Most people dream of achieving financial independence at an early age and spending the rest of their time enjoying life. But to do that one needs a solid plan of how to reinvest his hard-earned savings and make the most of them.
Achieving Financial Independence and Retiring Early
You can find many materials and instructions across the internet on how to retire at an early age provided by both finance industry professionals and regular people who want to share their experience. Of course, there are also many scams that promise unrealistic returns, and you should avoid them.
All investment opportunities for achieving your financial goals have a common theme – they are related to some form of investments such as stock, shares, indices, pension and mutual funds, buying property, government securities and other similar instruments. There is also the option of waiting for the return on your bank savings, which will most likely take forever. In most cases, these methods are a zero-sum game, where your gains are equal to the losses of someone else. Also, there are situations where you are left with the amount which you had in the beginning or less. Naturally, each opportunity has its merits and should be considered, but none presents a combination of the two most demanded elements when it comes to investment – high return and low risk.
Furthermore, in recent years there has been a trend of lowering interest rates, set by the central banks in the US and the EU. It affects all levels of the economy and limits the profit that you can make on interest, especially on bank deposits, which in some cases might even yield negative profitability.
There is a conclusion that can be drawn here – in order to retire at an early age and even become a millionaire; there comes a time when your money should do the work for you. Not merely sitting in a safe place, but actively accumulating a steady return.
P2P Lending as a Long-term Investment Alternative
A new investment opportunity has emerged among the turbulence of recent economic conditions, one that addresses the limitations of other methods while yielding steadier and higher returns – investing in p2p lending platforms. It is a service that enables people to invest in consumer loans and profit by receiving a percentage of each loan.
This type of investment provides a drastically higher annual return when compared to bank deposits or even trading stock, but it also allows you to better hedge the risk by crafting a loan portfolio according to your risk preferences. Even when keeping the risk at a minimum, the return is still high and steady.
But the real beauty of investing in consumer loans through platforms like Iuvo is the long-term return. The key to being profitable in the long term is the compound interest which enables investors to utilize their capital most efficiently and get the highest returns.
Here`s an illustrative example where you will be able to relate personally.
If you start now it is realistic to say that in 30 years you can be a millionaire, the key is to be consistent and stick to the plan – invest 5 000 Euro each year for 30 years and reinvest the earnings from each year.
Let`s go through the numbers in more detail. The typical return on a p2p investment platform ranges from 7% to 15%, so if you invest 5 000 Euro each year, with an average yield of 8% and keep reinvesting your earnings, in 28 years, you will have over 500 000 Euro in your account.
Admittedly, such a thing might seem impossible or grandiose now, but remember that this is a long-term methodical investment, with a steady return rate and a specific plan behind it. By sticking to the plan and maintaining the same level of risk (by investing in loans of particular score class) you can achieve a total return of 8%. When coupled with the reinvesting of your previous earnings it will help you be financially independent at a much younger age than if you relied on other investment methods, or simply regular pension funds. The key here is that you have control over your money and can make them do all the work for you. You can do all the compound interest calculations yourself and see how the profit adds up by using this calculator.
Of course, this is a quick and shortened explanation of the mechanism, and many other aspects and practices should be considered when investing in p2p lending platforms. You can read more about them here.
However, we should emphasize again that to be most efficient you should always reinvest any available funds in your account. Otherwise, you`re losing money that could be making a profit.
What conclusion can you draw from this all
In order to be able to retire at 50, or at least be able to have enough savings to feel financially secure, one must act with a clear plan in mind and stick to it. There are no other investment opportunities that present the same great balance of high return and low risk as investing in p2p lending does. Furthermore, you can adjust the level of risk and micromanage your portfolio for optimum efficiency, but there is also an auto-invest feature that can handle all of that.
If you`re still not sure, then give it a try by investing a small amount for a shorter period of time, (a month or a year) and if things go well, dedicate yourself to the long-term strategy that will help you retire early.