Is it worth investing in Index Fund, Bond Index Fund and Gold at the same time?
"Index funds can be a very good way to get into the stock market. It's a lot easier, and cheaper, to buy a few shares of an index fund than it is to buy a few shares in hundreds of different companies. An index fund will also generally charge lower fees than an ""actively managed"" mutual fund, where the manager tries to pick which stocks to invest for you. While the actively managed fund might give you better returns (by investing in good companies instead of every company in the index) that doesn't always work out, and the fees can eat away at that advantage. (Stocks, on average, are expected to yield an annual return of 4%, after inflation. Consider that when you see an expense ratio of 1%. Index funds should charge you more like 0.1%-0.3% or so, possibly more if it's an exotic index.) The question is what sort of index you're going to invest in. The Standard and Poor's 500 (S&P 500) is a major index, and if you see someone talking about the performance of a mutual fund or investment strategy, there's a good chance they'll compare it to the return of the S&P 500. Moreover, there are a variety of index funds and exchange-traded funds that offer very good expense ratios (e.g. Vanguard's ETF charges ~0.06%, very cheap!). You can also find some funds which try to get you exposure to the entire world stock market, e.g. Vanguard Total World Stock ETF, NYSE:VT). An index fund is probably the ideal way to start a portfolio - easy, and you get a lot of diversification. Later, when you have more money available, you can consider adding individual stocks or investing in specific sectors or regions. (Someone else suggested Brazil/Russia/Indo-China, or BRICs - having some money invested in that region isn't necessarily a bad idea, but putting all or most of your money in that region would be. If BRICs are more of your portfolio then they are of the world economy, your portfolio isn't balanced. Also, while these countries are experiencing a lot of economic growth, that doesn't always mean that the companies that you own stock in are the ones which will benefit; small businesses and new ventures may make up a significant part of that growth.) Bond funds are useful when you want to diversify your portfolio so that it's not all stocks. There's a bunch of portfolio theory built around asset allocation strategies. The idea is that you should try to maintain a target mix of assets, whatever the market's doing. The basic simplified guideline about investing for retirement says that your portfolio should have (your age)% in bonds (e.g. a 30-year-old should have 30% in bonds, a 50-year-old 50%.) This helps maintain a balance between the volatility of your portfolio (the stock market's ups and downs) and the rate of return: you want to earn money when you can, but when it's almost time to spend it, you don't want a sudden stock market crash to wipe it all out. Bonds help preserve that value (but don't have as nice of a return). The other idea behind asset allocation is that if the market changes - e.g. your stocks go up a lot while your bonds stagnate - you rebalance and buy more bonds. If the stock market subsequently crashes, you move some of your bond money back into stocks. This basically means that you buy low and sell high, just by maintaining your asset allocation. This is generally more reliable than trying to ""time the market"" and move into an asset class before it goes up (and move out before it goes down). Market-timing is just speculation. You get better returns if you guess right, but you get worse returns if you guess wrong. Commodity funds are useful as another way to diversify your portfolio, and can serve as a little bit of protection in case of crisis or inflation. You can buy gold, silver, platinum and palladium ETFs on the stock exchanges. Having a small amount of money in these funds isn't a bad idea, but commodities can be subject to violent price swings! Moreover, a bar of gold doesn't really earn any money (and owning a share of a precious-metals ETF will incur administrative, storage, and insurance costs to boot). A well-run business does earn money. Assuming you're saving for the long haul (retirement or something several decades off) my suggestion for you would be to start by investing most of your money* in index funds to match the total world stock market (with something like the aforementioned NYSE:VT, for instance), a small portion in bonds, and a smaller portion in commodity funds. (For all the negative stuff I've said about market-timing, it's pretty clear that the bond market is very expensive right now, and so are the commodities!) Then, as you do additional research and determine what sort investments are right for you, add new investment money in the places that you think are appropriate - stock funds, bond funds, commodity funds, individual stocks, sector-specific funds, actively managed mutual funds, et cetera - and try to maintain a reasonable asset allocation. Have fun. *(Most of your investment money. You should have a separate fund for emergencies, and don't invest money in stocks if you know you're going need it within the next few years)." I'd say neither. Index Funds mimic whatever index. Some stocks that are in the index are good investment opportunities, others not so much. I'm guessing the Bond Index Funds do the same. As for Gold... did you notice how much gold has risen lately? Do you think it will keep on rising like that? For which period? (Hint: if your timespan is less than 10 years, you really shouldn't invest). Investing is about buying low, and selling high. Gold is high, don't touch it. If you want to invest in funds, look at 4 or 5 star Morningstar rated funds. My advisors suggest Threadneedle (Lux) US Equities DU - LU0096364046 with a 4 star rating as the best American fund at this time. However, they are not favoring American stocks at this moment... so maybe you should stay away from the US for now. Have you looked at the BRIC (Brazil, Russia, India, China) countries? Taking into account that you are in Cyprus, a Euro country, you should not invest in USD as the USA and China are starting a currency war that will benefit the Euro. Meaning, if you buy USD today, they will be worth less in a couple of months. As for the way of investing your money. Look at it like a boat race, starting on the 1st of January and ending on the 31st of December each year. There are a lot of boats in the water. Some are small, some are big, some are whole fleets. Your objective is to choose the fastest boat at any time. If you invest all of your money in one small boat, that might sink before the end of the year, you are putting yourself at risk. Say: Startup Capital. If you invest all of your money in a medium sized boat, you still run the risk of it sinking. Say: Stock market stock. If you invest all of your money in a supertanker, the risk of it sinking is smaller, and the probability of it ending first in the race is also smaller. Say: a stock of a multinational. A fleet is limited by it's slowest boat, but it will surely reach the shore. Say: a fund. Now investing money is time consuming, and you may not have the money to create your own portfolio (your own fleet). So a fund should be your choice. However, there are a lot of funds out there, and not all funds perform the same.  Most funds are compared with their index. A 3 star Morningstar rated fund is performing on par with it's index for a time period. A 4 or 5 star rated fund is doing better than it's index. Most funds fluctuate between ratings. A 4 star rated fund can be mismanaged and in a number of months become a 2 star rated fund. Or the other way around. But it's not just luck. Depending on the money you have available, your best bet is to buy a number of star rated, managed funds. There are a lot of factors to keep into account. Currency is one. Geography, Sector... Don't buy for less than 1.000€ in one fund, and don't buy more than 10 funds. Stay away from Gold, unless you want to speculate (short term). Stay away from the USD (for now). And if you can prevent it, don't put all your eggs in one basket.
Are you going to need any of the money in the next year or two, or are you saving it long term? Are you going to need any of it before you are 65?  If no to both, put in a Roth IRA with a Vanguard Target retirement fund.  If no to the first and yes to the second, put in the VTI index fund. If you want, you can keep 20-30% in a bond fund instead of 100% stock.  Every 3-12 months, log in and redistribute your funds to maintain the desired split if you'd like, but this is somewhat optional.  If you really, really want, set aside 5% for investing in a few companies you really believe in. You'll probably lose money on that investment, but it will reassure you that the rest of your money is wisely invested. If you are looking for an index index fund, I know vanguard offers their Star fund which invests in 11 other funds of theirs and is diversified across stocks, bonds, and short term investments. "Of course. ""Best"" is a subjective term. However relying on the resources of the larger institutions by pooling with them will definitely reduce your own burden with regards to the research and keeping track. So yes, investing in mutual funds and ETFs is a very sound strategy. It would be better to diversify, and not to invest all your money in one fund, or in one industry/area. That said, there are more than enough individuals who do their own research and stock picking and invest, with various degrees of success, in individual securities. Some also employe more advanced strategies such as leveraging, options, futures, margins, etc. These advance strategies come at a greater risk, but may bring a greater rewards as well. So the answer to the question in the subject line is YES. For all the rest - there's no one right or wrong answer, it depends greatly on your abilities, time, risk tolerance, cash available to invest, etc etc." Bond laddering is usually a good idea, but with interest rates so low, a properly laddered portfolio is going to have a higher duration that you should be willing to accept right now.        CD laddering seems like a silly idea.  Just keep whatever amount you're going to need in a Money Market account and invest the rest according to your risk tolerance. Determine an investment strategy and that will likely answer this for you. Different people have different approaches and you need to determine for yourself what buy and sell criteria you want to have. Again, depending on the strategy there can be a wide range here as some may trade index funds though this can backfire in some cases. In others, there can be a lot of buy and hold if one finds an index fund to hold forever which depending on the strategy is possible. Returns can vary widely as an index can be everything from buying gold stocks in Russia to investing in short-term Treasuries as there are many different indices as any given market can have an index which could be stocks, bonds, a combination of the two or something else in some cases so please consider asset allocation, types of accounts, risk tolerance and time horizon in making decisions or consider using a financial planner to assist in drawing up a plan with allocations and how frequently you want to rebalance as my suggestion here. No I get that.  But if you don’t want risk, then buy bonds.  Long term an S&amp;P Index has very low risk.  On the other hand, actively managed funds have fees that take out a ton of the gain that could be had.  I don’t have time to look for the study but I read recently that 97% of actively managed funds were outperformed by S&amp;P Indexes after fees.  Now I don’t know about you but I think the risk of not picking a top 3% fund is probably higher than the safe return of index’s. Adding international bonds to an individual investor's portfolio is a controversial subject.  On top of the standard risks of bonds you are adding country specific risk, currency risk and diversifying your individual company risk.  In theory many of these risks should be rewarded but the data are noisy at best and adding risk like developed currency risk may not be rewarded at all. Also, most of the risk and diversification mentioned above are already added by international stocks.  Depending on your home country adding international or emerging market stock etfs only add a few extra bps of fees while international bond etfs can add 30-100bps of fees over their domestic versions.  This is a fairly high bar for adding this type of diversification.  US bonds for foreign investors are a possible exception to the high fees though the government's bonds yield little. If your home currency (or currency union) does not have a deep bond market and/or bonds make up most of your portfolio it is probably worth diversifying a chunk of your bond exposure internationally.  Otherwise, you can get most of the diversification much more cheaply by just using international stocks. "Without knowing anything else about you, I'd say I need more information. If all of your investments are in stocks, then that's not really diversified, regardless of how many stocks you own.  There are other things to invest in besides stocks (and bonds, for that matter). What countries?  ""International"" is pretty broad, and some countries are better bets than others at the moment. If you're old, I'd say very little of your money should be in stocks anyway. I'd also seek financial advice that is tailored to your goals, sophistication, etc." "A bond fund will typically own a range of bonds of various durations, in your specific fund: The fund holds high-quality long-term New York municipal bonds with an   average duration of approximately 6–10 years So through this fund you get to own a range of bonds and the fund price will behave similar to you owning the bonds directly.  The fund gives you a little diversification in terms of durations and typically a bit more liquidity.  It also may continuously buy bonds over time so you get some averaging vs. just buying a bond at a given time and holding it to maturity.  This last bit is important, over long durations the bond fund may perform quite differently than owning a bond to maturity due to this ongoing refresh.  Another thing to remember is that you're paying management fees for the fund's management. As with any bond investment, the longer the duration the more sensitive the price is to change in interest rates because when interest rates change the price will track it. (i.e. compare a change of 1% for a one year duration vs. 1% yearly over 10 years) If I'm correct, why would anyone in the U.S. buy a long-term bond fund   in a market like this one, where interest rates are practically   bottomed out? That is the multi-trillion dollar question.  Bond prices today reflect what ""people"" are willing to pay for them.  Those ""people"" include the Federal Reserve which through various programs (QE, Operate Twist etc.) has been forcing the interest rates to where they want to see them.  If no one believed the Fed would be able to keep interest rates where they want them then the prices would be different but given that investors know the Fed has access to an infinite supply of money it becomes a more difficult decision to bet against that.  (aka ""Don't fight the Fed"").  My personal belief is that rates will come up but I haven't been able to translate that belief into making money ;-)  This question is very complex and has to do not only with US policies and economy but with the status of the US currency in the world and the world economy in general.  The other saying that comes to mind in this context is that the market can remain irrational (and it certainly seems to be that) longer than you can remain solvent." ETFs are just like any other mutual fund; they hold a mix of assets described by their prospectus. If that mix fits your needs for diversification and the costs of buying/selling/holding are low, it's as worth considering as a traditional fund with the same mix. A bond fund will hold a mixture of bonds. Whether that mix is sufficiently diversified for you, or whether you want a different fund or a mix of funds, is a judgement call. I want my money to take care of itself for the most part, so most of the bond portion is in a low-fee Total Bond Market Index fund (which tries to match the performance of bonds in general). That could as easily be an ETF, but happens not to be. You have to look at the market conditions and make decisions based on them. Ideally, you may want to have 30% of your portfolio in bonds. But from a practical point of view, it's probably not so smart to invest in bond funds right at this moment given the interest rate market. Styles of funds tend to go into and out of style. I personally do asset allocation two ways in my 457 plan (like a 401k for government workers): In my IRA, I invest in a portfolio of 5-6 stocks. The approach you take is dependent on what you are able to put into it. I invest about 10 hours a week into investment related research. If you can't do that, you want a strategy that is simpler -- but you still need to be cognizant of market conditions. Most people carry a diversity of stock, bond, and commodities in their portfolio.  The ratio and types of these investments should be based on your goals and risk tolerance.  I personally choose to manage mine through mutual funds which combine the three, but ETFs are also becoming popular. As for where you keep your portfolio, it depends on what you're investing for.  If you're investing for retirement you are definitely best to keep as much of your investment as possible in 401k or IRAs (preferably Roth IRAs).  Many advisers suggest contributing as much to your 401k as your company matches, then the rest to IRA, and if you over contribute for the IRA back to the 401k.  You may choose to skip the 401k if you are not comfortable with the choices your company offers in it (such as only investing in company stock). If you are investing for a point closer than retirement and you still want the risk (and reward potential) of stock I would suggest investing in low tax mutual funds, or eating the tax and investing in regular mutual funds.  If you are going to take money out before retirement the penalties of a 401k or IRA make it not worth doing. Technically a savings account isn't investing, but rather a place to store money. "I find it interesting that you didn't include something like [Total Bond Market](http://stockcharts.com/freecharts/perf.html?VBMFX), or [Intermediate-Term Treasuries](http://stockcharts.com/freecharts/perf.html?VBIIX), in your graphic.   If someone were to have just invested in the DJI or SP500, then they would have ignored the tenants of the Modern Portfolio Theory and not diversified adequately.  I wouldn't have been able to stomach a portfolio of 100% stocks, commodities, or metals.  My vote goes for: 1.) picking an asset allocation that reflects your tolerance for risk (a good starting point is ""age in bonds,"" i.e. if you're 30, then hold 30% in bonds); 2.) save as if you're not expecting annualized returns of %10 (for example) and save more; 3.) don't try to pick the next winner, instead broadly invest in the market and hold it.  Maybe gold and silver are bubbles soon to burst -- I for one don't know.  I don't give the ""notion in the investment community"" much weight -- as it always is, someday someone will be right, I just don't know who that someone is." Putting the money in a bank savings account is a reasonably safe investment. Anything other than that will come with additional risk of various kinds. (That's right; not even a bank account is completely free of risk. Neither is withdrawing cash and storing it somewhere yourself.) And I don't know which country you are from, but you will certainly have access to your country's government bonds and the likes. You may also have access to mutual funds which invest in other countries' government bonds (bond or money-market funds). The question you need to ask yourself really is twofold. One, for how long do you intend to keep the money invested? (Shorter term investing should involve lower risk.) Two, what amount of risk (specifically, price volatility) are you willing to accept? The answers to those questions will determine which asset class(es) are appropriate in your particular case. Beyond that, you need to make a personal call: which asset class(es) do you believe are likely to do better or less bad than others? Low risk usually comes at the price of a lower return. Higher return usually involves taking more risk (specifically price volatility in the investment vehicle) but more risk does not necessarily guarantee a higher return - you may also lose a large fraction of or even the entire capital amount. In extreme cases (leveraged investments) you might even lose more than the capital amount. Gold may be a component of a well-diversified portfolio but I certainly would not recommend putting all of one's money in it. (The same goes for any asset class; a portfolio composed exclusively of stocks is no more well-diversified than a portfolio composed exclusively of precious metals, or government bonds.) For some specifics about investing in precious metals, you may want to see Pros & cons of investing in gold vs. platinum?. My personal gold/metals target is 5.0% of my retirement portfolio. Right now I'm underweight because of the run up in gold/metals prices. (I haven't been selling, but as I add to retirement accounts, I haven't been buying gold so it is going below the 5% mark.) I arrived at this number after reading a lot of different sample portfolio allocations, and some books. Some people recommend what I consider crazy allocations: 25-50% in gold. From what I could figure out in terms of modern portfolio theory, holding some metal reduces your overall risk because it generally has a low correlation to equity markets. The problem with gold is that it is a lousy investment. It doesn't produce any income, and only has costs (storage, insurance, commissions to buy/sell, management of ETF if that's what you're using, etc). The only thing going for it is that it can be a hedge during tough times. In this case, when you rebalance, your gold will be high, you'll sell it, and buy the stocks that are down. (In theory -- assuming you stick to disciplined rebalancing.) So for me, 5% seemed to be enough to shave off a little overall risk without wasting too much expense on a hedge. (I don't go over this, and like I said, now I'm underweighted.)