How to use it
- Use the formula below with your own figures.
The formula
PV = FV ÷ (1+r)ⁿ.
Worked example
$10,000 in 10 years at 5% is worth about $6,139 today.
Frequently asked questions
Why discount?
Money today can be invested, so future money is worth less.
What rate to use?
Your expected return or cost of capital.
Tips
- Time in the market beats timing the market.
- Reinvest returns to let compounding work.
- Keep fees low — they compound against you.
Key terms
- Compounding
- Earning returns on past returns.
- CAGR
- The smoothed annual growth rate.
- Yield
- Income as a percent of price.