Time value of money: how does it work?
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Time value of money: how does it work?

The concept of the value of money over time arises from the relationship between interest and time because money can be remunerated by a certain interest rate on investment, for a period of time, and it is important to recognize that a monetary unit received in the future does not have the same amount as a currency available at present.

For this concept to be understood, it is necessary to eliminate the idea of ​​inflation. For this, it is assumed that inflation technically affects all prices in the same way, and is therefore canceled in the period considered.

So a dollar today is worth more than a dollar tomorrow. Similarly, a dollar today has more value than a dollar in the future, regardless of inflation during the period.

This assertion stems from the present opportunity to invest this dollar for a period of, for example, 2 years, which will yield interest at the end of this period, having, consequently, greater value than this same dollar received in 2 years.

We conclude because money has a value over time, that the same amount in dollars, at different times, has another value, as much as the interest rate exceeds zero. On the other hand, it can be said that this money varies over time due to the purchasing power of a dollar over the years, depending on inflation in the economy, as will be seen below.

What is money?

forex trading

According to the dictionary, money is what allows a means of payment, in the form of coins or banknotes, issued and controlled by the government of each country.

We have to understand that money is a sum of two variables. That is, the value of money is an ordered pair between its financial value and the date on which it is being analyzed.

A simple way to understand this is: $ 100.00 today, is it worth more or less than it will be in a year?

We cannot assume that today’s $ 100.00 is worth the same as $ 100.00 next year. But what causes this to happen?

What affects this change in the value of money over time? Some factors cause the value of money to change over the years, in this topic I decided to list them to facilitate their understanding. Check out!



Our society’s consumption is affected over time. There are time preferences for the use and consumption of certain products.

For example, today a cell phone is highly valued, as it has a high market value, as it has a very high demand.

A few years ago there were no cell phones, but there were mini-games, for example, which at the time were highly valued and therefore very expensive. Only the wealthiest could have one of these.

And the more the technology evolves, the demand for these technological products increases, they gain market value while the previous products lose their value.

Therefore, one of the factors that influence the change in the value of money over time is society’s consumption preferences.

Inflation and deflation


To understand how this changes the value of money over time, I will briefly explain these concepts. Inflation is the loss of purchasing power, while deflation is the gain of purchasing power.

Sometimes money gains value over time, but it is difficult, as we are usually experiencing rising inflation. But suppose we lived a year with deflation; purchasing power would increase, and if it did, money would gain value over time.

But what is common is that inflation occurs and, thus, purchasing power is lost, resulting in the consequent loss of value of money over time.

Opportunity cost

This factor is related to the alternative investment that provides future results.

If we have $ 100.00 today, what is the opportunity cost of that money? If I invest this money, I will have a result in the future. It is necessary to analyze whether the opportunity cost is greater than deflation.

For example, suppose that there was a 1% deflation in the year. But I have an opportunity cost to invest 10% in the year.

Still, my money will lose its value over time if it is saved, as I could have made a 10% profit from it instead of just 1% deflation.

Therefore, we always have to observe whether the opportunity cost is greater than deflation because if it is not, it is not worth investing in.



The risk is nothing more than the possibility of losing money in the future.

Usually, people keep the money, because they have the feeling that the money bill is not worth as much as you invest in something more tangible and, in this way, obtain the return of that application.

In other words, risk influences the value of money over time. In 99% of cases, 1 dollar today is worth more than 1 dollar tomorrow.

Now that you know what changes the value of money over time, check out a super important concept in this regard, liquidity.



Liquidity is the facility for an asset to be turned into cash without significant losses in value. In other words, it is the agility with which an investor manages to dispose of an investment to have money in his hand again without, for that, need to have significant losses.

For example: if I have $ 10,000 dollars within the organization and with that money I decide to invest in the purchase of machinery.

This machinery is very little liquid because if there is a sudden need to capitalize and, for that, I will need to sell the machinery. I will probably lose 30 to 50% of the amount invested.

On the other hand, if that money were in the current account, I would have absolute liquidity, as it would be enough to withdraw to capitalize.

It is then necessary, within the organization, to understand the liquidity of each of the assets (company structure, building, machinery, the amount receivable, cash, etc.) to work with what is really liquid.

We can, then, realize that liquidity analysis is fundamental when talking about the value of money over time and the real possibility of having to make a financial rescue, for some reason, such as honoring some debt, for example.

Learn more!

Therefore, it is extremely important to be careful with the value of money over time, as this will influence all your financial decisions and also those of an organization.

The best way to trade forex

There are two ways to invest with our AI in forex:

1. Automated with AI-Trading. Check out the 3 steps to trade automated with our AI.


By trading forex automated with AI, you will save time and improve your performance without monitoring the market and managing trading platforms.

With Automated AI trading you do not need MT4 / MT5 and other trading platforms to invest in forex. All forex trades are automatically placed into your broker account every time that our AI system identifies a new worthy trading opportunity. You can monitor the AI trading performance in real-time directly on our dashboard.

Automated AI trading benefits ✅

  • Setup in 3 minutes.
  • Totally hands-off, from anywhere.
  • Invest from just $100.
  • APY of 40% over the past 13 years*.
  • Lightning-fast execution & no slippage.
  • No commissions, no management fees.
  • Portfolio with 40 different automatic strategies.
  • No MT4/MT5 or other platforms required.
  • Test with a risk-free practice account.
  • Trading results directly on our dashboard.

Don’t you have a broker account yet? Our AI is integrated to trade automated with the broker FXCMClick here to open an account with FXCM.

Advanced forex trading strategies and algorithms 

The foundation of successful trading in the forex market is having a trading strategy. It’s based on a specific methodology that best suits your trading needs. Strategies could be manual, automated, or a combination of both.

Over the past decade, there has been a proliferation of automated trading strategies made available for retail traders.

And while there are many serious traders with established track records for their trading systems, there are many more low-quality trading systems falsely marketed as high-quality by overly eager affiliates, making it harder for investors to navigate the market for trading signals.

There has also been an increase in the social copy trade. Where an operator can mimic other operators’ businesses in real time.

Whether using a copy-trading platform or an automated trading system, in almost all cases, this type of investing is considered self-directed and doesn’t require a power-of-attorney or another third-party money manager to handle your account.

Unlike other copy and social trading platforms, Wiseinvet’s AI has the ability to execute a huge set of market data. It does this by combining technical and fundamental analysis. This strategy can increase the accuracy of our automated AI-Trading and AI-signals.

Self-directed forex investors

Compared to investing in a managed fund, there is greater responsibility. Traders put it on self-directed traders who use trading systems. A self-directed trader should conduct more detailed due diligence. It can avoid falling for the countless low-quality trading systems that exist on the internet.

  • Good quality trading systems will have established track records (historical results), and there will be other quantitative performance rankings, along with qualitative data about the strategy developers and any proprietary math used to operate the strategy.
  • Bad quality trading systems will usually promise high returns that will not equally emphasize potential risk.

There are no guarantees that a strategy will perform well. But conducting proper due diligence can help traders assess various trading systems. They consider using them to aid their trading or investment strategy.

What is the AI performance in forex trading?

The Win Rate of our AI varies according to the period and can reach up to 95%. The performance is based on the efficient frontier measurement metric, which means that our model is profitable whenever the Win Rate is greater than 60%. All strategies of our AI trading system seek stable returns and sufficient results to achieve an average return of 40% per year (APY), without the use of high leverages.

We understand that what matters in forex trading is the final result. Thus, the investor needs to consider that Win Rate is not always the best metric to measure performance in forex, as other signal providers disclose. For instance, out of 100 trades, only 1 trade may be enough loss to make the 99 trades not profitable. In this case, the Win Rate would be 99%, but the final result would be unfeasible (negative).

We focus on the return of 40% of APY and not just on Win Rate.

It is essential to observe that forex brokers may charge spreads, commissions, and overnight fees in your trading account, and these factors can affect the AI performance. You can check our forex trading track record to understand more about AI trading performance by clicking here.

How much do I need to trade forex with AI?

You can start in forex trading with free AI signals or an AI trading account and deposit just $100 in the broker. It is also possible to test using a risk-free practice account with our AI trading system. However, to do efficient risk management in real accounts, we suggest you start at least $100. Notice that some forex brokers require different initial deposits to trade forex.

What is the trading strategy of our AI?

Our AI strategy is the combination of different AI trading systems, with more than 100 features, that define 40 different strategies which simultaneously consider: Quotes of the 28 forex pairs, Supports & Resistances in different time frames, Trends and Counter-trends, Cross-indicators, Index of each pair, Economic Calendar, Investors Sentiment.

Our AI analyzes those fundamental, technical, and sentiment factors that affect forex trading, and all criteria are evaluated in real-time using different weights. After completing the analysis, the choice of the signal emission strategy is made considering the increased likelihood of short-term profit and the amount available for investment.

Using technical analysis, our algorithm considers not only the patterns of various trends, including support and resistance levels and cross-indicators, but our AI is also able to create its own real-time index for each currency pair, which is used to identify what is the best direction and target.

In relation to fundamental analysis in forex, the AI makes a correlation within the economic calendar to find news data that can affect specific currency pairs.

What is the best forex broker for my country?

We have listed here some of the top forex brokers to trade, such as FXCM and Oanda. However, as long as not all forex brokers accept accounts from all countries, you need to check availability to open a Forex trading account directly with the broker. We have been working to identify the best foreign exchange brokers for each country, as you can see below:

Did not find a licensed forex broker in your country to trade forex? Remember that forex trading is not regulated in all jurisdictions, but most countries allow their citizens to open an fx trading account with foreign brokers. For example, this is the case for forex in Nigeria and Brazil.

How long should I hold my investments?

The great famous investor Warren Buffett says if you don’t feel comfortable owning a stock for 10 years, you shouldn’t own it for 10 minutes. Even during the period, he called the “Financial Pearl Harbor,” Buffett loyally held on to the bulk of his portfolio. This reinforces the importance of being patient when using our AI trading solution. 😉

🎯 Wiseinvest is committed to democratizing the retail forex trading market through AI solutions. We work hard to provide financial education, allow anyone in the world to invest easily with Automated AI trading and free AI forex signals. To assure the quality of the AI trading system, our multi-layer platform is integrated with AWSIBM Watson, and Google AI.

Enjoy other free articles about forex trading on the trading Academy and on our free forex Telegram channel.

Disclaimer: Forex and Contracts for Difference (CFDs) are complex instruments and come with a high risk of losing money due to leverage. Forex trading is not suitable for everyone. You should consider whether you understand how forex and CFDs work and whether you can afford to take the high risk of losing your money.

The forex brokerages displayed shall disclaim the overall performance of traders in their platforms. Oanda warns that 76.8% of retail forex traders lose money trading CFDs. XTB warns that 80% of retail forex traders lose money trading CFDs.

FXCM warns that 74.74% of retail forex traders lose money trading CFDs. The performances aforementioned are not related to Wiseinvest AI forex trading and AI forex signals system. You can check the performance of our AI forex system on our dashboard.