The Best and Worst Investments

What is the best investment that you can make at an early age?

Before I answer this, allow me to give a little background of my own history.  I had my share of risk taking in my younger years.  I am much more conservative now, although I still like to dabble in mining stocks.

I advocate a permanent portfolio for relative safety.  Preservation of wealth should be your main goal unless you are swinging for the fences.  Even if you are swinging for the fences, it is still better to have some money tucked away that is secure.

The worst investments I ever made were in options.  At least I never bought futures.  With options, you are at least limited in your losses. I had some success with options early on, but ended up losing money.  It was my own swing for the fences.

I have traded individual stocks over the years, but there is nothing that really sticks out.  I have had winners and losers, just like anyone else who trades individual stocks.  I bought Groupon early on, and that has been a loser.  I bought a few ETFs that I held onto too long after the financial crisis and stock crash back in 2008/ 2009.

My biggest fault in trading individual stocks was the fact that I sold my winners too soon.  I bought Amazon in the late 1990s, but I was in and out.  If I had held onto it, I would be up by 10 times now.  Of course, that would have been over the course of over 17 years.

I also bought Apple in the 2000s.  I sold it for a decent gain, but I would have made much more if I had held the stock.

I had a good run with some mutual funds that invested in mining stocks before they turned down around 2011.  I have had some losses since then, so it is hard to brag too much about the gains.  You have to count both sides.

There are two things I consider my best investments.  The first was buying gold around the year 2000.  Even with the gold price significantly off its all-time high, I am still up about 4 times the nominal dollar investment.  I first bought when it was around $300 per ounce.

The second best investment was putting some extra money into the principal amount of my mortgage.  This was over a decade ago.  At that time, the rate was near 5%.  When you can get a tax-free rate of return that is guaranteed at near 5%, you should almost always take it.

There is one investment I didn’t make when I was young that I wish I had made.  This may sound cliché, but I wish I had invested more in myself or in some kind of side business.

When I think of the opportunities missed, especially in the beginning era of the Internet, it makes my head spin.  When I was swinging for the fences with options, I should have been using that money to try different side businesses.  Sometimes it is worth taking a thousand dollars and just trying something to see if it takes off.  If I had done that once per year for five years, I think something would have stuck.

The first question of this post asked: What is the best investment that you can make at an early age?

My answer is that the best investment is investing in yourself.  Actually, this probably applies to almost any age.

If you can gain valuable skills, learn the ins and outs of a particular business, learn how to build a web site, learn how to build an app, learn how to write copy, learn how to market your products, etc., then you will be set.  You will likely make more money from these skills than you could ever hope to make with traditional investments.

I still focus on financial investments and helping others because I think it is important to preserve the wealth you have already accumulated.  But your income minus your expenses (your savings) is going to determine a lot about your wealth.  It is likely going to matter a lot more than your financial investments.

I think a lot of people waste money paying financial advisors.  I think a lot of people also take unnecessary risks in the stock market that could end up really hurting their net worth.  This is why I recommend a permanent portfolio for simplicity and relative safety.

The lesson here is: Invest in yourself.  This isn’t what most people want to hear, but they should take the advice.  For your actual savings, I recommend keeping a majority of it safe and sound, or at least as safe and sound as is possible in this uncertain world.

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