Time Value of Money
What does PV stand for?
Present Value
What is a retail investor?
An individual who invests their own money using a public brokerage service.
What is a passive investor
An investor who invests in generally safe investments and is invested for the long term (does not enter and exit positions often)
What does DCF stand for?
Discounted Cash Flow
What is an institutional investor?
An institutional investor is a company or organization that invests money on behalf of clients or members
What is an active investor?
An active investor is someone who regularly buys and sells investments in an attempt to outperform the market and make a profit
What is the concept behind the time value of money
Money available at the present time is worth more than the identical sum in the future due to its potential earning capacity.
Give one example of an institutional investor?
Endowment funds, Commercial Banks, Mutual Funds, Hedge Funds, Pension funds, Insurance Companies, Venture Capital, Private Equity
What is a growth investor?
What can TVM be used for?
DCFs, LBOs, and Compound Interest
What is the difference between a mutual fund and ETF
ETFs are passively managed, Mutual funds are actively managed
Mutual funds can only be bought and sold at the end of a trading day, whereas ETFs can be bought throughout the day.
What is a value investor?
A value investor tries to find undervalued investments by conducting financial analysis (typically later stage companies)
What does the exponent on the time value formula signify?
The amount of times your money compounds.
What are LPs and GPs. What is the difference?
LPs are limited partners, and GPs are general partners. LPs are fund allocators and give money to GPs who are fund managers.
What is one benefit of being a passive investor?
Low fees, Transparency, Lower risk, Greater Tax Efficiency