There’s no single best answer to this question, since needs will vary from user to user. But we’ll walk you through some of the options, and this will hopefully help you make an informed decision about which settings suit you best.
There are essentially three decisions you need to make when setting up your Color Settings (Edit / Color Settings) – RGB Working Space, CMYK Working Space, Missing / Mismatched Profile Notification. Other parameters – Color Management Policies, Conversion Options, Advanced Controls – are rarely changed from the default.
The default Color Settings in Creative Cloud are “North American General Purpose 2”, which uses sRGB (RGB) and SWOPv2 (CMYK) Working Spaces and has Profile Notifications unchecked. NAGP is going to be a good choice for many users, particularly those not overly concerned about color.

RGB Working Space
Most consumer cameras embed sRGB in their photos. And imagery intended for the internet generally assumes sRGB as well. So that’s a reasonable default choice.
However, sRGB involves some tradeoffs. sRGB was developed as an approximation of the colors that could be achieved on typical LCD monitor in the mid 1990s. As the Image 2 below shows, the sRGB color space is larger than pretty much all printing presses, but not in ALL areas. Specifically, a modern printing press can achieve colors in the Cyan region that are outside sRGB. So by choosing this color space, if your final destination is a printing press, you are sacrificing some achievable colors.
The tradeoffs become more dramatic if your final destination is an inkjet printer like an Epson SureColor P9570.

And many modern displays have a color gamut significantly larger than sRGB. Notably, Apple’s iPhones and and XDR displays are tuned for the Display-P3 color space, so sRGB may not be the best fit if Display P3 is your final destination.
Many professional photographers or prepress professionals will use AdobeRGB 1998 as their preferred working space, since it offers a “bigger box of crayons” than sRGB. And videographers tend to like P3. AdobeRGB and P3 are similar in size, with AdobeRGB having a higher chroma green and P3 having a higher chroma Red – see Image 3.

CMYK Working Space
The Creative Cloud CMYK default is SWOPv2. This is an out-of-date standard designed for lower quality high volume web presses used to print consumer magazines or catalogs. Not sure why Adobe chose that as a default, other than an implicit acknowledgement that not many of their users are working in CMYK. The more common choice in the U.S., one that is available with Creative Cloud, is GRACoL2006. The European standard, FOGRA and Japan standard are also found in Creative Cloud. So Image 4 shows an alternative choice, saved with a custom name.

Profile Notifications
This is a tough one. It is indeed a best practice to have these checked on. If, for instance, your chosen RGB working space is AdobeRGB and someone sends you an image with sRGB embedded, you will get a “Profile Mismatch” warning and will be asked what you want to do. Generally, you want to convert to your preferred working space. If a profile is missing, that’s a little trickier, since you are not sure of the creator’s intention, and is covered in another blog post.
Summary
North American General Purpose 2 / Default (sRGB/SWOPv2) – this is probably a reasonable choice for most Creative Cloud user, particularly those that are not particularly color critical.
AdobeRGB / GRACoL2006 – a good choice for more color critical users or those wanting to access a larger color range. If you are not working in CMYK, of course, there’s no compelling reason to change to GRACoL.
Profile Notifications – Best practice to have them checked on, though this can lead to a confusion array of dialog boxes.


