The easiest way to invest
In the past 5-10 years, financial institutions started to realize that many people have money to invest, yet they have no idea where they need to put their money. In order to help these people get into investing, they created a thing called target date mutual funds (or life cycle funds).
Target date mutual funds are the absolute easiest way to invest your money in a smart and responsible way. I’m not going to lie and say they are the absolute best investment, but they are a good investment and they require little maintence on your part. The best part is that you can invest in these in your Roth IRA and many 401k plans offered by your employer.
Here’s what you do. When choosing what funds to invest in for your 401k or Roth IRA, you simply pick the fund that has the year you expect to retire in it (for example the “T. Rowe Price Retirement 2050 Fund”) and the fund does the rest. It automatically rebalances your investments each year depending on how close you are to retirement. The farther you are from retirement, the more heavily invested you are in stocks since they perform the best over a long period of time. As you get closer to retirement age, the fund automatically starts moving your money into safer investments (like bonds) in order to make sure you have the maximum amount of money available for you at the time of your retirement.
Sounds easy, right? Well it is. Don’t worry about spending hours and hours researching the best possible funds for your retirement plan (be realistic, you will just get more confused that way). You just need to forget about being unsure of the right investment to start with, and start putting your money in a target date mutual fund so you know you are on the right track. After that, you can rest easy knowing that your finances are on auto pilot.
