Experts agree: This is the simplest way for beginners to begin investing

Investing Made Easy: A Beginner’s Guide

Investing can seem overwhelming, with many Americans feeling paralyzed by the complexity of it all. However, investing doesn’t have to be hard. In fact, getting started can be relatively easy, according to financial experts.

Warren Buffett, chairman and CEO of Berkshire Hathaway, famously said, “You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.” Investing is essential for many people to grow their savings and secure their financial future in retirement. Starting early in one’s career is beneficial due to the longer time horizon for interest and investment returns to compound.

One rule of thumb is to save roughly 1x your salary by age 30, 3x by 40, and ultimately 10x by 67, according to Fidelity Investments.

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A ‘fabulous, simple solution’ for beginners

For novice investors looking to start on their investing journey, target-date funds (TDFs) are considered the simplest entry point for long-term investing. TDFs are based on age, where investors choose a fund based on the year in which they aim to retire. These mutual funds do most of the heavy lifting for investors, like rebalancing, diversifying across various stocks and bonds, and adjusting the level of risk as investors age.

How to pick a target-date fund

Selecting a TDF that uses underlying index funds is recommended by financial experts. Index funds aim to replicate broad stock and bond market returns and are generally cheaper than actively managed funds. Some of the biggest TDF providers are Fidelity, Vanguard Group, Charles Schwab, BlackRock, and T. Rowe Price.

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Other ‘solid choices’ for novice investors

For investors who want to be a bit more hands-on, target-allocation funds or global market index funds are other simple options. These choices provide diversification among stocks and bonds according to a specific asset allocation, with global market index funds being an all-stock portfolio diversified across U.S. and non-U.S. equities.

Ask yourself: Why am I investing?

Young, long-term investors should ensure their fund has a high allocation to stocks, around 90% or more. Retirement investors under age 50 would benefit from a mostly stock portfolio with some cash reserves set aside for emergencies.

The easiest place for long-term investors to save is in a workplace retirement plan like a 401(k). Those with employer matches should aim to invest enough to get the full match. Investors without access to a 401(k)-type plan can save in an individual retirement account (IRA) and set up automatic deposits.

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Overall, investing doesn’t have to be complicated. With the right guidance and a solid strategy, anyone can start investing smartly for their future financial security.

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