Quora Answer: What is the Best Type of Investment for a 33-Year-Old, with $100,000 in the Bank?

The following is my answer to a Quora question: “I am 33 years old, this year, and have $100,000 in the bank, earning very little interest.  What is the best type of investment for me, in 2016?”

You must understand that the bank is not there to make you money.  The bank is there to make the bank money.  With more than a million, or in some banks $2 million, in assets and an annual income above their threshold, you would qualify for private banking services and products.  Your current amount does not qualify.  Even a fixed deposit would not offer competitive returns at this level.

Consider mutual funds or any collective investment scheme.  There is no capital guarantee, unlike a fixed deposit, so this sits in a higher risk class.  Alternatively, if you want an element of estate creation, a form of capital protection, put the funds into an investment-linked plan.  Both options offer more liquidity than a fixed deposit should you need to draw on the funds.  Both carry good potential returns of at least 6.5 per cent.  Both give you a slew of underlying funds to shift capital between.

Diversification and Region Matter

Spread your risk across several markets and sectors, balancing debt and equity securities.  With a medium to long investment horizon, a pivot toward Asia makes sense.  US market fundamentals were not sound at the time, and remained susceptible to the boom-and-bust cycle that has plagued the market repeatedly.  American regulation was comparatively weak, meaning capital was less protected than it should have been.  Europe carried its own risk, tied directly to the Eurozone debt crisis.

I was generally bullish on Asia, particularly East Asia.  Money held in funds rather than direct counters offers some insulation from market volatility.  On a long strategy, minor market shifts that panic watchers should not derail the plan.  Major players routinely engineer panic so larger positions can feed on smaller ones, dumping their holdings in fear.  China’s own quantitative easing period, which had the Financial Times and other major publications forecasting a meltdown while the Shanghai bourse dropped sharply, was a clear example.  When this happens, step back and re-examine the fundamentals rather than react to the headline.  China looked fundamentally sound over the long run at the time, and the outlook for the rest of East Asia looked strong, except Japan, weighed down by persistent negative interest rates.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code