> I think a more useful question is, what is the amateur person worth $25K to do today? Or the young person with negative net worth? The usual "just dump it into the stock market and pray" seems very risky. Sure, long-term the overall stock market expected to go up on average, but that is if you can survive the variance. Netted out over the years, I'd guess that I've pretty much lost money on the stock market, and I'm skeptical of someone with a simple answer that amounts to "hand your money to Wall Street".
The big thing is to avoid the fees. The average money manager performs averagely, so unless you have some way of picking an above-average one, the fees you're paying are literally handing money to Wall Street. You're right to want something anticorrelated with the stock market, but everyone wants that, and paying a 2% fee to "diversify" probably costs more than you gain. I think there's some merit in the "fifty-fifty" approach - half your investment in an equity index fund, half in a cheap bond fund. But more exotic asset classes probably cost more than they're worth.
The other thing is to make sure your exposure to the housing market is appropriate (indeed I've heard a three-way split suggested). If you're paying a mortgage you'll do better to pay that off quicker rather than invest in stocks or bonds. If you're wealthy enough to own outright you want some of your "excess" wealth (over what you need to own the house you want to keep) in housing, either by buying another one to rent, or by having a big enough house that you could downsize if you needed to. If you're young and renting is the really tough part: if you buy then you're insulated from the market, but relying on your ability to repay the loan. But I guess books have been written on this already.
The big thing is to avoid the fees. The average money manager performs averagely, so unless you have some way of picking an above-average one, the fees you're paying are literally handing money to Wall Street. You're right to want something anticorrelated with the stock market, but everyone wants that, and paying a 2% fee to "diversify" probably costs more than you gain. I think there's some merit in the "fifty-fifty" approach - half your investment in an equity index fund, half in a cheap bond fund. But more exotic asset classes probably cost more than they're worth.
The other thing is to make sure your exposure to the housing market is appropriate (indeed I've heard a three-way split suggested). If you're paying a mortgage you'll do better to pay that off quicker rather than invest in stocks or bonds. If you're wealthy enough to own outright you want some of your "excess" wealth (over what you need to own the house you want to keep) in housing, either by buying another one to rent, or by having a big enough house that you could downsize if you needed to. If you're young and renting is the really tough part: if you buy then you're insulated from the market, but relying on your ability to repay the loan. But I guess books have been written on this already.