In-place edits with sed on OS X

I’d like edit a file with sed on OS X. I’m using the following command:

sed 's/oldword/newword/' file.txt

The output is sent to the terminal. file.txt is not modified. The changes are saved to file2.txt with this command:

sed 's/oldword/newword/' file1.txt > file2.txt

However I don’t want another file. I just want to edit file1.txt. How can I do this?

I’ve tried the -i flag. This results in the following error:

sed: 1: "file1.txt": invalid command code f

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