Time value of money
The time value of money is the principle that the economic value of a sum depends on when it is available, because it can earn returns or incur costs and purchasing power can change.
Build a Robo-Advisor with Python (From Scratch)
The time value of money is the principle that a given amount of money available today has greater economic value than the same nominal amount available in the future because it can earn a return.
- How it is used
- Applies earlier-versus-later valuation to tax-loss harvesting and decisions about deferring tax payments.
- How deep it goes
- Explains reinvestment and tax deferral with a numerical ETF example, without presenting code or a formal valuation model.
- Examples
- Uses a $100,000 ETF declining to $95,000, a 20% tax rate, and a resulting $1,000 tax benefit.
- What you can do after
- Evaluate tax-loss harvesting by comparing deferred-tax benefits with trading and opportunity costs through backtesting.
Read how Build a Robo-Advisor with Python (From Scratch) explains time value of money →
Investing for Programmers
The time value of money is the principle that money available today has greater economic value than the same nominal amount received later because it can earn a return and purchasing power can change.
- How it is used
- Frames comparisons of money and company performance across time by accounting for interest and changing purchasing power.
- How deep it goes
- Defines the principle and gives a one-year interest example, but does not develop valuation formulas or detailed calculations.
- Examples
- Uses a $1 investment earning 5% annually and a company with unchanged net income over ten years.
- What you can do after
- Evaluate nominal financial amounts and company results more cautiously across different time periods.
Read how Investing for Programmers explains time value of money →
Related concepts
- tax-loss harvestingused by · Tax-loss harvesting is an investment strategy that realizes investment losses to offset taxable gains or otherwise improve after-tax returns.
These guides are generated from the text of Manning books by Manning's knowledge graph and link to the sections they draw on. The full books are available on liveBook and at manning.com.