Compound interest is one of the most important terms to fully understand for someone who is planning to invest money. It is important because it will make growing your money more effectively.

What is interest itself? It is a fee paid by someone for the right of using someone else's money. If you borrow money you pay it, and if you invest your money well you are paid for it. 

In growing your money compound interest is the interest you earn from the interest previously earned. So if you invest 100€ with a 10 % interest by the end of a year you have 110€. If you keep the money in the system the next year the principal of 100€ will again earn you 10€, but the 10€ you earned previously has also earned you and 1 extra €. This 1€ does not seem as much but as years pass it can actually make a huge difference. So basically the more time you have to let your money grow the more previous earnings will start also earning for you. The main things that help you here are the sum initially invested, how much you are able to add to this regularly, how much time you have and of course the interest you receive from your investments. 

As compound interest works it's magic ower years starting as early as possible is important. Start in your twenties if you can.  As they say, the best time to start to invest was 10 years ago; the second best time is now. So start now!

Here is a graph that shows it clearly. If you save 200€ a month and therefore invest 2400€ a year - in 20 years you will have more than 100 000€ although you have deposited less than half as much with 48 000€. You have more than doubled your money.

So what happens if you start later? If you start 10 years later by the same time you have deposited 24 000 and have earned just 11 000€. 

It is always easy to put it off, thinking that in my future I will earn more and will be able to invest more, so there is no reason to invest now when I have little money. Well, let's say you start 10 years from now and invest twice as much with 400 € a month. You will have invested the same amount of money, but the account value is just 71 000 € compared to 105 000€. So starting early with small sums is always better than waiting.

Also it is, of course, important to figure out where to invest. Saving money in a piggy bank is bad, also bank accounts have dismal interest rates (mine is at 0,3%), Savings Accounts offer up to 2% which is way better than nothing, but still dismally low. If possible strive for 7-10%.

Here is a graph that shows what happens when you invest 200 € a month for 20 years at different interest rates.

And as I stated the real magic comes in time, so the same amounts with 30 years of investing on the lower graph are really interesting visuals. As you can see the 10% interest is really taking off in an exponential manner.

So what can you do to take best advantage of compound interest?

1. Start right now!
2. Find a place which offers the best interest to you at the risk level you are comfortable with. If possible it should have automated investment option to reinvest all interest incurred. Perhaps use Mintos or Gupeer loans with buyback guarantee, which at the moment offer even 14% interest. Or a safer option would be to invest in dividend-paying ETFs, but with lower rates. 
3. Automate your deposits. Make an automated transfer to the chosen investment account or site that deposits money as soon as you receive your paycheck. So you even don't have time to miss the money you invest. Do it even weekly, even just 10€ a week is much better than nothing at all.
4. Figure out the tax system of your country and if there are any tax benefits use them. In Estonia there is an option to postpone income tax with some investments, so the 20% you would otherwise be giving to the government helps your money to grow... and you pay it when you start withdrawing money in the future. This extra 20% is very important in compounding the interest. I use this with my LHV growth account, when investing in ETFs. So figure out if there are any similar possibilities in your country.
5. From time to time look at how your investments are doing and if needed or new and better opportunities arise invest in offers giving you better interest. But make sure that you don't become too greedy. Higher interest means higher risk. Find a balance, even if it means investing a certain portion in safer options and part in higher risk and interest places. 
6. Be patient and do not withdraw the money to spend it.

I have been thinking long and hard, but it is so hard not to dabble in stocks. I DO know better, but... Is anyone really immune to the psychology of money? The fact that loss of an amount X will be a much stronger emotion than the profit of the same amount. Why are we like this?

Maybe someone who is really good at analyzing stocks and therefore can make the decisions solely based on that. Not me, not yet anyway.

I have known that I needed to take the step and sell my TVEAT (Tallinna Vesi) stocks. They were looking so red in my account, but it is so hard to take the loss. So I postponed the decision and the outlook worsened month by month. I wonder if I should actually take the chance and buy some more? But there is another court decision to come... Would it favor the company? Not very likely. Should I sell? Yes, I really should. So I finally took the plunge and after the dividend ex-date I sold the TVEAT stock with a loss.

My purchase price was 1949€ and sale price was 1449€, so exactly 500€ loss (not including the transaction fees). I have received dividends last year of 75,6€ and will receive 50,4€ this year's dividends as well. But still, the first real loss, not to count the small 10€ red loans in P2P lending platforms.

Did I learn from it? Not sure, as I took a chance and bought some of Madara Cosmetics stocks. I made a post about Madara cosmetics a month ago, writing about their investor bonus program. So I took a plunge and bought some. The price has gone down 30 cents since the post I wrote, so I decided it was time to buy it. I also just completed the form on the Madara Cosmetics website to register to the stock owners program. I wonder what happens in the autumn as I am expected to receive the Madara cosmetics box I ordered as well as the one I should from now on get as a stock owner. I guess I will be overrun with cosmetics.

Also, it is interesting to see that the market is not rational, the Madara also had dividend ex-date just a week ago. The dividend is 9 cents per share but the market dropped 25 sents so far. I guess the dividends were lower than expected and people sold. But I want to see what the company will do and to profit from the "cosmetic dividends" as well. So not (too) worried about it. But maybe life will correct my optimism. I found it strange that the info that the Madara finally came out with organic sun protection this spring almost did not affect the price. + 20 sents, after it had just dropped more than 50 cents- really? I would think this would boost it as good suncare is so hard to find, but I guess not very many people are really following the stock who also know about the struggle to find actually good SPF... Unfair, in my eyes. Also looking and official stock releases, their blog etc I do not understand what caused the drop just before that? Anyone knows?

But what happens to the rest of the money I got from selling the TVEAT stock? 

Rest of the money will be put to the LHV Growth Account- I do not plan to dabble in any other stock in foreseeable future. I hope the decision to buy Madara will not let me down. Of course, if I have any news on the stocks I will post about it.

Few posts ago I promised more information on a new portal Grupeer that I am trying out. I have invested just 100€ and been on the portal for 2 months but here is what I have learned so far.

In many ways, Grupeer is similar to Mintos platform. Grupeer is a loan listing platform which provides services to other creditor companies. It mediates car, mortgage, business and personal loans as well as lists bigger developmental projects. At the moment there seem to be 16 loan originators in the platform. 

Making an account is easy, you need a working email address and need to provide your name and to actually use the portal you also need to transfer some money to the portal. The transfer is easy and is processed quite quickly, you need to add your personal Grupeer ID to the payment details/info field. 

Making investments is easy you can pick them from list, read extra info and click invest, add the sum and then it is added to your "shopping basket". When you are happy with the loans you have selected, you can go to the basket, look them through again, delete some or all and confirm all investments you are ready to make. Minimum investment in a single loan is 10€. 

This is how the loan listing table looks:

When using the list you can also use several filters to see just the loans you are interested in. A few weeks ago also auto investment option was added to the portal, it has the same filters as the manual filtering does. This tells me that there seems to be an active development of the portal which is always a good sign!

Some projects (mostly larger developmental projects) tend to have also 1% cashback which is automatically added to your account as soon as you confirm the investment (compared to Mintos where it takes several days to get that money, Grupeer is much faster, but gives always just 1%). These are marked with a blue € sign with an arrow circling it. You can see a few in the image above. At the moment even one 9 month investment option gives 1% cashback, the longest is 12 months and they all are at 14% interest rate- not a bad deal.

You can not filter loans by cashback and not add this as an auto-invest filter. But of course, if you invest in them manually or with auto-invest you get the money credited to the account.

At the present time Grupeer gives on absolutely all loans 60-day buyback guarantee- so if the loaner is late with payments you get back the principal as well as the incurred interest for the 60 days the loan was late. Also most, if not all, loans are listed with 14% interest. Sounds great, doesn't it :)

So high interest and buyback guarantee. Is there something negative or limiting as well? 

• There are a quite limited number of loans currently on offer. So if you would like to diversify across 100 or 200 loans at once- you can't.
• There is no secondary market. So there is no option for a quick exit, but the link to secondary market is already there in the portal with the text "We are sorry, secondary market will be introduced later." so I guess it is coming.
• In general, the maximum amount to add to grupeer account is 50 000€/month. If you wish to invest a larger amount, you will need to provide the bank with additional information. This won't be limiting me in years but might be a problem for some perhaps.
• When manually picking loans it does not tell you that you have already invested in that loan. In auto-invest you can set the maximum amount invested in a single loan so there no double investing to the same loan should happen, but this might occur in manual investing.

All in all, I am happy with the Grupeer portal and hope to be able to add more money there in coming months. And I hope the number of loans they offer will be steadily increasing.

May was again a slow month. No big payouts to excite me. I try to remind myself that I am not trading, long-term investing is supposed to be quite slow and boring. 😎

From deposit side, I had a little bit of excitement as I could not help myself and I decided to take a bigger advantage of the Mogo and Lendo cashback campaigns in Mintos and compared my usual 60€ deposit I added an extra 500. So my deposit to Mintos was 560€, which is larger than my whole deposit to all platforms in April for example (460€). Other platforms were more traditional: I withdrew 25€ from Bondora and deposited 50€ to Grupeer and LHV Growth Account, 150 to both EstateGuru and CrowdEstate. So all in all my deposit in May was 935€.

Income was relatively low this month with 78,79€ or 2,54€ a day.
More than half of it from Mintos with 42,57€ out of which 14,95 was cashback. If you are interested then the Mogo cashback is still available until 16th of June. Also always check the running campaigns by clicking your name on the top right corner in the portal and checking the campaigns page.

The other larger sum came from EstateGuru with 25,92€. Bondora and CrowdEstate were both less than 10€. One payment which was supposed to come on the last day of the month on the CrowdEstate platform was divided to 3 payments due to internet bank limitations from the borrower side, so that money will come in June report. CrowdEstate is quite an uneven payer in my portfolio just because I do not have money to take part in all projects and therefore I do not have projects ending every month as well. There are also some who pay monthly or quarterly but these are really low sums if you happen to invest the minimum of 100€. So maybe I should try to put more money there to get better money rotation later with being able to invest more there also from ending projects... Need to think about it.

The portfolio value was 15648,88€ on 31.05.2018.
So I have succeeded one of my yearly goals to have portfolio at least 15 000€ even before the half-year mark. Now I just need to work on the getting 1000 profit this year as well (my second financial goal of 2018). At the moment for the first 5 months, the profit has been 501,68. So I am at a good place but should not be complacent as this includes two especially great months... If all other months will be as May or even April were, I will be quite hard pressed to get the 1000 in income as I decided my goal was. And to be honest it would be great to get 1000 after taxes, but as most of my investmenst are long term then 15000 in investmenst with 10% interest does not mean I get this mathematical 1500€ payout within this year. We will see how it goes :)

Exact numbers for May and previous months can be seen in the spreadsheet here.