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Overview of lifecycle funds and why they'll make your life easier
1. “A unique voice on money,
i w r d an
do
i l l ail d i
wn
fo ds,
one singularly attuned to…his generation.”
t e y t nt
loa
a c ac er
I WIll
h y tic act
Vis u t o l tip e sp
—San FranciSco chronicle
o a iv
it b e r s, b re
i c on ads
h . us h
co
m
ee
ts
TEAch
You
by
RAmIT SEThI
founder and writer of
iwillteachyoutoberich.com
ToBE No Guilt.
No Excuses.
No B.S.
Just a
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2. I Will Teach You to Be Rich
LIFECYCLE FuNDS AuTOmATICALLY ADjuST AS
YOu GET OLDER
H ere’s a comparison of two popular lifecycle funds. These funds target
roughly the same age—someone in his or her twenties—and assume
retirement at age sixty-five. You should pay special attention to the minimum
initial investment (it matters if you don’t have a lot of money lying around)
and the asset allocation, which will help you determine which fund most suits
your risk tolerance. Remember, these are only two example funds; you can
choose among many lifecycle funds offered by companies like the ones I list
on page 187.
Vanguard target
t. Rowe Retire 2045
Retirement 2050
(tRRkx)
(VfIfx)
$1,000 if within
Minimum initial $3,000 an IRa, $2,500
investment
otherwise
none (but you none (but you
Minimum monthly should send some should send some
investment
money every month) money every month)
Asset allocation at 90% stocks, 10% 88% stocks, 9%
25 years old bonds bonds, 3% cash
90% stocks, 10% 86% stocks, 11%
35 years old
bonds bonds, 3% cash
78% stocks, 22% 74% stocks, 23%
45 years old
bonds bonds, 3% cash
55 years old 63% stocks, 37% 58% stocks, 38%
bonds bonds, 4% cash
The major benefit to a lifecycle fund is that you set it and forget it. You just
keep sending money and your fund will handle the allocation, trading, and
maintenance, automatically diversifying for you. If you invest in a lifecycle
fund, you could literally spend minutes per year on your investments. You
may not agree with the exact allocation of the fund, but frankly it’s close
enough. as you know, 85 percent correct is way better than nothing at all.
184
3. Get the full
book at
Amazon.com
About the book
At last, for a generation that's materially ambitious
yet financially clueless comes I Will Teach You To
Be Rich, Ramit Sethi's 6-week personal finance
program for 20-to-35-year-olds. A completely
practical approach based around the four pillars of
personal finance—banking, saving, budgeting, and
investing—and the wealth-building ideas of
personal entrepreneurship.