The best investment you can make
Let’s say I am a bank or an investment firm or an investment advisor. I have a reputation, a history, a track record, and recommendations from your friends and or people you trust. I say to you “give me $10,000.00, let me manage that money and I will make it grow for you. I will put your money to work for you”. I will even, in some cases, guarantee a return on your investment (although it will be potentially smaller) and, for an even smaller return, guarantee your principle will be safe with me.
This is the classic risk vs reward – the lower the risk the lower the return, higher risk – higher return. You, based on the past performance, the recommendations of others or any other reason, turn your money over and say, “Yes, I trust you, put my money to work for me”. Sometimes it works in your favor, other times not so much.
Here is the thing, you give these people your money for a number of reasons, the highest being that you believe, when it comes to money management, they are smarter than you, know more about the market and have more experience. All of which may be true but, does not mean they will take any better care of your money than you would.
I am pretty sure that most of you would not give your money to the car mechanic, or the grocery store clerk, or your mailman and expect they could deliver the same or better return on your investment than the “experts”. None of these people have the letters behind their names that make them experts in the area of money management. I am however, going to propose you do something similar.
INVESTING in a solar system for your home is the safest, securest and best return on investment you can get today, period. Investing in solar puts your money to work for you, and the returns on investment are immediate.
Looking at that $10,000.00 investment, in solar terms, means you have a pretty big electric bill every 2 months and would need a big solar system to eliminate it. Smaller bills = smaller system, less investment less reward – the solar version of risk vs reward. Having said that, even with a small system there is substantially greater reward than almost any other secure investment available. The best part is that your investment in solar is safe, secure and protected against inflation and (if you carry house insurance) even protected against natural disasters (unlike the stock market). Let me show you how it works.
The next sections use numbers that are examples only, each solar system is tailored to the specific needs of the homeowner and as such, costs for a system vary from house to house.
With a $10,000.00 investment (about $200,000.00 pesos) in a home or business solar system you would be looking at a normal electric bill in the $4,000.00+ peso range per month. This means you are currently spending about $50,000.00 peso per year on electricity. The installation of a correctly sized solar system will eliminate your electric bill. Think about that – an extra $4,000.00+ pesos in your pocket every month.
Compare those numbers with any other safe and secure investment available through the banks or any other “money management expert”.
Let’s have a look even further down the road. A five year investment of $10,000.00 dollars ($200,000.00 pesos) will get you? If we look at a safe and secure investment (your principle is not at risk) you would be looking in the 2 – 3% return per year. Let’s call it 3% and put a ¼% escalator in each year.
Year one your money (put to work by the experts) will grow to $10,300.00.
Year two $10,300.00 X 3.25% = $334.75 $10,634.75
Year three $10,634.75 X 3.5% = $372.21 $11,006.96
Year four $11,006.96 X 3.75% = $412.76 $11,419.73
Year five $11,419.73 X 4% = $456.79 $11,876.51
Your return on investment having left your money in for five years is $1,876.51 dollars. On a safe secure investment like this, money managers would be flocking to it.
Invest the same in a solar system:
Year one your money (put to work in a solar system) will pay you $2,500.00
Year two $2,500.00
Year three $2,500.00
Year four $2,500.00
Year five $2,500.00
Total return on investment for solar over 5 years: $12,500.00
This means in five years you have recovered your investment, and made $2,500.00 profit through not having to pay electric bills. This does not even consider the possibility of the rising cost of electricity. As well, you have completely paid off your initial investment with years of production remaining.
Let’s look at the next five years for both investments
You would need to re-invest all the money you made in the first five years including the principle. This is worth noting; with a $10,000.00 traditional investment you are unable to use the money it is locked in and, even if not locked in, the more you take out the less your return. A solar system, on the other hand, locks in your initial investment but pays you back every 2 months when you do not have to pay an electric bill. This is money in your pocket each and every 2 months.
Year six $11,876.51 X 4.25% = $504.75 $12,381.26.
Year seven $12,381.26 X 4.5% = $557.16 $12,938.41
Year eight $12,938.41 X 4.75% = $614.58 $13,553.00
Year nine $13553.00 X 5% = $677.65 $14,230.65
Year ten $11,886.39 X 5.25% = $747.11 $14,977.75
Your return on investment having left your money in for 10 years is $4,977.75 dollars.
You have almost added 50% to your initial investment.
Invest the same in a solar system:
Year six your money (put to work in a solar system) will pay you $2,500.00
Year seven $2,500.00
Year eight $2,500.00
Year nine $2,500.00
Year ten $2,500.00
Total return on investment for solar over 10 years: $25,000.00
Less initial investment $10,000.00 – net profit = $15,000.00
And you still have the equipment to keep producing power!
After recovering the cost of the solar system, it has paid you on average $208.33 per month for 10 years - tax free.
On the other hand, the traditional investment has paid you one lump sum of $4,977.75 at the end of the 10 years. Oh, don’t forget this is now income and you need to pay taxes on it.
You would need to be earning in excess of 12% annually on your money to come close to what you will save by investing in your solar system.
At a 12% return on investment you would see at the end of 10 years a profit of about $17,300.00 and your original $10,000.00. You would need to pay taxes on the $17,300.00 Say about 10% leaving you with $15,570.00 and your original $10,000.00 for a total of $25,570.00.
Compare this to the total ROI on the solar system of $25,000.00 (without considering any increase in the CFE rates for the ten years) and you still have the solar system in operation.
These calculations do not take into consideration any increase it the cost of power from CFE.
It is well worth noting that for those who are in DAC (the highest cost level for power) the cost of power from CFE has increased by 40% since August 2015 to December 2017