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Complex Answers for a Simple Question

Any question on investment tends to attract a lot of advice that isfar more complicated than it needs to be

A few days back, I came across a fascinating set of answers to a question on an online Q&A forum. The questioner had a happy problem--he had inherited 15 million dollars and wanted to know how he should invest it. He said that he didn't need the money for about 15 years. His own idea was that he should put the money in three-four index funds from Vanguard, which is a US mutual fund company that is known for ultra low cost index funds, and just 'sit on it' for fifteen years. However, he wanted to know what the online community thought he should be doing.

Obviously, he got dozens of answers, and almost each of them different. Over a few days, the sheer variety of answers became a kind of a survey of all the possible kinds of investments one can make. There were a lot of answers advocating real estate, either for rent or for capital gains, there were many advising actively trading equities, there were those who recommended hedge funds of one kind or another, and there were the inevitable gold bugs who think that everything except the precious metals are some sort of an illusion.

There were also plenty of salesmen--investment advisors and private banking types who wanted him to get in touch with them. Funnily enough there was also one former private banker whose advice was to do anything at all except fall into the clutches of one because that would be the worst possible choice. There were also one or two who seemed to be representing what sounded like Ponzi schemes. All in all, the entire discussion seemed pretty representative of reality--an investor who has studied the options and arrived upon a good choice, and a large number of people who, out of malice or ignorance were out to misguide him.

However, the basics of how an investment should be judged stay constant. Its ideal time period should match your needs, it should beat inflation by a realistic amount, it should have the kind of liquidity you might need, and should have low cost and low or negligible commissions.