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$1000 returning 15%/year compounded over 50 years is $1,083,000.

$1000 returning 8%/year compounded over 50 years is $47,000.

Thats a difference of 20 fold, and is one of the key reasons why you should start saving money today. As you read this, youre probably thinking, Wow! Id better learn to invest in stocks better! That 7% could be the difference between a $50,000 retirement fund and a $1 million dollar retirement fund in 50 years!

Awesome! Enthusiastically, you start learning about all the ways to value a company. Price over earnings ratio low, good! No debt good! High ROE great! On and on you learn, about all kinds of dips and rises in technical analysis. Supply is low! Demand is high! Its hit a 20 day support! Its hit a 50 day peak! It all sounds like it makes sense at the time. Youve learned an awesome system. It should work right?

Except sometimes it doesnt. Stocks that hit their 20 day lows fall further to hit their 50 day lows, then 100 day lows, then 200 day lows whoops! All of a sudden, that infallible system seems like complete garbage! And it is because you only had a vague idea why it works in the first place. When you dont know where the money is coming from, its hard to know why it doesnt come anymore!

Maybe you try again and again and eventually, you do succeed a bit and increased your average yearly earnings to 12%. You pat your self on the back and congratulate yourself. That is great! Youll have $289,000 in 50 years! Yay! Thats over a 4 fold increase that you can enjoy in your retirement!

Wait. before you celebrate though, think about you much youve actually made this year. You have made an extra 4% on your $1000. That is a grand total of $40. With those hundreds of hours you spent analyzing stocks and learning about them, you couldve been working near minimum wage at $10/hour and still have made a few thousand extra dollars!

But Ive learned how to get better than market returns now! you say, Some years from now, all this hard work will pay off and Ill get superior returns! Well, lets see just when this hard work actually pays off! Say you are holding a pretty decent job at $50/hour, and you spend 15 hours/week studying companies and analyzing stocks. That is a total of 780 hours per year, valued at $39,000! So in order to justify spending that time this year, youll need to have invested $975,000! You need almost a million dollars and a sure 4% increase to breakeven on the amount of time you spent on it!

That would mean an absolutely no risk 4% increase from the market returns (since the job holds about no risk). If you make less than 4% or even lose money, then the opportunity cost of your learning experience is even higher! Remember that this % is relative to the market index though. For example, if the market gained 15% this year and you only made 11%, then youve lost 4% relative the alternative of just investing in the market. In these situations, not only have you lost the $39,000 (for this year), you would also have lost $40 more (from the 4% loss on your $1000), and you wouldve lost the interest on the $39,040 compounded for the rest of your life (at 8%/year, thats $1.8 million)! Consider very carefully whether the knowledge youve gained is worth that! Will you really make $1.8 million of value (50 years from now) from the current knowledge youve gained?

Isnt it quite possible that what youve learned isnt correct? Or what if you never gain enough capital ($975,000 is a decent chunk) to actually make the difference in returns significant? How would you get that money if you focused all your efforts on learning about the stock market? As mentioned in How To Learn To Make A Good Investment. how does anyone know their skills are beating the market without having enough information?

With all of these uncertainties in the future and regarding the value of the skills learned, its exceptionally hard to value the knowledge you gain from spending that much time learning about stocks!

In these situations, it seems to make more sense to just focus more on the short term. Ask yourself, Will I gain more this year (or over the next few years) by learning about stocks or just improving my skills/working hard? Without capital near a few million dollars (and probably even then), it seems wiser to just build your business or career!

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