What are best things to invest in (question asked of me on Quora)?

There is only one “thing” that you can invest in that has the potential to reliably yield returns that are significantly higher than individual stocks (or the entire market), real estate, bonds, and all of the other “popular” investments.

This is one of the best kept-secrets in the world of investment, and I’m about to let you in on this secret. Warning: Once you’ve learned what I’m about to share with you, there is no “un-learning” it. What you do with the information is up to you.

The World’s Greatest Investment is… You.

Some may read the above statement and think “wow, that’s cheesy” or “…such a cop out answer — I wanted to hear about flipping houses, recommended stocks, currency arbitrage, hedge strategies, and more,” hear me out — I’m going to explain how investing in yourself can effectively be the best investment you can make — not only in a “touch-feely” kind of way, but also in terms of cold, hard cash.

Investing in yourself will not only yield greater financial returns than investing elsewhere, but will also result in significant personal growth. You’ll build skills, confidence, and passion, which will serve you well for the rest of your life.

Let me explain.

The question “What are the best things to invest in?” can be tough to answer without getting some additional details. The “best” investment choice for you depends on your goals, your age, time horizon, and your financial situation. But there’s one investment that is never a mistake.

If you’re anything like me, you’ve often gotten the feeling that you’re not tapping into your true potential — like there is so much more out there for you, but that certain things are getting your way. These things generally relate to a feeling of “lack” — you feel as though something is missing. Some of the common things that we feel that we lack are:

• Time
• Energy
• Money
• Knowledge or Ability
• Passion/Motivation
• Security/Peace of Mind
• Love

And when we come from this place of lack, we often limit our true potential because we don’t even know what is possible for us; we don’t know what we’re capable of.

If you’re caught up in the trap of self-doubt, lack, or you just feel as though you haven’t tapped into your true potential, I recommend reading some books. A good place to start would be:

• The Compound Effect by Darren Hardy
• Think and Grow Rich, by Napoleon Hill
• The 7 Habits of Highly Effective People: Powerful Lessons in Personal Change by Stephen R. Covey
• and there are many more…

To become all that you can be, it’s important to get in touch with the thoughts, feelings, and “reasons” that are holding you back from your full potential. I could probably write a book on the topic of mindset, however, I’ll simply state that mindset is often the main thing that holds people back from achieving all that they are capable of.

Once you feel as though you’re in the right mindset, it’s time to master the steps of self-investment success!

Four Steps to Self-Investment Success

1. Learn
   1. Choose topics that interest you. Don’t pressure yourself or shoot your ideas down just because you don’t see how you’d ever make money by learning about “X” — whatever “X” may be. Maybe you want to learn about African Dance, but can’t see how you’d ever make money from that — but don’t worry about this right now. In the worst case, the subject that you learn about may end up being “fuel” for connecting with people in new ways — which may ultimately lead you to new opportunities.
   2. Find books, workshops, and local events focusing on the subject. You can search Amazon for books, do a Google search on the subject, or check out Meetup.com to find local people who share the same interest. You can also check out Coursera to search for online courses.
   3. Read these books, attend these events, and take these courses.
2. Do
   1. Just to clarify, “doing” may not mean jumping in wholeheartedly. While some may recommend “ripping off the band-aid” or jumping into something fully, you may not be ready for that, and that’s ok. We’re talking about smarting small. Baby steps will help you to determine whether or not you’re on the right path.
   2. With certain subjects, “doing” automatically goes along with learning. You can’t truly learn to play the piano without having a piano in front of you. With other subjects, though, you’ll need to put yourself out there. You may “academically” learn to write by reading books on how to write books, or studying Strunk and White’s “The Elements of Style.” Unless you put yourself out there by attempting to write, you may not know if you truly enjoy this activity, and you certainly won’t be able to gauge your level of ability or improve… which leads me to point “b” below:
   3. Get feedback. Recognize that when you get started with something new, you may not be an expert. All outside perspectives have the potential to benefit you as long as you keep an open mind. Some people may not be supportive and may be critical of what you do because of their own issues or fears — be careful not to let them crush your spirit. At the same time, listen for potentially valid feedback on how you might approach your craft better. This applies to everything, from writing — to sports — to running a business.
   4. Going along with point “b” above, find ways to get consistent feedback, and to be held accountable. In business, consider joining a group such as Vistage — something that will enable you to get honest feedback from peers (who have shared many of your experiences). Or go to networking events and work on forming your own peer group.
3. Reflect
   1. Are you enjoying what you do? Do you feel that you are building momentum? Note that not every moment may be enjoyable — even if we have certain “natural talents,” things don’t always come easily. As Angela Duckworth said in her TED Talk, the largest predictor of success is “grit” — the ability to push yourself and power through tough situations — so don’t give up too easily.
   2. Do you feel as though the new skills that you’re learning or experimenting with are a good use of your potential? Do you feel like you’re “in the zone” when learning, growing, and practicing this activity? Or do you feel that your time would simply be spent better elsewhere?
   3. Many people stay in the same job for years (or perhaps for life) because they are simply afraid of the unknown. They have a gnawing feeling that they are capable of so much more — but it is easier, safer, and “financially responsible” to stay where they are. Does the skill that you’re learning and practicing help you to feel more alive than you’ve felt in a while? Through this skill, do you feel as though you can be your best self? If you are stuck in a job that you don’t like, does dreaming about leaving this job to work on “X” excite you?
4. Decide to Make a Change
   1. Here’s where you take action. The earlier steps are baby steps to help you to get your feet wet. Here’s where you basically make a choice. No choice is 100% permanent, but by committing to something and declaring it, you will remove a lot of the doubt in your mind.
   2. This does not mean that you have to immediately quit your job, sell your house, and move to Tahiti to open that surf shop! Smaller decisions are ok too — maybe instead you commit to an intermediate step, like meeting and interviewing ten surf shop owners within the next six months — and saving the money to allow you to travel and do this. The important part is that you remain in motion. Don’t let fear stop you — continue moving toward a goal.

The above process is not a “one and done.” It’s actually an ongoing cycle. For instance, I happen to be experimenting with writing as we speak. While I’ve done a fair bit of writing in the past, I’ve had thoughts and dreams of writing a book. I’ve started smaller by beginning to blog part-time, and posting on Quora.

You may also be at step #1 when it comes to one of your hobbies/interests/professional goals, and step #3 on another. For example, I’m probably at step #2 when it comes to writing — but I’ve already completed step #4 when it comes to starting and running a business. It’s ok for you to explore multiple ideas at once — as long as you recognize that you only have 24 hours in a given day; dividing your focus too much is a recipe for failure.

Here’s The Best Part

Yesterday, I answered a similar question similar to this one on Quora, and then also posted the answer to the On.Cash blog, where a reader commented. The reader, Fille De Finance, pointed out that there are so many free resources, and that investing in one’s self does not necessarily mean spending a lot of money.

I feel lucky and blessed to be living in a time when information is literally at our fingertips. If you’re reading this post, you likely have access to a computer or a smartphone — which means that there is so much information available to you — and not all of it costs money.

I have found numerous books for $0.00 at eBookDaily. These are Kindle books, and even if you don’t have an Amazon Kindle device, you can read these on your smartphone or computer using the Kindle app.

There are literally hundreds of millions of blogs, many of which contain very useful information. If you get creative, there are so many ways to find free information.

More than that, you can use the Internet to connect with people who have common interests and to reach out to people who may be able to help you to learn, grow, and explore.

Risk & Return on Investment (ROI)

So let’s not forget that when investing, there is the expectation of return. When it comes to the stock market, there’s no telling what it will do. If you had invested in certain stocks in October 2007, when the Dow Jones Industrial Average had exceeded 14,000 points, you would have been mighty upset in March 2009, when it reached a trough of about 6,600. There’s always risk in any investment.

What’s the risk when you invest in yourself? Well, there’s risk that you won’t be very good at what you’re trying to achieve — or that you won’t like it — or that it won’t yield any positive financial results. Ultimately, there’s the risk that you’ll spend time, and perhaps some money, and that it won’t get you anywhere financially. One of the main risks is to your pride. Keep in mind, though, that growth cannot happen without failure.

So what’s the upside? It’s significant.

1. You’ll learn about yourself; what you enjoy and what you do not enjoy.
2. You’ll be able to “cross something off your list.” If you don’t explore the dreams and ideas that “light you up,” you’ll be left wondering. You’ll use your energy thinking about what “could have been” because you never fully explored the possibility.
3. You’ll get better a things. Maybe your idea won’t work out or won’t make you any money — but it’ll give you a new, unique perspective that you can share with others, and a good way to make conversation at a party if nothing else.
4. You may just do very well, financially — or you may achieve enough success for this to serve as your starting point.

With regard to #4, there’s a significant chance that you will be successful. If you’re smart about it, there’s very little downside in investing in yourself, but a ton of potential upside.

This is a concept that experienced investors often call “Asymmetric Risk and Reward.” The amount that you are risking, if you were to lose it all, is much less than the amount of the potential return or upside.

I’ll give you an example of what investing in myself did for me, personally. Sharing personal details is a bit out of my comfort zone… but here goes.

When I was in high school, I dabbled with starting a business that would provide web hosting and data center services. This was really before the days of the Internet, but I was intrigued by all of the potential that I saw in the Internet.

Here are some examples of how I followed the four step process outlined above:

1. Learn: I read what I could about web hosting and the Internet. In the early 1990’s, information was more scarce, but I read books, dialed into online bulletin board systems (one might consider these an early version of the Internet), and talked to people who knew more than I did.
2. Do: I pitched car dealerships and realtors on my ideas to images and descriptions of car and real estate inventory online. I guess they didn’t take the 16 year old kid seriously or think that this “Internet thing” would really take off. Bummer. I continued to “do,” though — I learned about web programming (both HTML/design and web-database integration) and found a couple of clients for whom I built sites, and hosted them. I also launched a free redirection service that provided customers a faster, shorter URL for their long web addresses. This is back when domain names still cost about $75/year. I learned a lot about programming and running a small business.
3. Reflect: I continued to run this side business throughout college, periodically reflecting on where I was and where I could be. I came up with new ideas and plans for the future. I realized that I enjoyed what I was doing — and that I was pretty good at it.
4. Decide: After college, I worked at a startup company and did some consulting. After the startup went out of business, as many did in 2000–2001. I made the decision that I was going to get my own business going, full-time. I started small, but I did make the conscious decision to devote nearly 6 months to writing code to expand my free redirection service into a hosting business. This ultimately led me to build a business that grew to multiple millions of dollars in revenue annually and over 30 employees.

Now, don’t get me wrong — it may sound “simple,” but it certainly wasn’t easy. After spending about 6 months of developing software and living off of savings, my business launch was far from an instant success.

In the first week, my total sales were about $10 — not exactly the pot of gold that I had imagined at the end of the rainbow. But I pushed myself to learn more about what I was doing wrong and what I was doing right. Eventually, $10 weeks turned into $10 days ($70 week). And with more patience, hard work, and hope, a few months later I had my first $1,000 day! This money was not all profit; I had expenses in running my business.

And even after hitting $1,000/day, I had the naive idea that I had “hit it big” and that I was now “set for life,” only to discover that as much as I tried to automate this business, there were things that I just couldn’t automate. It was a lot of hard work, and I was initially on-call 24/7, 365 days per year. Eventually, I hired people and got help. While running a business was certainly not easy and did not always feel like I was “living the dream,” the experience that I gained was immensely valuable to me, and will benefit me for the rest of my life.

I ran the business for many, many years, and only recently, I merged my business with another business.

I invested in myself — not only financially, but in terms of time and effort to learn as much as I could about a particular subject. I spent a lot of time reading and speaking to resources who knew more than I did. I spent time learning, coding, and experimenting. As I built up my confidence, I decide to spend some money — investing in hardware, software, and staff resources to build my business.

While I look back, I realize that without investing in myself, none of this would have happened.

So what was my true ROI?

I can’t say that the below example is 100% accurate, but it should give you a rough idea.

1. Years 1–4 were spent primarily learning and experimenting — running the business as side business. I probably spent a few hundred dollars per year in books and other resources. Total investment, $2,000 at the most.
2. Years 5–7: I experimented more seriously and probably spent about $5,000 on hardware. I earned a few thousand dollars each year, paying back the $7,000 spent to date, with a few thousand dollars to spare (my total business earnings might have been around $10,000).
   1. A “side” benefit here was that although I had my Bachelor’s Degree in Computer Science, it was largely the learning that I did on my own that enabled me to land a very well-paying career as Chief Software Architect for a startup company out of school — earning well into six figures when I would never have been able to do so with my schooling alone — BINGO — instant ROI.
      1. If we simplify this example and assume that $7,000 was invested and that five years later, I made back $10,000 through my own business, and landed a career that earned me at least $50,000 annually more than I would have made otherwise, we are talking about an ROI of over 50% annually over the course of those 5 years. Ok, so yes, I also spent a lot of my time on learning growing… but when you look at the pure financial impact, it’s undeniable that my self-investment made a huge difference. I actually held that job for almost two years, further increasing my returns.
3. Year 8: I began to work on my own business full-time, and invested about $30,000 into new hardware after seeing some success. I believe that my “profit” was about $50,000 that year. It was grueling — I worked 24/7, and while I loved a lot of what I did not, I didn’t love all aspects of running a business.
4. Years 9 and beyond: While I won’t expand on every detail, I will say that most years, I was often able to pay myself as much as I would have probably earned at a “job,” if not more. I continued to learn a lot, and built a valuable asset that is still serving me today, both financially and in terms of my own personal growth (helping me to build knowledge and skill, and to create additional opportunities).

Moving forward, what was better was that once I got the business going, I was often able to reinvest profits while still paying myself a reasonable salary — and grow the business even more. Sure, there were tough years when I couldn’t pay myself much at all — but there were also great years.

Before I felt like the business had solid momentum, I made financial investments that felt very speculative. While I had some confidence that I would succeed, I wasn’t quite sure if I would. I spent money that I had earned in other ways (i.e. not produced by the business). This was a bit scary, and a bit exciting. If I do rough math, I’d say that annual returns are easily well over 50% per year.

Where else can you get a 50% annual return on investment?

What is more is that this investment in myself has already had an impact on me personally that I will take with me for the rest of my life.

Seasons change and markets go up and down, but investing in yourself is the only surefire way to yield lifelong benefits.