Ramit Sethi says this strategy is the best way to invest your money if you never want to have to worry about it

Personal Finance

Retirement target or planning to quit job or financial freedom, miniature people businessman standing and thinking about date with important target red circle on calendar with text Retire.

Published: December 2, 2024 10:02 am

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24/7 Wall St. Key Points

Many people over-complicate investing, but it doesn’t have to be complicated! Ramit believes that you don’t have to master the stock market to start building wealth.
A target-date fund does all the heavy lifting for you, allowing you to focus on consistent contributions.
Also: Take this quiz to see if you’re on track to retire ^(Sponsored)

Investing can easily feel overwhelming for those who are just starting out. There are countless options, from stocks and bonds to ETFs and cryptocurrencies. But Ramit Sethi, author of I Will Teach You to Be Rich, simplifies the process in a way anyone can follow in one of his newest YouTube shorts.

His advice? Start with a target-date fund.

We’ll explore what a target-date fund is below and why it can be a good choice for new investors.

What Is a Target-Date Fund?

A target-date fund is a single investment designed to grow with you as you approach retirement. It’s named for the year you plan to retire, such as a Vanguard 2050 Fund or Fidelity 2050 Fund. These funds automatically adjust their allocation over time based on risk. For instance, it starts with more aggressive investments and gradually shifts to safer ones.

It’s a “set it and forget it” solution! Clark Howard also recommends this retirement strategy.

Why Is It Perfect for Beginners?

Ramit recommends one of these target-date funds for three reasons:

1. Simple and Accessible

You only need to choose one fund. For example, if you’re planning to retire in 2050, you pick the 2050 fund from your broker.

2. Automatically Diversified

These funds automatically diversify into a mix of stocks, bonds, and other investments. However, it’s only one fund that you have to put money into. This diversification is automatic and doesn’t require your input.

3. Hands-Free Contribution

Once you’ve chosen your fund, you can set up automatic monthly contributions. You don’t have to worry about messing with your portfolio otherwise. It’s already all taken care of.

How to Get Started

So, if you’re ready to invest using Ramit’s approach, here’s how you can get started:

1. Choose Your Broker

Popular options include Vanguard, Fidelity, and Schwab.

2. Pick Your Target-Date Fund

You’ll want to look for a fund that matches your retirement year.

3. Set Up Automative Investments

Next, set up investments based on how much and how often you want to add to the fund. Let your broker handle the rest.

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