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
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-
, 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
Stories you might have missed
3 crucial investing lessons I’ve learned the hard way
Educator and writer Allison Nichol Longtin isn’t new to wealth-building, but she says her failures have given her multiple takeaways about smart investing.
I want to be a millionaire by 40, so I asked financial advisors and accountants for their 6 best tips
Entrepreneur and writer Jen Glantz consulted financial advisors and tax experts to identify the patterns they’ve seen in clients who have become self-made millionaires.
3 steps to earn passive income from real estate, according to a 29-year-old who did it
Software engineer CJ McGlown wanted to earn passive income from real estate without having it become his occupation. See how he purchased a property that earns him $12,000 a year.
The best investment apps to use right now
Whether you’re a hands-off investor who prefers automated accounts or a DIY trader, we’ve compiled a list of both the best and most inexpensive investment apps for you.
Enjoying this newsletter and want to recommend it to a friend? Here’s a sign-up link.
Have feedback about this newsletter? We’d love to hear it. Get in touch at [email protected]