The business and personal finance magazines are offering their usual advice about the best places to invest for 2007. I’d like to suggest that you look no further than you.
Imagine two 25 year-old people making $30,000 a year. One person invests $1,000 a year into seminars, books, tapes, classes, and activities that improves her productivity by 15% a year, half of which goes into her paycheck. Another spends his on season tickets, and his productivity grows by only 10% a year (more experience means greater productivity, whether or not the person gets further education), half of which goes into his paycheck. In other words, one is getting raises of about 7.5% a year and the other is getting raises of about 5% a year.
10 years into the career, she is making just over $60,000 a year and he is making just under $50,000. A significant, if not huge, difference. By the time they are 45, she is making about $125,000 a year and he is making nearly $80,000. By 55, she makes about a quarter of a million a year and he makes about half that. By 65, she is making about $500,000 a year and he is making about $200,000 a year – a really big deal.
But here is the most amazing thing. During this 40 year career, she makes $3.5 million more than he does. This little difference of 2.5% on an initial salary of $30,000 a year can make that big of a difference. What mutual fund or real estate investment offers that kind of investment return?
So, where best to invest in 2007? Perhaps you should look no further than you.