Is this the best investment you’ll ever make?

You are the average of your five friends.

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Investment Lesson

For anyone that’s taken my advice before, you’ll know that I believe the best investment you’ll ever make is yourself.

As Ben Franklin said:

“An investment in knowledge pays the best interest”

Sure, you could invest some money to beat the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) and achieve 10% plus per year, on average. Sure you might, like I did, even get lucky and make many times your money in one year.

But nothing will compound over many years like your knowledge can. That’s why children go to school — and not adults.

Here’s how you can effectively invest in yourself for a lifetime of dividends.

3 ways to effectively invest in yourself

1. Invest in colleagues, friends and family

There’s a saying — which I believe to be true — that you are the average of your five closest friends, colleagues or family members. I don’t know about you but I spent a big part of my life escaping toxic or cynical people.

I remember when I was young and impressionable an older family member told me one night, “don’t look up at the stars, most of them are satellites.”

Another said (about my high school sweetheart — now wife), “at your age, it’s not worth having a girlfriend — go out and enjoy yourself”.

I’m not chasing a crowd of people to agree with me — I think groupthink is very dangerous to a person’s wealth and health. You can do that on social media with a ‘like’ or a ‘follow’ button, if you are so inclined.

However, I believe it’s important to separate yourself from overly negative or cynical people. It’s easier said than done, of course, especially with family. But, candidly, simply because someone is family does not mean you need to like them, hang around with them or — most importantly — be influenced by them.

I’m actively looking for people who can improve my level of happiness and my skill in investing — not drag it down.

2. Pay yourself an hour each day.

Billionaire Charlie Munger, a lawyer and the long-time investing partner of Warren Buffett, believes that successful people “compound time”. Farnam Street, which is likely one of the world’s best blogs, quoted him as saying, “Go to bed smarter than you woke up.”

But that’s not all, like my first point above, you owe this time to your friends, family and colleagues.

Here’s Charlie again: “the best thing a human being can do is to help another human being know more.”

The easiest way to do that is to pay yourself an hour each day. Use it to read a book, paper, blog or — of course, this is the best idea of all — my articles.

You may also simply need time to clear your mind and go for a run, walk, yoga, gym, etc.

Doing nothing can sometimes be more important than doing something” – Joe Hyams.

I (try to) read an hour each day before work. It’s not easy and I’m a slow reader, but it’s a great way to start each day.

3. Learn for reward

You’re busy. I’m busy. Everyone is busy. However, you must invest some time to your intellectual development if you plan to get ahead.

Don’t drop the spanner to become a surgeon right now. But if you’re like me and procrastinate it might be a good idea to enrol in formal education part time or online.

Australians have no excuse. Our education system is one of the best in the world and — for all intents and purposes — it’s free. Sure, HECs comes off your tax bill. But you only pay tax if you earn money. And you only pay HECs if you earn good money.

Foolish Takeaway

You probably clicked on this article looking for my view on some ASX share like Commonwealth Bank of Australia (ASX: CBA) or a ‘hidden gem’ small cap.

If you engage your brain and apply it to investing in another sense nothing will compound as fast as your knowledge.

But, heck, some people just want the answers, right…

Wondering where you should invest $1,000 right now?

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Motley Fool contributor Owen Raszkiewicz has no position in any of the stocks mentioned. Follow Owen on Twitter @OwenRask. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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