There is no one-size-fits-all solution when it comes to choosing color settings, as different users will have different needs. However, we will guide you through some options to help you make an informed decision on the settings that suit you best.
When setting up your Color Settings (Edit/Color Settings), there are three main decisions you need to make: RGB Working Space, CMYK Working Space, and Missing/Mismatched Profile Notification. The other parameters, such as Color Management Policies, Conversion Options, and Advanced Controls, are usually left at their default settings.
The Color Settings in Creative Cloud default to “North America General Purpose 2”, which uses sRGB as the RGB Working Space and SWOPv2 as the CMYK Working Space. The Profile Mismatches and Missing Profiles checkboxes are unchecked. North America General Purpose 2 is a good fit for many users, especially those who are not terribly concerned with color.

RGB Working Space
A reasonable default choice for the RGB Working Space is sRGB. Consumer cameras typically use sRGB, which is also the standard for web images. However, sRGB has some limitations, as it was designed to match the colors of typical LCD monitors from the 1990s. As a result, it may not accurately represent all colors achievable by modern printers or displays, particularly in the Cyan region. If color accuracy is critical, professional photographers or prepress professionals may prefer AdobeRGB 1998, which has a larger color range than sRGB. Videographers may prefer P3, which is similar in size to AdobeRGB but has a higher chroma Red.
As seen in the screenshot below, the sRGB color space is larger than most printing presses in most, but not all, areas. Today’s printing presses can reproduce colors in the cyan region that sRGB cannot.

CMYK Working Space
The default CMYK Working Space in Creative Cloud, SWOPv2, is a legacy standard that was designed for lower-quality web presses. A better choice for most users in the US would be GRACoL2006, which is also available in Creative Cloud. The European standard (FOGRA), and Japan standard are also available.

Profile Notifications
These deserve some considerations. It is indeed a best practice to have these checked on. For instance, if your chosen RGB working space is AdobeRGB and someone sends you an image with an sRGB embedded profile, 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 bit trickier, since you are not sure of the creator’s intention, and is probably worthy of another blog post.
Summary
In summary, North American General Purpose 2 is a good default choice for most users. AdobeRGB or P3 may be better choices for more color-critical work, while GRACoL2006 is a better CMYK Working Space option. Profile Notifications should be checked on, but users should be prepared for potential dialogue box overload.