How I Built Wealth While Figuring Out the Stock Market

Welcome to Personal Finance Insider, a biweekly newsletter that connects you with the stories, strategies, and tips you need to be better with money.

Here’s what: You can build wealth even if you don’t know everything about the stock market

When I landed my first job after I graduated from college, I had never invested a single penny. In fact, while I was aware that investing was an important component of attaining generational wealth, I was completely intimidated and afraid to risk losing money.

Saving alone seemed like a safer option.

But I was aware of one passive wealth-building tool in particular: 401(k)s. My family had always encouraged me to set up one of these employer-sponsored plans when I reached a position to do so. In fact (and at the same job), an older coworker helped me to understand the benefits — such as tax breaks, employer matches, and high contribution limits — associated with these accounts.

However, I still felt like I was missing out on true wealth by solely utilizing the employer retirement account. I felt like I could generate larger amounts of income by adding the self-directed/DIY investing route to my arsenal. I began to read more and more about the different types of investments and methods (e.g., financial advisors/full-service brokers, online brokerages, and robo-advisors) available.

While I was attracted to the professional guidance route, I ruled out hiring a financial advisor because I couldn’t afford the fees. I also looked into online brokerages, but the endless jargon around “options,”risk tolerance,” and “portfolio rebalancing” only added to my reluctance to begin. So that left me with robo-advisors.

After sifting through countless “Best robo-advisors” lists online, I finally settled on Betterment. Not only did the company have a $0 minimum requirement and low annual advisory fee (0.25%), but its algorithm handled the entire process for me. As for the account setup process, I only had to enter in my risk tolerance, time horizon, and investing goals, and the advisor would invest in ETFs, regularly rebalance my portfolio, and send progress updates. 

That’s how I extinguished my fear of investing. As the

robo-advisor

did the legwork for me, I took the time to learn about things like expense ratios, stocks, real estate, mutual funds, cryptocurrencies, and ETFs. I was determined to truly understand the markets while my 401(k) and automated investing account built wealth for me. 

For me, the next step was clear: Maintain my employer-sponsored plan and automated account while additionally opening a self-directed brokerage account. And I did exactly that.

I finally opened a self-directed account with Charles Schwab and began to invest in index funds, ETFs, and stocks. I was confident that these securities would pay off in the long run, and I buy shares of them every month.

My biggest lesson from this is that you don’t have to be a market genius to start building wealth. As I passively invested through my 401(k) and Betterment account, I simultaneously prepared myself to trade on my own by taking advantage of an array of free online resources. These included things like Youtube videos, brokerage/investment app website FAQ sections, and Investor.gov educational articles.

You don’t have to dive headfirst into DIY trading. You can absolutely use things like employer-sponsored accounts (or IRAs if you aren’t employed but have taxable income), micro-

investing apps

, financial advisors, or automated advisors. But always remember one rule of thumb: Never invest more than you can afford to lose.

— Rickie Houston, wealth-building reporter of Personal Finance Insider

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