In my last few posts I’ve been trying to model net worth over time as a function of savings. In my last post, I used real historical market data instead of a constant 6%. Looking at a few scenarios, the market returned more like an average of 9.5% over those time periods.

I still think you should use 6% in your plans (if it’s actually 9.5% in the next 60 years, then that’s good news—you can make adjustments every decade if you are way ahead of plan).

Reminder: I am not a financial advisor and this is not advice. I don’t know anything about your personal situation. Talk to a fiduciary if you want advice.

But, you might think: “I bet I can beat the market—I understand tech/bitcoin/stonks better than most people.”

It’s not likely.

S&P keeps a scorecard of actively managed funds against their benchmarks. In a single year, active funds may do ok against the market, but go to page 9 and look at their longer term performance. 75% don’t beat the S&P 500 over 5 years, and 94% don’t beat it in 20.

These are funds with professionals with a staff who spend all day, every day thinking about this and are paid based on performance. You can beat 94% of them by just putting your money in an index fund.

But, then what do you do with all of that free time?

To beat the market, remember that you are also a player in a market. If you work full-time, you are in the labor market. You could also create products and sell them (in the market).

Look at your current net worth. To pick a random number, let’s say it’s currently 100k. If the market returns 6%, you’ll have 6k more at the end of the year. If you try to beat the market by picking stocks, and get 10%, you have made $4k more. Let’s say your net worth is $500k. Working to get that 10% return will get you an extra $20k.

Is this really the best way to make an extra $4-20k? It’s not a sure thing—you might not beat the market (like over 50% of active managers each year). You could lose money.

So, instead, invest in yourself.

To “invest” in the labor market, you could take courses to make yourself worth more and then either ask for a raise or change jobs. You could raise your profile with an open-source project, writing, or by giving talks. You do not need to be “famous” to do this. Your projects or work don’t need a million followers. You could beat the market with a few dozen.

Outside of your job, you could seek side-income. If you make $100/hour, you only need 40 hours of consulting (less than 1 hour/week) to “beat the market”. Technically, you beat the market in your first hour.

Or with your first sale.

And there aren’t a lot of costs to consulting, e-books, or software (other than your own time). But, at least you know that the time spent will net a positive return. Even if you make no sales, it’s pretty likely that you have made yourself more valuable.

If you spend 40 hours and make $4k in the market, that’s a one-time effect. You haven’t made yourself more valuable, and it’s unlikely you can do this year after year. If you get a $4k raise, your salary is $4k higher the next year too. Beating the market is automatic and you can build on it.

More good news: the less you money you have, the more “return” you can make this way. If you have $10k in the bank, making $10k on the side doubles your net worth. Getting a $5k raise is like a 50% return.

You can’t beat that picking stocks.