vania-janet/multiturn-rag-retrieval-data huggingface dataset:
"Remember that risk should correlate with returns, in an investment. This means that the more risk you take on, the more return you should be receiving, in an efficient marketplace. That's why putting your money in a savings account might earn you <1% interest right now, but putting money in the stock market averages ~7% returns over time. You should be very careful not to use the word 'interest' when you mean 'returns'. In your post, you are calling capital gains (the increase in value of owned property) 'interest'. This may be understating in your head the level of risk associated with property ownership. In the case of the bank, they are not in the business of home construction. Rather than take that risk themselves, they would rather finance many projects being done by construction companies that know the business. The bank has a high degree of certainty of getting its money back, because its mortgages are protected by the value of the property.  Part of the benefit of an efficient marketplace is that risk gets 'bought' by individuals who want it. This means that people with a low-risk tolerance (such as banks, people on fixed incomes, seniors, etc.) can avoid risk, and people with a high risk tolerance (stock investors, young people with high income, etc.) can take on that risk for higher average returns. The bank's reasoning should remind you of the risk associated with property ownership: increases in value are not a sure thing. If you do not understand the risk of your investment, you cannot be certain that you are being well compensated for that risk. Note also that most countries place regulations on their banks that limit the amount of their funds that can be placed in 'higher risk' asset classes. Typically, this something along the lines of ""If someone places a deposit with your bank, you can only invest that deposit in a low-risk debt-based asset [ie: you can take money deposited by customer A and use it to finance a mortgage for customer B]"". This is done in an attempt to prevent collapse of the financial sector, if risky investments start failing."
Barton Biggs's book Wealth, War and Wisdom aims to answer the question of what investments are best-suited to preserving value despite large-scale catastrophes by looking at how various investments and assets performed in countries affected by WWII.  In Japan, stocks and urban land turned out to be good investments; in France, farm land and gold did better. Stocks outperformed bonds in nearly every country.  Phil Greenspun recently wrote a review of the book.
"Pension- and many ""low-risk"" investment funds may only invest in AAA-rated stocks and bonds.  While the S&P rating alone doesn't imply that such funds must immediately disinvest in US bonds (Fitch and Moody's are holding), it does create the risk that the other rating agencies will follow suite and also lower the US rating. As the largest issuer of bonds, controller of the world's reserve currency, and with many emerging markets placing almost all their current account surpluses in US bonds, this risk change has implications everywhere. Some companies will already start disinvestment while some investors will start demanding higher interest returns in order to buy US bonds.  It isn't yet a stampede, but the gates are now open. That said, S&P is simply reflecting the opinions of bond traders. Markets were already unstable long before the downrating.  However, from the US perspective, it is a timely reminder to politicians that the global balance is shifting and that the US cannot count on incumbency to protect it from the disapproval of financial analysts."
There is some sense that negative interest rates make no sense, because then two things appear to happen Neither of these are true in reality. But then we are edging towards a deflationary time, during which the common understanding of money and what to do with money reverses. During deflation, spending is better (to an extent) because the buying power of money is less as time passes, so also saving is less worthwhile. But for the bond market (and your question), the reason why people are still investing in negative interest bonds, is that they are going to be looking to capital gain to make their money. Over time the bond price fluctuates and as the bond approaches maturity, the bond price equates to the face value minus whatever interest will be received, or in this plus whatever interest will need to be payed.
"This is always a judgement call based on your own tolerance for risk.  Yes, you have a fairly long time horizon and that does mean you can accept more risk/more volatility than someone closer to starting to draw upon those savings, but you're old enough and have enough existing savings that you want to start thinking about reducing the risk a notch. So most folks in your position would not put 100% in stocks, though exactly how much should be moved to bonds is debatable. One traditional rule of thumb for a moderately conservative position is to subtract your age from 100 and keep that percentage of your investments in stock. Websearch for ""stock bond age"" will find lots of debate about whether and how to modify this rule. I have gone more aggressive myself, and haven't demonstrably hurt myself, but ""past results are no guarantee of future performance"". A paid financial planning advisor can interview you about your risk tolerance, run some computer models, and recommend a strategy, with some estimate of expected performance and volatility. If you are looking for a semi-rational approach, that may be worth considering, at least as a starting point."
"Markets are amoral. If you don't buy stock in a company that has high growth/earnings, someone else will. By abstaining you will actually make it cheaper for someone else who is interested in making money.  Investing in ""socially responsible"" funds will only ensure that you have less money to make a moral difference in the world when you decide to transition from working to philanthropy. Edit to clarify -- You aren't interested in buying individual stocks directly, that leaves you with two general options: You can make a statement with your investment now, or you can take the better returns and make a difference with your money later."
It also depends on what kind of investment account you are putting this in. Since a TFSA account doesn't get taxed on the return, it might make sense to put higher risk investments in that account. Of course, MDJ's comment about looking at tax brackets is also important...
"A home is an investment, but the value it returns isn't primarily financial ($$) - they are consumption (a place to live). This gives it different characteristics than other investments (e.g. increasing the amount invested by buying a more expensive home doesn't do much to assist your financial well-being and future income, and isn't necessarily the ""responsible"" thing to do). You may get some capital gains, typically in line with inflation, sometimes less, sometimes more, but those aren't the most reliable, and it's difficult to realize them (it involves selling your house and moving). Its main value as a hedge is a hedge against rising rent. But if you're still working full-time and can expect cost-of-living increases, that hedge may not be as valuable to you as it would to, say, someone living on a fixed income. But as for treating it as a ""low-risk investment""? That's very problematic. Real low-risk investments are things like government bonds, where you can't lose principal. Unless you're going to live into your house until the day you die, the real estate crash should have disabused you of any notion that housing values never go down. Rather, your house is a single, indivisible, undiversified, illiquid investment. Imagine, if you will, going to your brokerage and borrowing a hundred thousand dollars or more on margin to invest in a single real estate investment trust... then take away whatever diversification the trust offered by holding multiple properties. Also, you can't sell any of it until you move away, and the transaction fee will take something like 3%. Still sound ""safe""? Moreover, it's exactly the wrong kind of risk. Your house's value is tied to what people are willing to pay for housing where your house is, which is usually subject to the whims of the local economy. This means that in a recession and housing bust in the local economy, you can lose your job and have your mortgage go underwater at the same time. It totally makes sense to treat your house as an investment to some extent, and it makes double sense for a financial adviser to consider it as part of your investment recommendations. ""Safety"" is not the way you should be thinking of it, though."
Nobody can give you a safe 6% return with that portfolio under current conditions. It looks like the current 10 year treasury is yielding about 2.2%. With 60% in bonds, the stocks would have to yield about 12%, which just isn't happening safely now.
In a word, no. Diversification is the first rule of investing.  Your plan has poor diversification because it ignores most of the economy (large cap stocks).  This means for the expected return your portfolio would get, you would bear an unnecessarily large amount of risk.  Large cap and small cap stocks take turns outperforming each other.  If you hold both, you have a safer portfolio because one will perform well while the other performs poorly.  You will also likely want some exposure to the bond market. A simple and diversified portfolio would be a total market index fund and a total bond market fund.  Something like 60% in the equity and 40% in the bonds would be reasonable.  You may also want international exposure and maybe exposure to real estate via a REIT fund. You have expressed some risk-aversion in your post.  The way to handle that is to take some of your money and keep it in your cash account and the rest into the diversified portfolio. Remember, when people add more and more asset classes (large cap, international, bonds, etc.) they are not increasing the risk of their portfolio, they are reducing it via diversification.  The way to reduce it even more (after you have diversified) is to keep a larger proportion of it in a savings account or other guaranteed investment. BTW, your P2P lender investment seems like a great idea to me, but 60% of your money in it sounds like a lot.
I always thought high-risk investing is hit or miss, but this is working out very well with the stocks I've chosen  High risk investing IS hit and miss.  We are in an historic bull market.  Do not pat yourself on the back too hard, the bear can be around any corner and your high risk strategy will then be put to the test.
Stock market is like poker: you don't take the same risks when it is fake money and thus you don't learn the same lessons from your mistakes. I would recommend instead to play with real market and real money (rule #0: use only money that you don't need). Start with safe products and go to the bath progressively. It took me about ten years and I am still learning.
"If I don't need this money for decades, meaning I can ride out periodical market crashes, why would I invest in bonds instead of funds that track broad stock market indexes? You wouldn't.  But you can never be 100% sure that you really won't need the money for decades.  Also, even if you don't need it for decades, you can never be 100% certain that the market will not be way down at the time, decades in the future, when you do need the money.  The amount of your portfolio you allocate to bonds (relative to stocks) can be seen as a measure of your desire to guard against that uncertainty. I don't think it's accurate to say that ""the general consensus is that your portfolio should at least be 25% in bonds"".  For a young investor with high risk tolerance, many would recommend less than that.  For instance, this page from T. Rowe Price suggests no more than 10% bonds for those in their 20s or 30s. Basically you would put money into bonds rather than stocks to reduce the volatility of your portfolio.  If you care only about maximizing return and don't care about volatility, then you don't have to invest in bonds.  But you probably actually do care about volatility, even if you don't think you do.  You might not care enough to put 25% in bonds, but you might care enough to put 10% in bonds."
As always with investments, it depends on your risk adversity. I don't want to repeat the content of hundreds of recommendations here, so just the nutshell: (For qualified investments,) the more risk you are willing to take, the more returns you'll get. The upper end is the mutual funds and share market, where you have long-term expectations of 8 - 10 % (and corresponding risks of maybe +/- 50% per year), the lower end is a CD, where you can expect little to no interest, corresponding to little to no risk. Investing in shares/funds is not 'better' than investing in CDs, it is different. Not everybody likes financial roller-coasters, and some people mainly consider the high risk, which gives them sleepless nights; while others just consider the expected high long-term gains as all that counts. Find out what your personal risk adversity is, and then pick accordingly.
The way I usually make this decision is to answer the following question: Do I think that I can earn a better   return on my savings than the interest   rate I would get on the loan? Yes= Get a loan No= Use the savings If you have your savings in a fixed income investment like a CD or bond, then it is just simple math to answer the question, for more volatile investments like stocks you just have to make an educated guess based on the direction of the markets and past performance.
Diversification and convenience: Is .15-0.35% fee worth it? It depends on your net worth, amount you invest and value of your time (if you have high net worth and low cost of your time the fee is highier then in case when you have low net worth but high cost of time - so Betterment seems to be a better option to young professional just after college then to someone already retired), your interest in finance, your willpower etc. Is Betterment allocation better then pure SPY? From what I understand about finance theory - yes. EDIT (as requested) I don't have any affiliation with any financial institution as far as I know. I opened it to get used to just investing as oppose to saving and ups and downs of market (and read up on the portfolio management, especially index funds) and I guess it worked well for me. I plan to move out entirely out of it once the cost of the account would be more then paying for a few coffees and move the account to Vanguard, Schwab or something similar.  In other accounts (HSA/...) I use simpler portfolio then the Betterment one (US Total, Small Value, Developed, Emerging and Bonds) but there are people who use simpler (search for 3 fund portfolio).
I wouldn't read into the title too much. We live in a world of click bait. I'd agree with your statement,  that really the point is that reading fiction makes you better at understanding human emotion which makes you better at investing because the market is very emotional by nature. Of course I'd say if this is your position I'd be taking some long straddle positions on options leading up to conference meetings on big companies like Apple, Google, Amazon, Tesla and calling it a day.
"There are a couple of misconceptions I think are present here: Firstly, when people say ""interest"", usually that implies a lower-risk investment, like a government bond or a money market fund. Some interest-earning investments can be higher risk (like junk bonds offered by near-bankrupt companies), but for the most part, stocks are higher risk. With higher risk comes higher reward, but obviously also the chance for a bad year. A ""bad year"" can mean your fund actually goes down in value, because the companies you are invested in do poorly. So calling all value increases ""interest"" is not the correct way to think about things. Secondly, remember that ""Roth IRA fund"" doesn't really tell you what's ""inside"" it. You could set up your fund to include only low-risk interest earning investments, or higher risk foreign stocks. From what you've said, your fund is a ""target retirement date""-type fund. This typically means that it is a mix of stocks and bonds, weighted higher to bonds if you are older (on the theory of minimizing risk near retirement), and higher to stocks if you are younger (on the theory of accepting risk for higher average returns when you have time to overcome losses). What this means is that assuming you're young and the fund you have is typical, you probably have ~50%+ of your money invested in stocks. Stocks don't pay interest, they give you value in two ways: they pay you dividends, and the companies that they are a share of increase in value (remember that a stock is literally a small % ownership of the company). So the value increase you see as the increase due to the increase in the mutual fund's share price, is part of the total ""interest"" amount you were expecting. Finally, if you are reading about ""standard growth"" of an account using a given amount of contributions, someone somewhere is making an assumption about how much ""growth"" actually happens.
"Investing is always a matter of balancing risk vs reward, with the two being fairly strongly linked.  Risk-free assets generally keep up with inflation, if that; these days advice is that even in retirement you're going to want something with better eturns for at least part of your portfolio. A ""whole market"" strategy is a reasonable idea, but not well defined. You need to decide wheher/how to weight stocks vs bonds, for example, and short/long term. And you may want international or REIT in the mix; again the question is how much. Again, the tradeoff is trying to decide how much volatility and risk you are comfortable with and picking a mix which comes in somewhere around that point -- and noting which assets tend to move out of synch with each other (stock/bond is the classic example) to help tune that. The recommendation for higher risk/return when you have a longer horizon before you need the money comes from being able to tolerate more volatility early on when you have less at risk and more time to let the market recover. That lets you take a more aggressive position and, on average, ger higher returns. Over time, you generally want to dial that back (in the direction of lower-risk if not risk free) so a late blip doesn't cause you to lose too much of what you've already gained... but see above re ""risk free"". That's the theoretical answer. The practical answer is that running various strategies against both historical data and statistical simulations of what the market might do in the future suggests some specific distributions among the categories I've mentioned do seem to work better than others. (The mix I use -- which is basically a whole-market with weighting factors for the categories mentioned above -- was the result of starting with a general mix appropriate to my risk tolerance based on historical data, then checking it by running about 100 monte-carlo simulations of the market for the next 50 years.)"
While the Vanguard paper is good, it doesn't do a very good job of explaining precisely why each level of stocks or bonds was optimal. If you'd like to read a transparent and quantitative explanation of when and why a a glide path is optimal, I'd suggest the following paper:  https://www.betterment.com/resources/how-we-construct-portfolio-allocation-advice/ (Full disclosure - I'm the author).  The answer is that the optimal risk level for any given holding period depends upon a combination of:  Using these two factors, you construct a risk-averse decision model which chooses the risk level with the best expected average outcome, where it looks only at the median and lower percentile outcomes. This produces an average which is specifically robust to downside risk. The result will look something like this:   The exact results will depend on the expected risk and return of the portfolio, and the degree of risk aversion specified.  The result is specifically valid for the case where you liquidate all of the portfolio at a specific point in time. For retirement, the glide path needs to be extended to take into account the fact that the portfolio will be liquidated gradually over time, and dynamically take into account the longevity risk of the individual.  I can't say precisely why Vanguard's path is how it is.
"Others have mentioned the term fiduciary but haven't really gone in to what that is. Despite the name ""financial advisor"" there is no legal (In the US) mandate as to what that means.  Often times a financial advisor is little more than a sales rep whose job it is to sell particular financial instruments.  These people will give you good generic advice such as ""make sure you have a nest egg"" and ""don't spend more than you make"".  However when the rubber hits the road in terms of how to save they will often recommend/insist/pressure a particular asset/security which doesn't necessarily meet your risk/reward preference/tolerance.  Often times the assets they pitch have high fees.  These people won't charge you for their time because their time is a loss leader for the commissions they make on selling their products. In contrast a fiduciary's job responsibility is to look out for your interests.  They shouldn't receive any kind of payment based on what assets you buy.  This means that you have to pay them for their time. The NAPFA website seems to have good ideas on choosing an advisor. http://www.napfa.org/HowtoFindAnAdvisor.asp"
"CFP stands for ""Certified Financial Planner"", and is a certification administered by the CFP board (a non-government non-profit entity). This has nothing to do with insurance, and CFP are not insurance agents. Many States require insurance agents to be explicitly licensed by the State as such, and only licensed insurance agents can advise on insurance products. When you're looking for an insurance policy as an investment vehicle, a financial adviser (CFP, or whatever else acronym on the business card - doesn't matter) may be helpful. But in any case, when dealing with insurance - talk to a licensed insurance agent. If your financial adviser is not a licensed tax adviser (EA/CPA licensed in your State) - talk to a licensed tax adviser about your options before making any decisions."
"Though @mehassee mentioned it in a comment, I would like to emphasize the point that the financial planner (CFP) you talked to said that he was a fiduciary.  A fiduciary has an obligation to act in your best interests.  According to uslegal.com, ""When one person does agree to act for another in a fiduciary relationship, the law forbids the fiduciary from acting in any manner adverse or contrary to the interests of the client, or from acting for his own benefit in relation to the subject matter"".  So, any of these Stack Exchange community members may or may not have your best interest at heart, but the financial advisor you talked to is obligated to. You have to decide for yourself, is it worth 1% of your investment to have someone legally obligated to have your best financial interest in mind, versus, for example, someone who might steer you to an overpriced insurance product in the guise of an investment, just so they can make a buck off of you?  Or versus wandering the internet trying to make sense of conflicting advice?  In my opinion, a fiduciary (registered CFP) is probably the best person to answer your questions."
No financial interest means that you have signing authority over the account, but you don't own the money in it and aren't allowed to withdraw from it at will. One example would be a business account owned by a company where you're employed as a purchasing manager, and you need to sign checks drawn on that account to pay invoices. FBAR doesn't care about income -- it just wants to know about every account that you having signing authority over.