk. This strategy will have intermittent opportunity cost risk in the form of slower returns during market expansion to pay for smaller losses during a crash; however, the expected long run return hedged this way should be greater than the underlying's expected long run return with less volatility.
The short term bond fund, which you are pretty certain to have as an option, functions in this capacity.  Its return will be low, but positive, in all but the most dramatic of rising rate scenarios. I recall a year in the 90's when rates rose enough that the bond fund return was zero or very slightly negative. It's not likely that you'd have access to simple money market or cash option.