If you get this investment trick right, you’re well on your way to retirement

It’s “so simple that most people don’t believe it,” according to financial guru Ramit Sethi.

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Key points

• The set-it-and-forget-it approach is a simple investment trick that can put you on track for retirement.
• All you have to do is choose one or more good passive investments, such as index funds.
• Commit to investing a fixed amount of money every month, and let your portfolio grow.

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Many people see investing as a complex subject, where you need to have a lot of expertise to be successful. While far from the truth, this misconception often leaves aspiring investors hesitant to get started. They assume that they still have a lot to learn and could lose money if they are not careful.

It’s really easy to invest and work your way towards a strong retirement fund. Financial advice and I will teach you how to be rich Author Ramit Sethi often shares an excellent way to invest your money. He says, “You’re doing so well and you’re 90% of the way there.”

The only investment trick you need

There is a simple trick that many successful investors swear by — set it and forget it. Sethi recommends it, Warren Buffett recommends it, and those are just two of the more famous examples.

For this method, start by choosing one or more passive investments. These are investments that do the work for you by putting your money into a large number of stocks (and sometimes bonds). Almost all good the brokers have many funds to choose from that work well as passive investments. Here are some popular options:

• Index funds track a specific market index, such as the S&P 500 (500 of the largest US trading companies).
• Target date funds invest money based on a target retirement year.
• Mutual funds are professionally managed investment funds.

If you already have a brokerage account or a withdrawal account, see what is offered first. If not, or if you don’t know what to choose, look in the the best index funds for some low rate options. For an investment that will track the stock market fairly well, an S&P 500 index fund is a great choice.

Once you have chosen your investments, invest every month and take a hands-off approach. Consistency is key here. Decide how much you can afford to invest per month, such as 10% of your monthly income. If possible, automate this process by setting up a recurring monthly investment.

This is one of the simplest and most effective ways to build wealth. Although it has ups and downs, the average stock market performance is about 10% per year. If you are a long-term investor, the odds are in your favor, especially if you invest more money every month.

Get ready for a comfortable retirement

You don’t have to get everything right to invest for retirement. All you really have to do is get a few great things. To recap, here’s what to focus on:

• Choose quality passive investments that you can buy every month. Options include index funds, target date funds and mutual funds.
• Decide how much to invest each month. If you can max out the retirement account contributions, that’s great. But consistency is what is most important here.
• Set it and forget it. Ideally, set up automatic monthly investments. From there, let your investments do their work and don’t take any money.

You can do all this through an individual brokerage account, an individual retirement account (IRA), or a 401(k). Since IRAs and 401(k) offer tax benefits, it is generally recommended to prioritize funding.

There are certainly more advanced ways to invest. Some people like to pick stocks and build their own portfolios, to give an example. If you are interested in going further with the investment, it may be something to consider. But if you want to keep it simple, the set-it-and-forget-it approach is hard to beat.