vania-janet/multiturn-rag-retrieval-data huggingface dataset:
"(Leaving aside the question of why should you try and convince him...) I don't know about a very convincing ""tl;dr"" online resource, but two books in particular convinced me that active management is generally foolish, but staying out of the markets is also foolish.  They are: The Intelligent Asset Allocator: How to Build Your Portfolio to Maximize Returns and Minimize Risk by William Bernstein, and A Random Walk Down Wall Street: The Time Tested-Strategy for Successful Investing by Burton G. Malkiel Berstein's book really drives home the fact that adding some amount of a risky asset class to a portfolio can actually reduce overall portfolio risk. Some folks won a Nobel Prize for coming up with this modern portfolio theory stuff. If your friend is truly risk-averse, he can't afford not to diversify.  The single asset class he's focusing on certainly has risks, most likely inflation / purchasing power risk ... and that risk that could be reduced by including some percentage of other assets to compensate, even small amounts. Perhaps the issue is one of psychology? Many people can't stomach the ups-and-downs of the stock market.  Bernstein's also-excellent follow-up book, The Four Pillars of Investing: Lessons for Building a Winning Portfolio, specifically addresses psychology as one of the pillars."
"I would start with The Intelligent Investor.  It's more approachable than Security Analysis.  I read the revised edition which includes post-chapter commentary and footnotes from Jason Zweig. I found the added perspective helpful since the original book is quite old. Warren Buffet has called Intelligent Investor ""the best book about investing ever written.""  (Source)  I would suggest that endorsement ranks it before the other.  :) Security Analysis is more detailed and, perhaps, oriented at a more professional audience – though individual investors would certainly benefit from reading it.  Security Analysis is used as a textbook on value investing in some university-level business & finance courses. (p.s. If you haven't yet heard about William Bernstein's The Intelligent Asset Allocator, I also recommend adding it to your reading list.)"
First, put the money someplace that is safe - a saving account is fine - while you figure out what you want to do with it. You will obviously want to think about it what to do for a while. A financial advisor could help out, but not that many of them make their money on commission and therefore don't act in your best interest. The ones where you pay them directly are more aligned with your interests. As for how to invest, you have a lot of different options depending on your timeline and your risk tolerance.
"There is a lot of interesting information that can be found in a fund's prospectus. I have found it very helpful to read books on the issue, one I just finished was ""The Boglehead's Guide to Investing"" which speaks mostly on mutual and index funds. Actively managed funds mean that someone is choosing which stocks to buy and which to sell. If they think a stock will be ""hot"" then they buy it. Research has shown that people cannot predict the stock market, which is why many people suggest index based funds. An index fund generally tracks a group of companies. Example: an index fund of the S&P 500 will try to mimic the returns that the S&P 500 has. Overall, managed funds are more expensive than index funds because the fund manager must be paid to manage it. Also, there is generally more buying and selling so that also increases the tax amount you would owe. What I am planning on doing is opening a Roth IRA with Vanguard, as their funds have incredibly low fees (0.2% on many). One of the most important things you do before you buy is to figure out your target allocation (% of stocks vs % of bonds). Once you figure that out then you can start narrowing down the funds that you wish to invest in."
Your question seems to be making assumptions around “investing”, that investing is only about stock market and bonds or similar things. I would suggest that you should look much broader than that in terms of your investments. Investment Types Your should consider (and include) some or all of the following for your investments, depending on your age, your attitude towards risk, the number of dependents you have, your lifestyle, etc. I love @Blackjack’s explanation of diversification into other asset classes producing a lower risk portfolio. Excellent! All the above need to be considered in this spread of risk, depending as I said earlier on your age, your attitude towards risk, the number of dependents you have, your lifestyle, etc. Stock Market Investment I’ll focus most of the rest of my post on the stock markets, as that is where my main experience lies. But the comments are applicable to a greater or lesser extent to other types of investing. We then come to how engaged you want to be with your investments. Two general management styles are passive investment management versus active investment management. @Blackjack says That pretty much sums up passive management. The idea is to buy ETFs across asset classes and just leave them. The difficulty with this idea is that profitability is very dependent upon when the stocks are purchased and when they are sold. This is why active investing should be considered as a viable alternative to passive investment. I don’t have access to a very long time frame of stock market data, but I do have 30 or so years of FTSE data, so let’s say that we invest £100,000 for 10 years by buying an ETF in the FTSE100 index. I know this isn't de-risking across a number of asset classes by purchasing a number of different EFTs, but the logic still applies, if you will bear with me. Passive Investing I have chosen my example dates of best 10 years and worst 10 years as specific dates that demonstrate my point that active investing will (usually) out-perform passive investing. From a passive investing point of view, here is a graph of the FTSE with two purchase dates chosen (for maximum effect), to show the best and worst return you could receive. Note this ignores brokerage and other fees.
First thing to know about investing is that you make money by taking risks. That means the possibility of losing money as well as making it.  There are low risk investments that pretty much always pay out but they don't earn much. Making $200 a month on $10,000 is about 26% per year.  That's vastly more than you are going to earn on low risk assets. If you want that kind of return, you can invest in a diversified portfolio of equities through an equity index fund.  Some years you may make 26% or more.  Other years you may make nothing or lose that much or more.  On average you may earn maybe 7%-10% hopefully. Overall, investing is a game of making money over long horizons.  It's very useful for putting away your $10k now and having hopefully more than that when it comes time to buy a house or retire or something some years into the future.  You have to accept that you might also end up with less than $10K in the end, but you are more likely to make money than to use it. What you describe doesn't seem like a possible situation.  In developed markets, you can't reliably expect anything close to the return you desire from assets that are unlikely to lose you money.  It might be time to re-evaluate your financial goals.  Do you want spending money now, or do you want to invest for use down the road?
Diversifying is the first advice given to beginner in order to avoid big loss. For example in 2014 the company Theranos was really appealing before it fail in 2016. So a beginner could have invest ALL his money and lose it. But if he has deverified he wouldn't lost everything. As an investor goes from beginner to experience some still Diversify and other concentrate. Mostly it depends how much confident you are about an investement. If you have 20 years of experience, now everything about the company and you are sure there will be profit you can concentrate. If you are not 100% sure there will be a profit, it is better to Diversify. Diversifying can also be profitating when you loose money: because you will pay tax when you earn money, if you diversify you can choose to loose money in some stock (usually in december) and in this way cut your taxes.
"First: what's your risk tolerance? How long is your investment going to last? If it's a short-term investment (a few years) and you expect to break even (or better) then your risk tolerance is low. You should not invest much money in stocks, even index funds and ""defensive"" stocks. If, however, you're looking for a long-term investment which you will put money into continually over the next 30 years, the amount of stock you purchase at any given time is pretty small, so the money you might lose by timing the market wrong will also be rather small. Also, you probably do a remarkably poor job of knowing when to buy stocks. If you actually knew how to time the market to materially improve your risk-adjusted returns, you've missed your calling; you should be making six figures or more on Wall Street. :)"
"If you want a ~12% rate of return on your investments.... too bad. For returns which even begin to approach that, you need to be looking at some of the riskiest stuff. Think ""emerging markets"". Even funds like Vanguard Emerging Markets (ETF: VWO, mutual fund, VEIEX) or Fidelity Advisor Emerging Markets Income Trust (FAEMX) seem to have yields which only push 11% or so.  (But inflation is about nil, so if you're used to normal 2% inflation or so, these yields are like 13% or so. And there's no tax on that last 2%! Yay.) Remember that these investments are very risky. They go up lots because they can go down lots too. Don't put any money in there unless you can afford to have it go missing, because sooner or later you're likely to lose something half your money, and it might not come back for a decade (or ever). Investments like these should only be a small part of your overall portfolio. So, that said... Sites which make investing in these risky markets easy? There are a good number, but you should probably just go with vanguard.com. Their funds have low fees which won't erode your returns. (You can actually get lower expense ratios by using their brokerage account to trade the ETF versions of their funds commission-free, though you'll have to worry more about the actual number of shares you want to buy, instead of just plopping in and out dollar amounts). You can also trade Vanguard ETFs and other ETFs at almost any brokerage, just like stocks, and most brokerages will also offer you access to a variety of mutual funds as well (though often for a hefty fee of $20-$50, which you should avoid). Or you can sign up for another fund providers' account, but remember that the fund fees add up quickly.  And the better plan? Just stuff most of your money in something like VTI (Vanguard Total Stock Market Index) instead."
They will charge you nothing at all to manage your money. They will give you some assistance and advice if you call them but don't expect any house calls. They aren't particularly in the business of giving advice. If you know what you want to invest in, this is the cheapest way to do it by far. Basically you won't have to pay anything at all except the actual cost of the assets you are investing in. Which is the best? Depends on your own preferences and ability. If you do not want to learn about personal finance and don't particularly care about whether you are getting the best return--if you don't mind paying for a personal touch--Edward Jones might be a good choice. For most people who are comfortable asking this type of question online and interested in learning about finance even a little bit, I'd expect that Betterment or Vanguard will be a better choice. For people who are willing to learn a bit of finance and manage their own affairs, using Vanguard (or a close competitor, like Fidelity) will ultimately result in the most wealth generated (the least given away to the financial industry).
Also, my wealth manager doesn't like to discuss my money with me. To some extent, I understand this because finances are not my forte This is akin to porn surfing all day at your job instead of writing code, fire him ASAP. For now I would stick it in a bank account until you are comfortable and understand the investments you are purchasing.   Here are some options to consider: The last one is tricky.  You might have to interview several in order to find that one gem.  With you being so young it is unlikely any of your friends have a need for such a service.  I would concentrate on asking older work colleagues or friends of your parents for recommendations.  Ask if they are educated by their adviser.   In the end it would really pay for you to educate yourself about finances.  No one can quite do as good as a job as you can in this area.  You recognize that there was a problem with your current guy, that shows wisdom.  If you have an interest in this area, I would recommend attending a Financial Peace University class.  All my kids (about your age and older) are required to take it.  It will help you navigate debt, mortgages, insurance, and investing and will cost you about $100.  If you don't learn enough the first time, and you won't, you can repeat the course as many times as you wish for no additional cost.
It looks like an improvement to me, if for no other reason than lowering the expenses. But if you are around 35 years away from retirement you could consider eliminating all bond funds for now. They will pay better in a few years. And the stock market(s) will definitely go up more than bonds over the next 35 years.
Now, assuming risk can be a profitable thing to do, but there are also a lot of people out there with higher risk tolerance than you, like insurance companies and billionaires, so the market isn't exactly short of people willing to take risks, and you shouldn't expect the returns of ""assuming risk"" in the general case to be qualitatively awesome. Now, it's true that investing in an unlevered fashion is risky also. But that's not an excuse to go leveraged anyway; it's a reason to hold back. In fact, regular stocks are sufficiently risky that most people probably shouldn't be holding a 100% stock portfolio. They should be tempering that risk with bonds, instead, and increasing the size of their bond holdings over time. The appropriate time to use leverage is when you have information which limits your risk. You have done research, and have reason to believe that you understand the future of an individual stock/index better than the rest of the stock market does. You calculate that the potential for achieving returns with leverage outweighs the risks. Then you dump your money into the leveraged position. (In exchange for this, the market receives information about anticipated future returns of this instrument, because of the price movement which occurs as a result of someone putting his money where his mouth is.) If you're just looking to dump money into broad market indicies in a leveraged fashion, you're doing it wrong. There is no free money. (Ed. Which is not to say there's not money. There's lots of money. But if you go looking for the free kind, you won't find it, and may end up with money that you thought was free but was actually quite expensive.) Edit. Okay, so you don't like my answer. I'm not surprised. I'm giving you a real answer instead of a ""make free money"" answer. Okay. Here's your ""how to make free money"" answer.
If you want to spend all of your money in the next few years, then a CD protects you from the risk of a bear market. however, if your time horizon is longer than 10 years, then the stock market is a better bet, since it is less effected by inflation risk. also, as you point out average stock returns are much higher, ignoring volatility.  On the whole, CD's appeal to people who would otherwise save their money in cash.  generally, it seems these people are simply afraid of stocks and bonds because those securities can lose nominal value as well as real value.  I suspect this is largely because these people don't understand inflation, nor the historical long-term index fund performance.
In general, the higher the return (such as interest), the higher the risk. If there were a high-return no-risk investment, enough people would buy it to drive the price up and make it a low-return no-risk investment. Interest rates are low now, but so is inflation. They generally go up and down together. So, as a low risk (almost no-risk) investment, the savings account is not at all useless. There are relatively safe investments that will get a better return, but they will have a little more risk. One common way to spread the risk is to diversify. For example, put some of your money in a savings account, some in a bond mutual fund, and some in a stock index fund. A stock index fund such as SPY has the benefit of very low overhead, in addition to spreading the risk among 500 large companies. Mutual funds with a purchase or sale fee, or with a higher management fee do NOT perform any better, on average, and should generally be avoided. If you put a little money in different places regularly, you'll be fairly safe and are likely get a better return. (If you trade back and forth frequently, trying to outguess the market, you're likely to be worse off than the savings account.)
"If the stock market dropped 30%-40% next month, providing you with a rare opportunity to buy stocks at a deep discount, wouldn't you want to have some of your assets in investments other than stocks? If you don't otherwise have piles of new cash to throw into the market when it significantly tanks, then having some of your portfolio invested elsewhere will enable you to back up the proverbial truck and load up on more stocks while they are on sale. I'm not advocating active market timing. Rather, the way that long-term investors capitalize on such opportunities is by choosing a portfolio asset allocation that includes some percentage of safer assets (e.g. cash, short term bonds, etc.), permitting the investor to rebalance the portfolio periodically back to target allocations (e.g. 80% stocks, 20% bonds.) When rebalancing would have you buy stocks, it's usually because they are on sale. Similarly, when rebalancing would have you sell stocks, it's usually because they are overpriced. So, don't consider ""safer investments"" strictly as a way to reduce your risk. Rather, they can give you the means to take advantage of market drops, rather than just riding it out when you are already 100% invested in stocks. I could say a lot more about diversification and risk reduction, but there are plenty of other great questions on the site that you can look through instead."
At twenty-two, you can have anywhere between 100%-70% of your securities portfolio in equities. It is reasonable to start at 100% and reduce over time. The one thing that I would mention with that is that your target at retirement should be 70% stocks/30% bonds. You should NEVER have more than 30% bonds. Why? Because a 70/30 mix is both safer than 100% bonds and will give a higher return. Absent some market timing strategy (which as an amateur investor, you should absolutely avoid) or some complicated balancing scheme, there is never a reason to be at more than 30% bonds. A 50/50 mix of stocks and bonds or a 100% bonds ratio not only returns less than the 70/30 mix, it is actually riskier. Why? Because sometimes bonds fall. And when they do, stocks generally gain. And vice versa. Because of this behavior, the 70/30 mix is less likely to fall than 50% or 100% bonds. Does that mean that your stock percentage should never drop below 70%? No. If your portfolio contains things other than stocks and bonds, it is reasonable for stocks to fall below 70%. The problem is that when you drop stocks below 70%, you should drop bonds below 30% as well. So you keep the stock to bond ratio at 7:3. If you want to get a lower risk than a 70/30 mix, then you should move into cash equivalents. Cash equivalents are actually safer than stocks and bonds either individually or in combination. But at twenty-two, you don't really need more safety. At twenty-two, the first thing to do is to build your emergency fund. This should be able to handle six months of expenses without income. I recommend making it equal to six months of your income. The reason being that it is easy to calculate your income and difficult to be sure of expenses. Also, you can save six months of income at twenty-two. Are you going to stay where you are for the next five years? At twenty-two, the answer is almost certainly no. But the standard is the five year time frame.
They made an analysis of my readiness to assume a risk and found out that I am willing to take only small risks. I would agree with this analysis. You really should rethink this part. At your age, you have no rational reason whatsoever to be risk-averse! Especially since any reasonably diversified fund already eliminates actual risk (of complete loss) almost completely. Going into bonds and real estate does not reduce risk at all; it reduces volatility - and you're giving up a lot of money merely to avoid seeing your investments go down temporarily(!)
The target date investment will automatically reduce equity exposure and increase bond exposure as it approaches retirement date.  If you are unlikely to make adjustments as you get older, you may be setting yourself up for more risk down the road.  Only you can decide what level of risk you can tolerate as you chase higher gains.
"The question is: how do you quantify investment risk? As Michael S says, one approach is to treat investment returns as a random variable. Bill Goetzmann (Yale finance professor) told me that if you accept that markets are efficient or that the price of an asset reflects it's underlying value, then changes in price represent changes in value, so standard deviation naturally becomes the appropriate measure for riskiness of an asset. Essentially, the more volatile an asset, the riskier it is. There is another school of thought that comes from Ben Graham and Warren Buffett, which says that volatility is not inherently risky. Rather, risk should be defined as the permanent loss of capital, so the riskiness of an asset is the probability of a permanent loss of capital invested. This is easy to do in casino games, based on basic probability such as roulette or slots. But what has been done with the various kinds of investment risks? My point is saying that certain bonds are ""low risk"" isn't good enough; I'd like some numbers--or at least a range of numbers--and therefore one could calculate expected payoff (in the statistics sense). Or can it not be done--and if not, why not? Investing is more art than science. In theory, a Triple-A bond rating means the asset is riskless or nearly riskless, but we saw that this was obviously wrong since several of the AAA mortgage backed securities (MBS) went under prior to the recent US recession. More recently, the current threat of default suggests that bond ratings are not entirely accurate, since US Treasuries are considered riskless assets. Investors often use bond ratings to evaluate investments - a bond is considered investment grade if it's BBB- or higher. To adequately price bonds and evaluate risk, there are too many factors to simply refer to a chart because things like the issuer, credit quality, liquidity risk, systematic risk, and unsystematic risk all play a factor. Another factor you have to consider is the overall portfolio. Markowitz showed that adding a riskier asset can actually lower the overall risk of a portfolio because of diversification. This is all under the assumption that risk = variance, which I think is bunk.