Learn About The Time Value Of Money - Open Sources

by: SA Author Experience

Summary

The time value of money is a foundational investment concept.

Seeking Alpha authors need to thoroughly explore and understand the link between present values, future values, and streams of cash flows.

Here we look at resources for learning about the time value of money.

Open Sources is an Author Experience series that focuses on free investment related tools from across the Web.

(You want your investments to increase in value as this thing spins. Source)

By Mike Taylor

Investing and financing activities - saving money, borrowing, raising equity capital - all are rooted in the concept of the time value of money. From this concept flow key analytical items like return on investment, required rate of return, present value calculations, and many other key considerations for investors. Seeking Alpha authors need to know this concept inside and out, so it's worth taking a minute to dig up some helpful guides that are available online, for free.

Time Value of Money Academic Resources

NYU professor Aswath Damodaran provides a wide array of valuation related resources online, so it's no surprise that he has made his slide presentation on the time value of money freely available to all. The slides are presented in accessible language and anchor on easy-to-follow examples. This is a great way to brush up on the general concept of the time value of money.

Damodaran also provides a detailed primer on the Time Value of Money that walks through the basic calculations governing present values, future values, and annuities. A PDF iteration is also worth a look.

Other finance professors have also posted a lot of their course materials online. For example, Dr. Del Hawley at Ole Miss has posted extensive excel resources, videos, worksheets, and guides to the web.

Time Value of Money Video

For video instruction on the time value of money, check out a Khan Academy presentation on the subject.

Conclusion

The time value of money is a basic concept, but because of its powerful implications for more complex investor considerations, Seeking Alpha authors need to know and understand it thoroughly. Deep understanding of how rates of return and the amounts and timing of cash flows affects the present value of an investment (and vice versa) will help authors guide readers along in their thought processes and make for enriching, clear articles.

Other Resources

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.