Correlation is not causation. Who you are defines your friends probably as much as your friends define who you are, AND both are mainly consequences of something different entirely (which schol you went too, etc...)

In some species of Anglerfish, the male is much smaller than the female and incapable of feeding independently. To survive he must smell out a female as soon as he hatches. He bites into her releasing an enzime which fuses him to her permanently. He lives off her blood for the rest of his life, providing her with sperm whenever she needs it. Females can have multiple males attached. The morale is simple: males are parasites, women are sluts. Ha! Just kidding! The moral is don't treat actual animal behavior like a fable. Generally speaking, animals have no interest in teaching you anything.

Oglaf (Original comic NSFW)

I often find that the hardest part is finding the answer to:

Do you know what your long-term and medium-term goals are?

I honestly have no idea. I can easily focus on short term goals, when I am rather confident that Me(now) will be very similar to Me(goal reached). Things get harder and blurrier when I have to take into account my most likely self modification. Concrete example. Since I was 10, I've always wanted to be a physicist. Roughly near the end of my Ph.D. I started to evolve into someone who doesn't want to be a phisicist. I tried a short post-doc abroad and looked for a different job. If I had known in advance I could have spared me at least a couple unpleasant months abroad and a couple (make it 3) of years of underpaid work. But I didn't know. Now I find myself wanting to make a lot more money, but I keep wondering what will happen if this desire faded away abruptly and I finded myself trapped in an awful job.

Let me suggest a way of thinking about investing. Here are a variety of things that an investor might want to do:

1: Minimize Bankruptcy Risk. (Chance of losing all of money)

2: Minimize Downsides. (Chance of losing some moderate chunk of money)

3: Keep Money Liquid. (Have your money be available for other things)

4: Maximize Upsides. (Chance of gaining some moderate chunk of money)

5: Maximize Speculative Upsides. (Chance of becoming rich.)

These are good things, but when investing, you generally don't get to pick all of them. For instance, I think my current strategy for my retirement account does a decent job of getting 1,2 and 4.

Now, you and I don't have to have the same values: As an example: You are throwing all of your money into a startup. That generally goes against 1. If the startup fails, all your money is gone, and so you aren't minimizing bankruptcy risk. And values can change: Your risk tolerance is not a fixed amount.

So a rough way to start is to categorize "In which order of priority are these goals are important to me right now and what will that be like in the future?"

A lot of investment sites also have these kinds of rough tests to get an idea of your risk tolerance so they can suggest advice accordingly, although they aren't necessarily perfect. This link seems to explain some of the issues that come up: http://www.businessweek.com/magazine/content/09_32/b4142059711173.htm

You imply that one should invest where economic growth is expected to be highest.

Note that it does not follow that shares in high growth companies (or countries) will lead to high returns. This is because the expected future growth may well be built into the current price.

That is, if everyone thinks something will be likely worth a lot in the future, the current price will be bid up to reflect this.

It is the uncertainty of the outcome that may arguably cause higher expected returns. If people have a distaste for uncertainty, then the price might be bid down leading to higher expected returns.

This is the idea that one must assume risk (uncertainty) to obtain excess expected returns. It is by no means ubiquitous: assuming risk may reduce expected returns. For example, people assume risk to gain exposure to negative expected returns in a casino (roulette, blackjack, &c). No doubt there are plenty of examples in financial markets where risk does not automatically yield excess expected returns.

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 reasoning has been correct for US bonds for several decades, but it's still a little too close to "housing prices always rise so who cares if some mortgages default" or "I'll resell the stock after it goes up more so who cares if the company is making a profit" for my liking.

On an unrelated note: has nobody mentioned tax issues yet? Canadians now have Tax-Free Savings Accounts available, and avoiding taxes on capital gains may be nearly as important as avoiding fees from overly expensive financial institutions. Keep enough liquid savings for emergencies and unexpected expenses, though.

All that said... how would you respond to question 4?

You can kind of tell that it was the question I came to realize was key, through the process of writing the post...

Should I even bother with this "investment" stuff right now, or just move the whole 13k sum to a simple savings account and worry about reinvesting it in a year?

Hm.

Well, I just did a quick google search for developing economies and looked for graphs that seemed to deal with the comparison I'm interested in.

For instance:

http://carnegieendowment.org/images/article_images/decoupleR1.gif

http://blogs.worldbank.org/files/prospects/charts/nl33cj23.sn0/chart-small.png

http://static.seekingalpha.com/uploads/2011/9/4/saupload_trendr1.png

http://farm5.static.flickr.com/4094/4771449749_7c63d01bdc.jpg

http://www.imf.org/external/pubs/ft/fandd/2012/09/images/dervis2.jpg

And my dad put the majority of investments in "Canada" and "US", which... are in the group of economies represented by the lower lines. (And the rest in "world", which is the average of the low and the high lines.)

As far as I can tell, his decision was based on... a heuristic that developing countries are lower status, and lower status=poorer=not a good investment? (I say "decision", but I don't know if it even occurred to him as an option...)

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.

What if they discover another force some day?