Why Even The Best Investment Won’t Beat This

Why Even The Best Investment Won't Beat This

In the past, we had written a piece about the best way to make more money. In it, we argued that the best investment you can make isn't through the traditional investment, but rather through investing in your skill development.

We then followed it up with another piece that gave you over 20 different ways to invest your money. And if you read till the end, you would've seen that there was one investment that had the lowest risk and the highest return. Once again, the best investment you can make is in your skill development

Today, we're going to show you just how much better skill development is (and how it can potentially give you over 100% return in just one year).

The Perfect World

Let's use a simple example and say that you make 3000/month. After all your other expenses are taken care of, you're able to save 10%, or 300 a month. Let's say that you do this over the course of 12 months and have 3600 saved up. You're now looking to make an investment.

You have a few options. You can invest your 3600 in:

  • In some fixed deposit
    Although it has a return of less than 5% (let's just say 5% to keep it simple), at least you're pretty much guaranteed the return.
  • Directly in stocks
    Let's pretend you have access to an online brokerage account, that allows you to buy stocks with no fees (completely not true in the real world). Let's say you're able to invest the complete RM300 in one stock and you expect it to go up 10% that year (which is actually better than the average stock appreciation).
  • In some P2P platform
    Many of these P2P platforms advertise how their returns are double digit. So let's pretend that you're going to be able to get 15%, but of course there is still quite a bit of risk in it.
  • Invest it in your skill growth
    You've noticed that your seniors at the company who are making 4000/month have skills that you're still relatively weak at. So you decide to take the suggestions made through this blog piece and start buying books and also buy into programs that really focus on helping you sharpen your skills.

You decided to trust what the blog was telling you and invested in growing your skills. You not only buy the books and the programs, but you actively go to events where people you aspire to be like hang out and spending learning from them.

One year later, it turned out that everything went as predicted.

The fixed deposit returned the 5%. If you invested in that, you would've made 3600 x 0.05 = 180, bringing your total to 3780

The Stock market also returned exactly 10%. If you invested in that, you would've made 360, and now you have 3960.

As for the P2P platform, it seems like everyone you lended the money to also paid back everything they owed, netting you a 15% return. If you invested in that, you would've made 540 and now have 4140.

As for skill growth, your boss calls you into their office and tells you that initially they thought that it would take you 2 years before you would be ready for the next promotion. However, they noticed that for some reason, you were becoming a lot more productive than your peers and they also hear your name though the network every so often.

Because of that, they want to fast track you and are offering you the promotion one year early. With that promotion, your salary raises to 4000 / month. That's an increase of salary by 33%! (4000-3000 = 1000 / 3000)

Of course, everything you invested in yourself doesn't return back as cash so you're now starting at 0. But with the new salary of 4000 (or 48,000/year), you had just got a return of over 100%. You invested 3600 and in return, got 12,000 (48,000 – 36,000), which is a 333% return.

Of course, now with the additional 15,600 in investable income, you now have more options than the 3600. Now you can start to allocate some money into other "passive income" while you continue to invest in yourself and defy how long it takes to become someone worthy of the ultimate salary you want.

Career growth in real life

Although all that is a story, it's actually one that is not unheard of. I did something like this at our full time job. And during one of the career conversations where we also talk about salary, my manager told me that I would be getting a raise of 36% (more than the story that you might not have believed). He goes on and says that I have been the fastest growing person ever to be on the team. Of course, he knows that I spend a lot of time learning everything I can, either during work hours, or out of work hours.

Will you make the best investment?

If you're not at your peak salary yet, it means that you can be doing something to get there even faster.

The question though, is do you know what you need to improve on in order to get to that next level?