Monday, May 26, 2008

What means being an Investor? (3)


While talking and trying to create a general framework intended to understand the way financial markets work and particularly those trained professionals to help you make your money grow (financial advisors) by investing in the most appropriate alternative based on your investment style, it becomes evident that a better understanding of basic financial topics such as "Nominal Interest Rate", "Simple Interest", "Compound Interest", "Interest", "Present Value", "Future Value", "Time Value of Money", etc should also be considered if an interested investor -like both of us- wants to work with his financial advisor in order to create a closer contact and understanding of how he manages our money.

We shouldn't ignore that understanding these basic financial topics could be a bit difficult because of mathematical implications (Finance and Mathematics are something financial advisors are trained to understand and work with) but worry not too much about going that "far"... What would you think about the practical convenience -and ultimately the importance- of learning how to use a financial calculator or a spreadsheet and begin making those "awful"calculations as a new and a bit more concrete step towards basic financial literacy?

Let's start by mentioning the following concepts or financial functions programmed into financial calculators and spreadsheets: PV or Present Value, FV or Future Value, RATE or Interest Rate, NPER or number of periods, PMT or Payment.

How these functions work in practice in a financial calculator or a spreadsheet? Let's talk about this practical subject in a following post...

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