36-year-old self-made millionaire reveals her biggest investing mistake: 'Tough to identify...'

Tess Waresmith encouraged people to get at least a basic understanding of investing before depending upon a financial advisor to make all the calls. (Image credit: LinkedIn)

Financial advisor Tess Waresmith has more than $1 million in stocks, real estate, and other investments. As she made most of her fortune on the stock market, she recently shared with CNBC Make It some of her biggest investing mistakes so that other budding investors don't follow in her footsteps.

“With stock market investing, I was really afraid to do it wrong, so I hired a financial advisor, and they made a lot of really bad decisions on my behalf,” she told the publication. “I was paying over 2 percent in fees. They sold me an annuity better suited for people in their 50s. I was 26.”

Waresmith encouraged people to get at least a basic understanding of investing before depending upon a financial advisor to make all the calls. “It’s tough to identify red flags if you don’t have basic knowledge of investing. And when I say basic knowledge, I mean reading one or two books or taking one course,” she told CNBC Make It. “You don’t have to have a Ph.D. in investing or be an analyst, but I didn’t really see red flags, because I wouldn’t have even been able to recognise them back then.”

In her case, since she wasn’t too familiar with investing initially, Waresmith didn’t immediately realise that the advisor she chose was running a suboptimal strategy on her behalf. It took her a while to find out that her portfolio was lagging the market because her advisor had chosen underperforming mutual funds and because the high fees were eating into her returns.

Moreover, instead of charging a flat rate, her financial advisor charged a fee equivalent to 1 percent of the value of her portfolio, plus a 0.25 percent to use the advisor’s online investing platform.

Waresmith then cut ties with her advisor and tried to keep things simple. She opened her own account and invested in low-cost index funds.  Over 10 years until June 2024, about 29 percent of active funds survived and outpaced their average indexed peer, Morningstar reported.