The time value of money


In one of the first jobs I ever had, I assisted an excellent head coach.

However, the biggest issue with this person was the lack of punctuality.

If a practice was supposed to start at x, usually it would not begin until a half hour or hour after that announced time.

 

investing

 

 

Patience Tried

I am sure you have experienced similar such inconvenience. As one has more responsibility, constraints become more frequent on each day, in my opinion.

So associating with people who don’t respect your schedule becomes trying at best, and quite irritating at worst.

 

Opportunity Cost

We can also apply this idea to the financial markets as well.

The time value of money is one of the first concepts of finance.

A dollar today is worth more than one a year from now. An investment in a portfolio that performs well this year is better than one that performs well next year.

 

Takeaway

Entities that have plans for three and five years from now are better left for venture capital and private equity fields as public investors have very little patience for those time horizons.

The idea of opportunity cost also applies as capital allocated to something today, which has poor performance, could have been in a position that outperformed.

Photo Credit: Dimitris Kalogeropoylos via Flickr Creative Commons

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Yale Bock
Yale Bock
Y H & C Investments is a registered investment adviser based in Nevada. Yale Bock founded the firm after 15 years of experience as an individual investor. Yale also manages the secured lending operations of a family-owned business.