---
aliases: ["Investing in Yourself vs. Markets"]
Is A: Evergreen
Topics: ["[[topic-personal-finance]]"]
Status: Published
---
# Investing in Yourself vs. Markets
The standard personal finance advice is to maximize your savings rate and invest in index funds. This is correct for most people. But there's a prior question for founders and early-career professionals: what's the expected return on investing in yourself versus the market?

If a €5,000 course or coaching program increases your earning power by €10,000/year, that's a 200% annual return — far above market rates. The window for these investments narrows as your career matures.

Index funds are the right answer when skill development opportunities are exhausted. Most founders and ambitious professionals haven't reached that point yet.

The framework I use is borrowed from venture capital: think of self-investment as a portfolio of bets with different risk profiles. Some investments — like learning a new programming language or getting better at writing — have near-certain positive returns because they compound across everything you do. Others — like attending a specific conference or hiring a coach — have higher variance but potentially transformative upside. The key is to maintain a portfolio that includes both, rather than defaulting entirely to the safe bet of index funds because the returns are easier to calculate.

This is particularly relevant in the early years of building a content business. When I started Refactoring, the temptation was to save aggressively and invest conventionally. Instead, I spent money on writing courses, podcast equipment, design tools, and conferences where I could meet potential guests and sponsors. Each of those investments had ambiguous ROI at the time. In retrospect, the conference where I met three future sponsors returned more than any stock position I could have taken. The writing course that improved my newsletter open rates by 5 percentage points paid for itself within two months through increased sponsor value.

The critical nuance is knowing when self-investment reaches diminishing returns. There is a phase in every career where the marginal return on skill development drops below the market return on financial investment. For most knowledge workers, that crossover happens later than they think — often not until their 40s or 50s. For founders, it may never happen at all, because the optionality of new skills in a rapidly changing environment maintains its value indefinitely. The mistake is defaulting to financial investment too early, when the right move is to invest in becoming more valuable.

## Key insight
The expected return on self-investment is highest early in your career and when building a business, often exceeding market returns by an order of magnitude. The difficulty is that self-investment returns are uncertain and hard to measure, which makes them feel riskier than they are. Index funds feel safe because the return distribution is well-understood. But "feeling safe" and "being optimal" are different things. The rational approach is to invest heavily in yourself while the ROI exceeds market rates, then gradually shift to market investment as skill development returns diminish.

## Related
- [[index-funds-and-intellectual-humility]] — The complementary case for index funds when you lack information edge
- [[the-compound-effect-in-knowledge-work]] — Self-investment compounds: each skill makes the next one more valuable
- [[on-founder-energy-management]] — Investing in your own capacity (sleep, health, energy) as a form of self-investment
- [[topic-personal-finance]] — Broader personal finance thinking
