The resource for personal investors.

Why the best investment is in yourself

When you're buying a share in a business, you're hoping that the business will be well managed, and will rise in value.

As a person you have a 100% share in yourself - you're effectively your own mini business. You can invest in equipment and skills to do your job better, and to earn more money.

If you're able to invest £10,000 in yourself, and it will result in a £5,000 increase in annual income over the rest of your working life, that is an incredible investment. You will almost never get that level of return by buying stocks in traditional businesses. But you can by investing in yourself.

As an example, take a scientist working for the National Health Service in the UK. To progress to the next level, she needs a masters degree. If the master degree costs less than the expected gain in future earnings, then it's a good investment.

The biggest levers you have to improve your financial situation are to increase your income, and to reduce your outgoings. If you can make an investment which dramatically increases your income, or reduces your outgoings, then you should do so.

Examples of reducing outgoings are paying off a mortgage, or getting a more efficient heating system.

Investments in stocks and shares are for excess capital, which can't be deployed more efficiently elsewhere. By investing in yourself first, by improving your income and reducing your outgoings, you can gain more in the long run to invest with.