When I worked as an investment analyst, the job was to search for great investments. It was common to find good ones, but the truly great are few and far between. Even more challenging, they’re often only recognized as great investments after the fact.
Investors and financial professionals often overlook the very best investment opportunity. It’s not an individual company, a bond, or other typical investments. The best investment opportunity is often your career.
Generally, most of the money we have to invest is savings from our income. While the success of our investments is important to the ultimate size of our portfolio, the bigger driver is the amount we add out of savings each year.
If you double the amount you add to your portfolio each month, you end up with twice as much at the end. Thus, an investment plan that would provide $500,000 for retirement at age 65 would provide $1 million if you doubled the amount you contribute each month.
But how can you afford to double your monthly investments? If you could increase your income by 10 percent, 20 percent, or even 30 percent, you’d likely be able to save and invest significantly more money. To accomplish this, it would be nice if you could just ask your employer for a raise. Unfortunately, large increases in income often only arise from job changes with a new employer. The good news is that increases of 20 percent or more are not uncommon when making well-planned job changes.
Not only does the amount available to invest grow immediately, but it also grows further each year by the percentage increase you receive in the form of a raise. A $10,000 increase in the amount you can invest today grows each year, ultimately reaching an additional $25,000 to invest 25 years from now, assuming only 4 percent annual raises.
Focusing on career and income growth is the highest return, lowest risk boost to your investments you’ll find. You don’t have to double your income to double your retirement.
Bill McGinnis, CFA, is the founder of Exponential Careers, a career strategy and consulting firm in Milwaukee.