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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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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.
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Rickie Houston, CEPF
Rickie Houston is a wealth-building reporter for Business Insider, tasked with covering brokerage products, investment apps, online advisor services, cryptocurrency exchanges, and other wealth-building financial products. He is also a Certified Educator in Personal Finance (CEPF). Previously, Rickie worked as a personal finance writer at SmartAsset, focusing on retirement, investing, taxes, and banking topics. He’s contributed to stories published in the Boston Globe, and his work has also been featured in Yahoo News. He graduated from Boston University, where he contributed as a staff writer and sports editor for Boston University News Service. Learn more about how Personal Finance Insider chooses, rates, and covers financial products and services »
Saving alone seemed like a safer option.