It should be clear by now, but frugality in itself is not the goal. Sure, it can lead to a whole lot of wonderful things and learnings, even things that you didn’t know about yourself (specifically about the things you love and value).
However, even if very rewarding without anything else, frugality is a step, a mean towards something. And you already know what that is: freedom.
And like it or not, freedom is always tied with money and what you are able to do with it. But more even with what you need it to do for you.
And that is why being frugal is the very first step – the less you need, the more freedom you have to navigate through your daily life.
But as they say, you can only shrink so far. At some point, to gain more freedom you have to grow – more specifically, your wallet has to.
With all that you are able to set aside from your frugal life, it is time to put it to good work, working for you.
Reaping the fruits of your frugality
Being frugal allows you to free up some capital at your disposal. Since you have reduced your spending needs, it is time to multiply its power through investing.
First things first, as some of you already know, one of the keys to good investing is diversification. It’s the whole “don’t put all your eggs in the same basket” sort of deal.
It really is no surprise. Every investment you make carries a certain amount of risk, that can vary depending on the products you choose. Spread your funds through different instruments and you won’t be completely tied up to the outcome of just one.
But where should you be investing?
Iban Wallet – diversification within diversification
Many of you may have heard of the world of fintech. It’s a word that has been going around a lot, but is simpler than it sounds.
It is only the application of technology to the financial world, which makes it possible to innovate in what was before a bit of a stuffy sector that only a few had been able to fully take advantage of.
Iban Wallet is one of these companies that is pushing for innovation with the use of technology, providing access to several products generating return up to a projected 6% AER.
Without going into detail, within the investment area, the company acts as an intermediary in the lending process. Their online platform serves as a connection point between investors and borrowers, the latter of which were first vetted by loan originators. You can read all about it here.
What is interesting for me, particularly, is the risk mitigation measures they have in place, with particular interest to the diversification aspect.
When you invest with a product accessible through Iban Wallet, your funds’ returns are not dependent on the performance of a sole, single loan.
Instead, what happens is that they gather funds from multiple investors and apply it to a set of aggregated loans. It is a case of automatic diversification.
So should one of these underperform or default, your exposure to that loan is minimized. And in that instance, the other protection measures would kick in.
Investor protection measures
The first line of defense is the fact that the selected loans are asset-backed. This means that there is a collateral that can be executed should a loan be in default.
Moreover, the loans also include a buyback guarantee on the side of the loan originator. In those cases where a loan is in a situation of delayed payment for over 90 days, a loan originator may be required to repurchase it, at the price of the nominal capital plus interests accrued.
And finally, a Safeguard Trust is in place, acting as a reserve of capital for any eventual occurrence. Find here how they make it happen.