Overview of lifecycle funds and why they'll make your life easier


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Overview of lifecycle funds and why they'll make your life easier

  1. 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 6-Week Program That Works
  2. 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. 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.