Table of Contents
What considerations do you need to take when considering time value of money?
They are:
- Number of time periods involved (months, years)
- Annual interest rate (or discount rate, depending on the calculation)
- Present value (what you currently have in your pocket)
- Payments (If any exist; if not, payments equal zero.)
- Future value (The dollar amount you will receive in the future.
What are the two main categories of time value of money problems or questions?
All time value of money problems involve two fundamental techniques: compounding and discounting. Compounding and discounting is a process used to compare dollars in our pocket today versus dollars we have to wait to receive at some time in the future.
Should you use home equity to invest in the stock market?
Those are some ideas. But generally speaking, not a big fan of taking money out of your home equity to invest in the stock market.
Is it better to invest in the stock market long term?
The stock market has historically risen an average of 10 percent annually over long periods – but it has proven to be quite volatile. So the longer time horizon gives you the ability to ride out the ups and downs of the stock market. The safety of short-term investments comes at a cost.
How long should you invest your money in stocks?
If you have a longer time horizon – at least three to five years (and longer is better) – you can look at investments such as stocks. Stocks offer the potential for much higher returns.
Should you invest in stocks or bonds first?
You’ll sacrifice a potentially higher return for the safety of having the money. If you have a longer time horizon – at least three to five years (and longer is better) – you can look at investments such as stocks. Stocks offer the potential for much higher returns.