WEALTH
The basics of the time value of money Before we dive into the nitty-gritty , let ' s understand the basics . The time value of money is a fundamental principle in finance that states that money available today is worth more than the same amount in the future . But why is that ? Well , it ' s because of three essential factors : risk , inflation , and opportunity costs . Let ' s take a closer look at each of these aspects and discover if time is your financial friend or foe . be aligned with your goals , but to get the balance from the time value of money you shouldn ’ t take on so much risk that you lose your capital or too little risk that you don ' t achieve your investment goals . Remember , it ' s all about balancing the risk and the reward to increase your wealth !
Risk : The leap of faith Risk encapsulates the uncertainty of the future . By having money today , you avoid the risk of not receiving it in the future . There are plenty of investment options in this world , each with a different risk level . To compensate for this risk , you may demand an extra sum , called interest , to be added to the loan . This interest rewards you for taking on risk and provides a buffer for potential losses .
In the world of investments , the higher the risk , the greater the potential return you may demand to take on that risk .
Your investment risk level should
61 AUG / SEPT 2023 SA Real Estate Investor Magazine