Investor Corner/Start here/Foundations
1.1.2 Time Value of Money
₹1 today is worth more than ₹1 a year from now, because today's rupee can be put to work immediately. This single idea underlies every return calculation, every loan, and every investing decision.
Why a rupee today beats a rupee tomorrow
If you have ₹1 today, you can invest it and it can start earning immediately. A rupee promised to you a year from now cannot start earning until it actually arrives. The difference between the two is the time value of money: the earning potential lost simply by waiting.
This is why lenders charge interest, why a discount for paying early makes economic sense, and why financial planning always asks not just how much but when.
A simple illustration
₹100 invested today at 10% a year is worth ₹110 in a year, ₹161 in five years, and ₹259 in ten years. Money promised to you in ten years, with no return along the way, is simply ₹100 in ten years' time. That is worth far less in today's terms than ₹100 you could invest right now.
Where this shows up in practice
Every present-value and future-value calculation, every bond price, every EMI, and every retirement projection rests on this idea. It is also the reason two investments with the same headline return can differ enormously depending on when the cash flows actually happen. That timing problem is exactly what XIRR is built to solve for irregular contributions like a SIP.
How PriLytics helps. Because SIPs, lump sums and withdrawals happen on different dates, a simple average return can be misleading. PriLytics computes XIRR for every holding, which correctly accounts for exactly when each rupee went in or came out. See how returns are calculated.