Markets are essentially random walks with an upward trend?
Yes, but with a relatively high variance.
“Index funds” are magic boxes that you put money in and your money will grow at the same rate of the market that the fund “indexes”?
This is more or less true (minus some potential entry/manteinance costs)
“Developing world” economies generally grow a lot quicker than those in the “developed world”?
In general this is true, but the variance here is even higher. Lately, though, they are not performing particularly well (see here for example).
And there are enough of these places over the world, and they're independent enough, that natural disasters/political trouble/etc in a few of them still leave a consistent and high rate of average growth? So shouldn't I just put all my money in a fund that “indexes” all these "developing" economies together?
Yes, diversification reduces the risk, but the risk for equities remains in general significantly higher then the one for e.g. government bonds (i.e. losing your money is a real concern).
That said, even with a very good allocation, it should be very hard to make more than 8-10% a year with you investent (not impossible, mind you, chaotic systems are chaotic). This means rouglhy 1-1.3K per year in you condition. Of course, mr. exponential says that the longer the investment, the better (barring future market instabilities). It's up to you to decide if it's worth it. On the other hand, if you don't need the money now, there are other forms of investing that block your capital for a longer period of time, but with much lower risk.
EDIT Maybe it's an obvious advice, but be careful about what you're doing. If there's someone you trust to whom you can ask questions and submit invesment proposals for evaluation, absolutely do it. In any case, try to learn at least the basic features of what you're investing in (e.g. stock markets' returns have fat tails, whch means high probability of heavy losses, various derivatives can have many complicated features). I'll be glad to answer any questions, here or by PM, the best I can, but any specific investment must be evaualted on its own.
but the risk for equities remains in general significantly higher then the one for e.g. government bonds
I would agree that this is true, but I'd caution against thinking of even government bonds as a textbook "risk-free" investment. There seems to be general agreement that balancing government budgets would create economic tragedy, but in that case the only reason to expect your bonds to be repaid is because someone else will buy more bonds later (because he expects to be repaid by someone else buying even more bonds even later). This reason...
[EDIT: Through conversation with Rolf Andreassen below, it has been brought to my attention that I am simply completely and irretrievably insane.
Sane and well-measured advice is therefore wasted on me, and I just wanted to edit in this notice here so that other well-meaning folks don't get tricked into wasting their time trying to talk sense into a total nutcase like me. :)
(I appreciate all y'all, though. ^^ ) ]
So my dad set up a trust fund for me when I was a kid, and I've got 13k (CAD) now, which I am going to be taking direct control of.
Now, I have no interest in making a deep study of investment. I have a life to live and dealing with money is boring.
The only thing more boring than dealing with money, is dealing with a lack of money, and so I want to optimize the time and thought I spend avoiding that down to a minimum.
Four things occur to me:
1) Taking the naive and sparse knowledge I have of this area, basically just stuff I‘ve randomly osmosis’d up, this is my train of thought:
Markets are essentially random walks with an upward trend?
“Index funds” are magic boxes that you put money in and your money will grow at the same rate of the market that the fund “indexes”?
“Developing world” economies generally grow a lot quicker than those in the “developed world”?
(This makes sense to me. Places like the US, Canada Europe, etc, already have mature transportation and communication infrastructure. You can't get much economic growth out of doing basic stuff like building a new highway here, but in, like, some African region that has previously been served by, I dunno, jungle-donkeys, it makes a proportionally much bigger difference.)
There are a few countries where “developing” is a euphemism for “totally messed up”, but in general it really does mean “growing”?
And there are enough of these places over the world, and they're independent enough, that natural disasters/political trouble/etc in a few of them still leave a consistent and high rate of average growth?
So shouldn't I just put all my money in a fund that “indexes” all these "developing" economies together?
2) My dad set up this trust fund with a bank that has a bunch of big expensive physical buildings for some reason. I recently read a letter from them saying that they will charge a $100 yearly fee for having less than 15k in an account.
Are there better options I should be taking than opening my own account with an institution that thinks it makes sense to charge me a hundred bucks for not being rich?
3) Me and muflax are actually going to go work full time on developing [this totally amazing educational technology that will completely revolutionize human civilization but you have no reason to care about that until you've seen a demo in action so nevermind].
We might spend as much as a year (yeah, that's outside-view calibrated) working on it until we have something we can make a living off of while continuing development.
We think we can get total living costs for a year down into the 5k..10k range… maybe even lower. We're going to be living in the UK, because of reasons.
So… can I leave this measly 13k in an investment account and still draw out of it for monthly costs?
4) Or is this whole “investing” thing something I should even be bothering with at all right now?
Should I just pop out the whole sum into a savings account that I can draw from as I need, and worry about reinvesting whatever is left over then, a year from now, after we have obviously started on our way to becoming rich and famous?