Would you like to know how you can more than double your Steem Power in three years, with this time lifting a finger, because this might be useful if you want to optimize your returns in Steem?
In this post, I am going to show you how compounding interests works for Steem Power with an additional contribution that can be SP earned or SP bought each week.
You absolutely have to read my previous post if you do not want to lift a finger and still earn good returns compounding Steem Power and to also understand the calculations and reasoning:
How to Compound Steem Power and See It Grow Without Doing a Thing!
This is not financial advice, just a fun method to see your Steem Power more than double in three years.
How to Compound Steem Power, Make Weekly Contributions and See It Grow Even Higher!
In my last post I explained about Steem Power and compounding so you can see that with a starting capital of 10,000 SP and a 25% annual return, delegating to bid bots, you can end up with 21,132 SP in 3 years without doing a thing.
I pushed the calculations to 5 years with 34,799 SP and for the braves, 10 years with 121,097 SP.
Today, I am doing the same thing, but this time, let's say that you manage to write blog posts on Steemit and earn just 20 SP per week that you use to increase your delegation at the end of each week, in addition of the payouts earned.
Earning 20 SP is not a lot and very realistic for this calculation. You may earn 3 SP on each post for each day of the week, earn 10 SP on two posts per week, or earn the whole 20 SP on one post each week.
If you still don't want to lift a finger and don't blog, then this may be useful for you if you prefer to buy 20 SP per week and add it to the delegation.
So, you have 10,000 SP to delegate to any bid bot of your choice that will give you a 25% APR, which is a good average considering my fundings in my case study: Case Study: Which Top Upvoting Bots to Delegate to for the Highest Daily Payout?
I made a new spreadsheet with some calculations as you see below.
On row 2 we have the "Principal (SP)," which is 10,000 SP.
On row 3 we have the "Annual Interest Rate" or "Annual Percentage Rate," which is 25%.
On row 4 we have the "Compounding Periods Per Year," and in the B column we have 1 time per year, in the D column we have 12 times per year (1 time per month), in the F column we have 52 times per year (1 time per week).
On row 5 we have the number of years, which is 1.
On row 6 we have the "Additional SP," which is 1,040 SP for a one year additional contribution, 86.5 SP added each month for 12 months, and then 20 SP per week for 52 weeks.
On row 7 we have the value "0" for the "At the end of the period," with a contribution that is made at the end instead of the beginning of each period. This will be used in the formula. A value of "1" would be used if the additional SP is added at the beginning, which I find less logical in this case.
Finally, on row 9 we have the "Amount earned (SP)."
You may want to see the formula for this, so you can do it by yourself in a spreadsheet.
This is the formula for the first block: =FV(B3/B4, B5*B4,-B6,-B2,B7)
I trust you will be able to replicate that formula on the other blocks.
Let's look at the results for one year and the effect of compounding interests plus additional contributions:
If we compound only once a year, which means we wait the end of the first year and re-invest our interests for the second year, plus an additional contribution of 1,040 SP at the end of the year, we would have a total of 13,540 SP.
If we waited the end of each month to re-invest and add our 86.5 SP additional contribution, at the end of the first year we would have a total of 13,973 SP and just like in the last post, I believe that you can see the advantage of compounding more frequently.
This is what I said about applying that to a delegation in my last post:
When I say compounding, this means keeping your daily rewards in Steem and SBD that you earn from the bot, wait the end of the month, change the SBD in SP, and then delegate the additional SP to the bot for the second month. This means, if you earned 200 SP in the first month in daily payouts, when the second month starts you make a new delegation of 10,200 SP, and so on every month.
When you compound every week, the total amount is then 14,011 SP, which is still a bit more.
I didn't do the daily compounding here because this is not realistic to every day add the interests plus the contribution, which at the end just add a little more SP, not worth the time spent.
My preferred frequency is doing it weekly.
Now let's see how it is after 3 years.
We started with 10,000 SP and just compounding once a year, adding a 1,040 SP contribution each year, we have now 23,496 SP. Only doing that, you have doubled your SP in 3 years.
If we do it once a month, in 3 years we have 25,578 SP and you can see that it's a significant increase compared to once a year.
We know the value of STEEM today, but we don't know how much it will be in 3 years.
If wee look at the weekly compounding this is a 2.5 coefficient.
If STEEM gains in value, then we will be in a good position, but if it loses less than half of its current value, then we will just have protected the initial investment value in $USD.
Now, we want to be positive and think that the value of STEEM will be at least double, then we would have more than quadrupled our money.
As we are optimistic and believe that the Steem blockchain will still be alive long enough, we can now look at the following tables. This also assumes that we still have voting bots that we can delegate to and earn payouts from, and still earn rewards from blogging or buy 20 new Steem each week.
This is for 5 years.
Let's say we are still compounding weekly and the total we have now is 45,115 SP.
This is 10 years later, and hopefully STEEM has survived.
We compounded weekly all this time and the total value is now 167,314 SP.
Now, you might be wondering what would be the amounts without the 20 SP additional weekly contribution.
This is the comparison table here:
As you can see, making weekly contributions can increase your SP dramatically, especially at the end of 10 years, if Steem is still around.
If that is the case, I will let you imagine what the value of STEEM would be in ten years, and if it was only a dollar, I would be really happy.
I hope that this is useful for you to see that compounding SP can be very rewarding with you adding a weekly contribution to your delegation in addition to the weekly payouts.
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Michel Gerard