From Trial and Error to Investing Success
Tess Waresmith’s journey to building a $1 million portfolio was not without its setbacks. The 36-year-old founder of Wealth with Tess learned the hard way, making costly mistakes in her early 20s. But it was her determination to take control of her investments that ultimately led to her success.
The Importance of Self-Education
Waresmith’s initial mistake was trusting a financial advisor who charged her high fees and created an underperforming, overly complex portfolio. It wasn’t until she took the time to educate herself on investing that she realized she could do better on her own. Today, her portfolio is a testament to the power of self-education and diversification.
Starting Simple
For those looking to replicate Waresmith’s success, she advises starting with the basics. “My No. 1 investing philosophy is to learn as much as you can about anything you’re interested in and diversify,” she says. This means beginning with index mutual funds and exchange-traded funds, which offer a low-cost and easy way to gain exposure to a large swath of the stock market.
The Benefits of Index Funds
Index funds are a favorite among investing pros for two key reasons. Firstly, they’re inexpensive, with annual fees as low as 0.03% of assets. Secondly, they provide broad diversification, mitigating the risk of a downturn in any single asset. “Index funds are a great way to get started and to understand the basics of the stock market,” Waresmith explains.
Broadening Your Horizons
While Waresmith’s portfolio includes real estate and cryptocurrency, you don’t need to venture into these areas to diversify your portfolio. The key is to educate yourself and understand the risks involved. “If you have a good portfolio and you want to take a little bit of money and learn, there’s so much power in knowledge,” Waresmith says.
Managing Risk
When exploring new investment opportunities, it’s essential to be aware of the risks involved. Some investments, such as cryptocurrency, can produce harshly negative returns. To mitigate this risk, Waresmith advises allocating no more than you’re willing to lose on more experimental portfolio holdings.
Building a Solid Foundation
Before expanding into riskier investments, it’s crucial to have a solid foundation in place. This means establishing a diversified portfolio with a strong core of index funds. “Expanding into riskier investments is not something I would necessarily suggest to someone just starting out,” Waresmith warns.
By following Waresmith’s advice and taking control of your investments, you too can build a successful portfolio and achieve your financial goals.
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