What are useful indexes for rapid evaluation of country investment risk?
Rather than using the Human Development Index or Ease of Doing Business, if you primary purpose is for investments, you need to consider the Country rating provided by various agencies like  These would tell as to how good the country is for investment in general. Just to highlight a difference, China may not fare very high in Human Development Index, however right now from investment point of view its a pretty good market. once you have decided the countries, you can either invest in funds specalizing in these countries or if legally permitted invest directly into the leading stock index in such countries. If your intention is to start a business in these countries, then you need to look at some other indexes. http://www.standardandpoors.com/ratings/articles/en/us/?assetID=1245219962821 http://www.fitchratings.com/jsp/sector/Sector.faces?selectedTab=Overview&Ne=4293330737%2b11&N=0 http://v3.moodys.com/Pages/default.aspx
"It's interesting that you use so many different risk measures. Here's what I'd like to know more in detail:  1) About the use of VaR. I've heard (from a friend, may be unreliable) that some investment managers like Neuberger Berman doesn't use VaR for assessing risk and maintaining capital adequacy requirements. Rather, some firms only rely on tracking error, beta, standard deviation, etc. Why do you think is this so? Isn't VaR supposed to be a widely accepted risk measure.  2) The whole ""Expected Shortfall vs. VaR"" debate. I've read some papers comparing Expected Shortfall and VaR. Mainly, they criticize VaR for not being able to consider the 1% probability left where losses can (probably) skyrocket to infinity. If I need to choose between the two, which do you think is better and why?" You could look up the P/E of an equivalent ETF, or break the ETF into components and look those up. Each index has its own methodology, usually weighted by market cap.  See here: http://www.amex.com/etf/prodInf/EtAllhold.jsp?Product_Symbol=DIA I would say your decision making is reasonable.  You are in the middle of Brexit and nobody knows what that means.  Civil society in the United States is very strained at the moment.  The one seeming source of stability in Europe, Germany, may end up with a very weakened government.  The only country that is probably stable is China and it has weak protections for foreign investors. Law precedes economics, even though economics often ends up dictating the law in the long run. The only thing that may come to mind is doing two things differently.  The first is mentally dropping the long-term versus short-term dichotomy and instead think in terms of the types of risks an investment is exposed to, such as currency risk, political risk, liquidity risk and so forth.  Maturity risk is just one type of risk. The second is to consider taking some types of risks that are hedged either by put contracts to limit the downside loss, or consider buying longer-dated call contracts using a small percentage of your money.  If the underlying price falls, then the call contracts will be a total loss, but if the price increases then you will receive most of the increase (minus the premium). If you are uncomfortable purchasing individual assets directly, then I would say you are probably doing everything that you reasonably can do. "TL;DR - go with something like Barry Ritholtz's All Century Portfolio: 20 percent total U.S stock market 5 percent U.S. REITs 5 percent U.S. small cap value 15 percent Pacific equities 15 percent European equities 10 percent U.S. TIPs 10 percent U.S. high yield corp bonds 20 percent U.S. total bond UK property market are absurdly high and will be crashing a lot very soon The price to rent ratio is certainly very high in the UK.    According to this article, it takes 48 years of rent to pay for the same apartment in London.  That sounds like a terrible deal to me.  I have no idea about where prices will go in the future, but I wouldn't voluntarily buy in that market. I'm hesitant to invest in stocks for the fear of losing everything A stock index fund is a collection of stocks.  For example the S&P 500 index fund is a collection of the largest 500 US public companies (Apple, Google, Shell, Ford, etc.).  If you buy the S&P 500 index, the 500 largest US companies would have to go bankrupt for you to ""lose everything"" - there would have to be a zombie apocalypse. He's trying to get me to invest in Gold and Silver (but mostly silver), but I neither know anything about gold or silver, nor know anyone who takes this approach. This is what Jeremy Siegel said about gold in late 2013: ""I’m not enthusiastic about gold because I think gold is priced for either hyperinflation or the end of the world.""  Barry Ritholtz also speaks much wisdom about gold.  In short, don't buy it and stop listening to your friend.   Is buying a property now with the intention of selling it in a couple of years for profit (and repeat until I have substantial amount to invest in something big) a bad idea? If the home price does not appreciate, will this approach save you or lose you money?  In other words, would it be profitable to substitute your rent payment for a mortgage payment?  If not, you will be speculating, not investing.  Here's an articles that discusses the difference between speculating and investing.  I don't recommend speculating." A target date fund is NOT a world market index. There is no requirement that it be weighted based on the weights of the various world stock markets. If anything, historically (since the invention of target date funds), a 2:1 ratio is actually pretty low. 6:1 is, or was, probably more common. Just a token amount to non-US investments. "He is wrong.  Using Total Return (Reinvesting Dividend), from the peak in December 1999, it only took 6 years to recover.   You can check the data for free here. Make sure you choose ""Gross Index Level"".  ACWI Index is Developed Markets + Emerging Markets.  World Index is Developed Markets only." "I don't think blanket answers are very helpful. You are asking the right question when you are young! You have a large number of investment options and Australia has the Superannuation system that you can extract significant tax value from. I've not attempted to grade these with regard to ""risk"", as different people will rate various things with different levels, depending on their experience and knowledge. Consider the following factors for you:-" "Wow, this analysis really surprised me. Very complete and useful, but i think my teacher request was easier. He just said: ""Try to build a diversified portfolio. Then try to add a commodity (like silver or gold) and understand how the risk vary introducing an asset like this."" So, i'm basically making a stocks portfolio and i'm calculating its expected return and risk. (for example 40%FB, 10%JNJ, 20%GS, 10%F and 20%MCD) then i'm adding GLD (so now i have something like 20%FB, 10%JNJ, 10%GS, 10%F and 20%MCD 30%GLD) and i'm actually making an excel spreadsheet where i calculate all the: -Expected returns -St Deviation -Covariance  At the end i compare the returns and the risks on the 2 different portfolios." There are some ETF's on the Indian market that invest in broad indexes in other countries Here's an article discussing this  Be aware that such investments carry an additional risk you do not have when investing in your local market, which is 'currency risk'  If for example you invest in a ETF that represents the US S&P500 index, and the US dollar weakens relative to the indian rupee, you could see the value if your investment in the US market go down, even if the index itself is 'up' (but not as much as the change in currency values). A lot of investment advisors recommend that you have at least 75% of your investments in things which are denominated in your local currency (well technically, the same currency as your liabilities), and no more than 25% invested internationally.  In large part the reason for this advice is to reduce your exposure to currency risk. Russia current account.  https://tradingeconomics.com/russia/current-account  US current account  https://tradingeconomics.com/united-states/current-account  Russia balance of trade  https://tradingeconomics.com/russia/balance-of-trade  US balance of trade  https://tradingeconomics.com/united-states/balance-of-trade  Forex reserve by country  https://en.wikipedia.org/wiki/List_of_countries_by_foreign-exchange_reserves  List of country by oil import size.  https://en.wikipedia.org/wiki/List_of_countries_by_oil_imports  .  If I have to make a wild guess, country with huge deficit everything and no saving usually sinks faster in time of crisis. Haven't there been examples of governments defaulting, delaying payment and imposing haircuts on investors? Greece and Argentina come to mind. Quite a few Govt have defaulted in the past or were very of default or crisis. Most 3rd world countries or developing countries have under gone stress at some point. Greece was amongst the first example of Developed country going bankrupt. am I not better off if the fund invests solely in AAA corporate bonds, avoiding government bonds? Well that depends. Corporate bonds are not safer than Government Bonds. There have been instances of Corporate bonds not giving the required returns. "Taking examples from this loosely Googled page: http://www.fundlibrary.com/features/columns/page.asp?id=14406 If you find, or calculate, the standard deviation (volatility) of the returns from your various investment classes you will find they range from low-risk (low volatility), such as Cash, to high-risk (high volatility), such as Strategic Growth.  The risk rating (volatility) is a good indicator of how reactive to market conditions your investment is likely to be.  As you can see below, from mid-2010 to mid-2011 the High Risk index performed really well, but it was also most reactive when the market subsequently turned down.  The medium risk indices performed the best over the chart period, 2010 to 2013, but it could have turned out different.  Generally, you choose your investment according to your ""risk appetite"" - how much you're willing to risk.  You might play safe with, say, 30% cash, 60% medium risk, 10% high risk.  (Then again, are you paying someone to manage cash, which you might be able to do for free in a bank?) Assuming, for a moment, European (3.) and Intnl Equity Tracker (9.) had the same medium risk profile, then holding 50% & 50% would also add some currency diversification, which is usually advisable.  However, the main choice is down to risk appetite. To address your specific question: ""my main interest for now is between Stockmarket Growth and Strategic Growth"", first thing to do is check their volatilities. For a further level of sophistication you can check how they are correlated against each other.  If they are inversely correlated, i.e. one goes up when the other goes down, then holding some of each could be a good diversification. FYI: An Introduction to Investment Theory The historical returns are important too, but the investment classes your pension fund is offering will probably be reasonably aligned on a risk-return basis.  You should check though.  I.e. do they line up on a plot of 3 year Return vs Volatility? e.g. the line through SA Cash - SA Bonds - Vol Target 20 - SA Equity.  Source" Your definition of 'outside your country' might need some redefinition, as there are three different things going on here . . . Your financial adviser appears to be highlighting the currency risk associated with point three. However, consider these risk scenarios . . . A) Your country enters a period of severe financial difficulty, and money markets shut down. Your brokerage becomes insolvent, and your investments are lost. In this scenario the fact of whether your investments were in an overseas index such as the S&P, or were purchased from an account denominated in a different currency, would be irrelevant. The only thing that would have mitigated this scenario is an account with an overseas broker. B) Your country's stock market enters a sustained and deep bear market, decimating the value of shares in its companies. In this scenario the fact of whether your investments were made in from a brokerage overseas, or were purchased from an account denominated in a different currency, would be irrelevant. The only thing that would have mitigate this scenario is investment in shares and indices outside your home country. Your adviser has a good point; as long as you intend to enjoy your retirement in your home country then it might be advisable to remove currency risk by holding an account in Rupees. However, you might like to consider reducing the other forms of risk by holding non-Indian securities to create a globally diversified portfolio, and also placing some of your capital in an account with a broker outside your home country (this may be very difficult to do in practice). First, currencies are not an investment; they are a medium of exchange; that is, you use currency to buy goods and services and/or investments. The goods and services you intend to buy in your retirement are presumably going to be bought in your country; to buy these you will need your country's currency. The investments you intend to buy now require the currency of whatever country they are located in. If you want to buy shares in Microsoft you need USD; if you want shares in BHP-Billiton you need AUD or GBP (It is traded on two exchanges), if you want property in Kuwait you need KWD and if you want bonds in your country you need IDR. When you sell these later to buy the goods and services you were saving for you need to convert from whatever currency you get for selling them into whatever currency you need to buy. When you invest you are taking on risk for which you expect to be compensated for - the higher the risk you take the better the returns had better be because there is always the chance that they will be negative, right down to losing it all if you are unlucky. There is no 100% safe investment; if you want to make sure you get full value for your money spend it all right now! If you invest overseas then, in addition to all the other investment risks, you are adding currency risk as well. That is, the risk that when you redeem your investments the overseas currency will have fallen relative you your currency. One of the best ways of mitigating risk is diversification; which allows the same return at a lower risk (or a higher return at the same risk). A pure equity portfolio is not diversified across asset classes (hopefully it is diversified across the equities). Equities are a high risk-high yield class; particularly in a developing economy like Indonesia. If you are very young with a decades long investment horizon this may be OK but even then, a diversified portfolio will probably offer better rewards at the same risk. Diversifying into local cash, bonds and property with a little foreign equities, bonds and property will serve you better than worrying about the strength of the IDR. Oh, and pay a professional for some real advice rather than listening to strangers on the internet. Debit cards with the Visa or Mastercard symbol on them work technically everywhere where credit cards work. There are some limitations where the respective business does not accept them, for example car rentals want a credit card for potential extra charges; but most of the time, for day-to-day shopping and dining, debit cards work fine. However, you should read up the potential risks. A credit card gives you some security by buffering incorrect/fraudulent charges from your account, and credit card companies also help you reverse incorrect charges, before you ever have to pay for it. If you use a debit card, it is your money on the line immediately - any incorrect charge, even accidential, takes your money from your account, and it is gone while you work on reversing the charge. Any theft, and your account can be cleaned out, and you will be without money while you go after the thief. Many people consider the debit card risk too high, and don't use them for this reason. However, many people do use them - it is up to you.