The Best Investment...

The best investment...is you. Or so says Warren Buffett at the last annual meeting accorfding to OID's most recent edition.

What he is talking about...well Buffett says he meets a lot of young adults (probably all those college students from undergrad Business and MBA programs) and many of them he is willing to give $100,000 for 10% of their future earnings..thereby valuing them as a "business" investment that will produce a milion bucks (and probably more) over their life times.

Why does he do this....because at the heart of it..all investment is about investing in people. So Buffett beleives that the best thing you can do with your money is invest in yourself.

What does that have to do with your own persoal investments...for me plenty.

It is the old saying of give a man a fish..or teach him to fish...

Before you figure out what comapny and its people to invest in...take some time and invest in yourself. Read some books on investing, learn how to read financial statements, do a discounted cash flow analysis, etc. Believe me..if your just starting out it will pay off.

We are all CEO's of companies called our families....most of us get a paycheck (revenue or sales of our time) spend money on gas, clothes and food to get that paycheck (cost of goods "our time" sold) spend money to aquire things that will help us keep on making that paycheck like a house, car (capital expenditures) ...i could go on but I think I made my point.

After we pay all the bills we got some money left over..thats the eps ...the decison then is where to distribute it...do we reinvest it into ourselves...and grow our business...or distribute it as a dividend to spend or save?

well for me...Before you figure out what company and its people to invest in...take some time and invest in yourself. Read some books on investing, learn how to read financial statements, do a discounted cash flow analysis, etc. Believe me..if your just starting out you are probably going to get a better return on your money by investing in yourself and growing your knowledge base than you will rushing into investing....or askign someone else to make the decisons for you.

Once you have spent enough time to learn about investing you will get to the point where you will find that you will not be able to acheive any more growth in your knowledge base at a high rate of return (the law of diminshing returns apply here as well...the more you learn the less there is to learn easily...) you will find than that you will have a better use of your money by investing in other people and the companies they run...

I am not saying that you should ever stop growing your knowledge...my point is that when you are starting out like I am it is pretty easy to learn something because you can pick up just about any book on investing and learn something pretty quick...so you might be better off buying a $20 book than a $20 stock...your ROI maybe higher...

once it is not so easy to learn something... your knowledge is no longer a growth stock but a divdend paying stock... than focus on investing those divdends in the stock market...and keep on learning to enhance those invested dividends...

Once you start thinking about yourself as a CEO of a company it gets alot easier to understand what Graham said (and Buffett takes to heart) when he talked about sound investing is most sound when it is business like.

Hope this all helps. Take Care.

Steven