The chart below lists the inflation adjusted returns for stocks, bonds, bills, gold and the US dollar over approximately 200 years.
So what if P2P investing existed in the year 1801 and you could invest one dollar? What would your returns look like in the year 2006 (the max X value on this chart).
Let’s look at four inflation adjusted returns: 3%, 4.5%, 6%, 7% (roughly 6, 7.5, 9, 10% pre-inflation).
- At 3% in 2006 your balance would be $428.18
- At 4.5% in 2006 your balance would be $8,295.44
- At 6% in 2006 your balance would be $154,064.43
- At 7% in 2006 your balance would be $1,056.025.55
At somewhere between a pre-inflation return of 9-10% P2P lending performs quite well compared to stock. What is shocking is how going from 3% to 7% produces almost a 2400x increase in returns.
“The most powerful force in the universe is compound interest” – Albert Einstein