Time Value of Money: So What?

I know there have been a lot of speculation and general mystery on  whether or not one investment vehicle is better than the other over a period of time.  Some people think why should they invest their money, and would it be better to invest it elsewhere? 

The answer generally lies in the time value of money (TVM), what a certain sum of money will be worth later in the future depending on a specified rate of return.  For savings accounts, it's typically around 0.375% per annum.  For mutual funds or stocks, around 7%, and for time deposit around 3% per annum.  Specifically for Ayala projects, the rate of return is projected to be anywhere from 8% to 20%, so that should already be a good indication how much the project would be worth after a period of time, especially for our pre-selling projects. 

For example, over a 5-year period, with the above-mentioned rates:

• Savings account: Future value of a 3M investment will be 3,056,673.46
• Mutual funds or stocks: Future value of a 3M investment "could" be 4,207,655.19 (stocks and mutual funds are not fool-proof and carries with it a certain degree of risk especially if not managed properly)
• Time deposit: Future value of a 3M time deposit for 5 years will be 3,477,822.22

Ayala projects with a projected rate of 8% conservatively, the future value of a 3M investment in a condo project such as The Lerato or Kroma Tower in Makati would be around 4,407,984.23 at time of turn-over.  More so now that Ayala is investing around 60 billion in the ongoing development of Makati, real estate property rates will typically trend positively as well.

That's just an example of how much your investment might be worth 5 years from now, with rates remaining more or less the same as they are now.  If you want to read up more on TVM, click HERE.  Play around with a future value calculator to get a better feel of it.

Hope that helps you understand how to make better investment decisions! 

-Jon