How to live off interest
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Long-term Investment Stablecoin Strategies
First of all, what is a “stablecoin”? It’s “crypto not crypto”. A stablecoin exists within the digital realm, and its job is to represent the value of a real-world asset.
For instance, a US Dollar stablecoin uses technology to track the value of a dollar, so it’s always worth “almost a dollar”. Actually, sometimes it diverges more than that, but the technology is built into it to wrench it back.
While stablecoins can mirror a lot of things (such as sterling, euro, gold, silver, oil, etc), the most commonly used stablecoins are the US dollar ones, and these are the ones you would tend to get the best interest rates on because they’re the most in-demand for borrowers.
Having a stable income means removing as much uncertainty about the value of your investment as possible. Investing in dollar stablecoins is one of those uncertainties.
However, if you’re British (and spending GBP), then your income is still going to vary according to USD:GBP rates if you’re pulling income from it. However, the exchange rate (usually) moves much more slowly than in cryptocurrency: fractions of a cent a day.
So, investing in US dollar stablecoins combines the stability of the world’s reserve currency with the crypto-size returns.
Returns and Interest
Interest and yield both refer to the extra assets you earn for leaving them invested, and it is almost always expressed as a percent of the initial investment if it was left invested for a year.
For instance, a 10% return on £100 would generate £10 over a year. A 0.2% return would generate £0.50.
You can see the difference that high percentage yields on stablecoins would make: returns like the 7% offered by AQRU.
The maths get more complicated when you consider what happens when you get paid interest on your interest. If you get paid interest daily, then your assets are worth more each day… so the interest you get slightly increases. But then, you want to live off the interest, don’t you? So you’ll be making regular withdrawals.
Regular Income
In this case, your goal is a regular income, which means you’ll regularly be withdrawing the interest you’re making at certain intervals. That means you’ll be back to square one after a withdrawal.
Let’s say you withdraw monthly.
How much would you have to have in your AQRU account to make £500 a month?
| Calculation Projection | |
|---|---|
| Future investment value £90,182 | Initial balance £89,682.00 |
| Total interest earned £500.00 | Effective Annual Rate (APY) 7% |
| Nominal Interest Rate 6.761% |
The answer is you’d have to invest £89,682 initially. Remember any investment in stablecoins at AQRU is currently in US dollars, so the conversion to sterling would result in a slightly different amount each month.
To get £1000 per month, your AQRU account would need to contain £179,364.
To get £2000 per month, your AQRU account would need to contain £358,728.
Saving for an Income
So, you might not have enough to generate that level of income yet: well, that’s what saving is for.
If it’s possible, then saving an amount each month in somewhere high-yield, like stablecoins, allows you to climb that hill to a place you can suck dry later.
How long would regular savings take to get you to your target?
£100 investment, £100 a month
Let’s say you invest £100 a month into an AQRU stablecoin account at 7%. How long would it take before you had enough money to generate a £500 per month income?
The answer is: 26 years, 6 months.
Total you invested: £31,800
Total interest: £57,535
£200 investment and then £200 a month?
You get to a £500 a month income in 18 years, 6 months.
Total you invested: £44,400
Total interest: £44,650
And Traditional Interest Accounts?
Let’s assume an interest rate of 0.2%.
How much would you need to have invested to generate £500 in a month?
| Calculation Projection | |
|---|---|
| Future investment value £1,203,250.00 | Initial balance £1,202.750.00 |
| Total interest earned £500.00 | Effective Annual Rate (APY) 0.2% |
| Nominal Interest Rate 0.499% |
You would need over £1.2 million.
How long would it take for you to get to this with £200 + £200 a month?
Substantially over 200 years.
7% stablecoins for the win!
Start investing at AQRU now
Get a headstart on that investment and open an AQRU account at aqru.io, or download our app from the App Store or Google Play. Unlike traditional finance, there’s no deposit fee, a sensible minimum deposit (equivalent to 100 euros), and no fee for withdrawing to fiat currencies such as GBP or EUR.
To buy stablecoins you can fund your account from bank transfer and invest them in-app at no extra cost.