Benefits of starting early in investing

From: alexhormozi

While traditional asset investment offers long-term benefits, the most significant returns in youth may come from investing in oneself to dramatically increase earning potential [00:00:40].

Traditional Asset Investment

Investing in assets like the S&P 500 or real estate at an early age and maintaining it for an extended period can lead to wealth accumulation [00:00:30]. This approach is considered a very safe way to live life [00:00:37].

Prioritizing Self-Investment for Maximum Early Growth

For individuals in their 20s and 30s, or at any age, the speaker suggests that the most impactful investment is in education that directly increases earning capacity [00:02:13]. This strategy allows for a much faster compounding effect than typical 10% annual returns from traditional investments, potentially doubling, tripling, or even tenfold increasing one’s earning capacity [00:06:56].

The Problem with Early Asset Investment

The moment one starts investing heavily in the asset side (like S&P stocks, not day trading) early in their career, it can signal a cessation of the desire to make more income [00:00:40]. This is because the focus shifts from actively increasing earning potential to passive growth.

The Power of Increasing Earning Capacity

Your ability to earn money, provide value, and solve problems for others is the true driver of wealth [00:01:41]. The greater the value of the problem you solve and what you charge for it, the more you can earn [00:01:51]. This earning capacity, whether through services or products, is what generates wealth [00:02:05].

Practical Application of Self-Investment

It is recommended to live frugally and invest 100% of excess money into education that enhances earning capacity [00:02:19].

• Example: Phlebotomy Certification

  • An 18-year-old with only a high school diploma could, in two days, become a certified phlebotomist by spending around $500 [00:01:10].
  • This instantly increases their hourly wage from minimum wage (e.g., $7.50)to$25 an hour, tripling their earning capacity for the rest of their life [00:01:14].
  • This $500investmentyieldsafargreaterreturnthanpassiveassetinvestments,especiallywhenstartingwithlimitedcapital<aclass="yt-timestamp"data-t="00:01:24">[00:01:24]</a>.A$25/hour job translates to a $50,000 annual income [00:02:30].

• Continuous Learning

  • Excess income (e.g., $25,000annuallyor$2,000 monthly) can be continuously invested in courses, coaching, mentorships, workshops, and seminars [00:02:43].
  • This approach, sustained over four years, can lead to earning significantly more than individuals with traditional four-year degrees, with earning potential beginning within the first year [00:03:27].

• Targeted Skill Acquisition

  • Instead of seeking a single “savior” or “everything” from one person, view each investment as a “class” within your entrepreneurial degree [00:04:23].
  • For specific skills, such as media buying or ad running, pay someone who teaches it [00:03:55].
  • Learning from individuals who provide valuable free content (e.g., Instagram, YouTube) reduces the risk of paid purchases, as you already know their style and value [00:04:41].
  • Don’t over-analyze; give yourself about seven days to decide, or even buy all available materials to learn what everyone knows, becoming equally or more proficient [00:05:09].

Building a Skill Stack

Skills stack exponentially [00:06:20]. For example, a videographer can add editing skills, then learn social media messaging, copywriting, branding, management, operations, and leadership [00:06:22]. Broadening one’s horizon and deepening knowledge in various “silos” leads to a dramatic increase in pay, potentially transforming into an entrepreneur [00:06:37].

Strategy Summary

1. Avoid wasteful spending: Do not spend all your money on “stupid stuff” [00:06:44].
2. Invest in yourself: Allocate funds not to the S&P 500, but to “snme” – yourself – as this investment compounds significantly faster than typical market returns [00:06:46].