Important concepts for sustainable investing from my private notes
By Jelson25 (Own work) [CC BY-SA 3.0 (https://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons
- It is possible to build a "compounding machine".
- A "compounding machine" is a source of "passive income" from an "appreciating asset" which is "continuously reinvested" (used to purchase more sources of passive income).
A primary example of this could be dividend stocks in the form of a dividend growth machine. Which is defined as a portfolio of dividend growth stocks which are continuously reinvested by "DRIP".
Another example for people who do crypto, is the interaction between "peer to peer lending" and "cloud mining". Peer to peer lending results in some interest from loans which can then be invested into "mining contracts". So for example, compound interest is generated by swapping the profits between interest earned from lending, and mining contracts, as both pay out passive income in such a way which has a synergy to produce compound interest for both.
Compound interest seems to be the key to making money make more money. In the stock example, the stock market typically increases at a rate of 8% a year so the stocks alone are assets which increase in value faster than the rate of inflation (appreciating asset). In the example of mining contracts, the value of a mining contract depends on the price of cryptocurrencies increasing over time, and for the mining contract to remain profitable. If we think of mining contracts and dividend stocks as we think of real estate, then this makes sense because it is digital real estate, and interest is like rent.
Best practices for sustainable investing have been established and certain models are shown to work in even in crypto
- It is possible to build a compounding machine.
- If Steem reaches $100 as some believe it will then many accounts could be worth millions.
- If this happens then knowledge on how to compound wealth will become much more valuable as those who have large accounts may seek to diversify.
- Several from Steemit have already proven the viability of this in practice by getting passive income from HYIP/lending, or cloud mining, so this business model is proven to work in practice.
- Dividend stocks are much safer than HIYP and can do as well as 10% yield annually which can be reinvested into increasingly lower risk lower yield stocks over time.
These are just my private notes on how I think about investing. As always, I do not give any investment advice nor can I predict the market accurately. Do what is best for you with the money you have earned on Steem or anywhere else.