Definition
Future Value
Future value is what a sum of money invested today will grow to by a future date, given an assumed rate of return and compounding.
It answers questions like 'if I invest this amount each month at this expected return, how much will I have in 20 years?' — the core calculation behind every SIP and retirement projection. The two big levers are time and rate of return, and because compounding multiplies on itself, small increases in either can hugely change the final figure.
Future value makes the cost of delay vivid: starting a few years earlier, or stepping up contributions, can mean a dramatically larger corpus. It is best paired with inflation-adjusted thinking, so the future number is judged in terms of what it will actually buy.
Related terms
- Retirement CorpusA retirement corpus is the total lump sum you need to have accumulated by retirement to fund your living expenses for the rest of your life.
- Time Value of MoneyThe time value of money is the principle that a rupee today is worth more than a rupee in the future, because today's rupee can be invested to earn returns.
- Present ValuePresent value is what a future sum of money is worth today, calculated by 'discounting' it at an appropriate rate to reflect the time value of money.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.