“It looks like they (Energea) have penalties if you want your money back in less than 3 years. Yeah no thanks.”
We had a reader reach out to us with the above comment, which they saw on Reddit.
There has been some confusion, so let’s clarify an important point. It is only the money used to buy new shares of a portfolio that is subject to the three-year holding period. The monthly dividends you receive from Energea are ready for you to use, penalty-free, when you receive them. They are excluded from the three-year holding period. You can reinvest them, keep them in the Energea wallet, or transfer them to an external account. Here is a screenshot from Energea’s FAQs:
To better understand how the three-year investment period and 5% penalty operate, here are the key points and links to the official Energea pages:
Key Points of the Redemption Plan (https://www.energea.com/liquidity/):
- Redemption requests can be made 60 days after purchase.
- A 5% discount applies to shares redeemed within three years of purchase, with no discount thereafter.
- Each request is capped at $50,000 worth of shares at a time.
- The redemption price reflects the current share price, minus any distributions during the request period.
- To ensure the stability of our investment assets from a cashflow perspective, redemptions can be subject to quarterly and annual caps.
- Each new investment (whether a scheduled monthly investment or a one-time investment) start their own 3-year 5% discount period.
https://www.energea.com/savings-accounts-vs-energea-investments
Liquidity: Savings accounts offer immediate liquidity. CDs may charge penalties for early withdrawal. Energea investments require a minimum three-year holding period. Early liquidation incurs a modest 5% fee, but after the hold period, investors can liquidate without penalty.
RideToFi is a superfan of Energea, but it doesn’t mean we are going to let emotion drive our investment decisions. One of the greatest ways to learn is to listen. It is amazing what you can then understand. So if you were hoping you would see us dig our heels in, tear this comment apart, and stand on top of the pieces triumphant at the end, well, we are sorry to disappoint you.
This is an important comment, and we are glad it was voiced. We only wish the person had given more context about why they feel so strongly.
It’s important to remember that everyone has experienced events in their lives that impact their opinions and ultimately, their decisions. For example, someone with a bad investment experience, such as losing 38.5% of their portfolio in 2008 because they sold when it was low, will have a mindset about investing in stocks that is very different from the new investor who has had an incredible experience because they have been investing for only the last 5 years and have enjoyed 14-16% average yearly gains.
Likewise, people are in different phases of their lives. A single 18-year-old may have different aspirations than a family looking to buy their first house or a couple deep in retirement.
What works well for one person may not work well for the next.
So, to figure out if the three-year investment period with 5% penalty was something we were willing to accept, we asked ourselves a few simple questions:
Are we living paycheck to paycheck by spending all we have? No, we are on our RideToFi. We spend less than we earn, so we have money to invest. We never want to go back to the stress of living paycheck to paycheck.
Do we need the money for an unexpected emergency or a big purchase in the next three-years? We already have a home and a vehicle, which are the biggest purchases we anticipate ever making. If an emergency happens, we have ways to handle it financially.
Are we speculators or investors? We are investors, and we want to surround ourselves with like-minded people who are long-term investors. Three years means little when we think in decades. It has been refreshing to step away from day traders, covered calls, NEOS, and low-yielding accounts that erode because of inflation.
We see the three-year holding period with 5% penalty as being a big benefit that aligns perfectly with the type of investor we are and where we are on our RideToFi.
As a matter of fact, after writing this we just invested $1,000 more and can’t wait to see the additional dividends next month!
How does it fit with your goals?