Why numbers matter Essay Example | Topics and Well Written Essays - 500 words

Why numbers matter - Essay Example The principles concerned with managing money are important to be taken into account while planning to save or invest money somewhere. To discuss and understand these principles, an article from Msnbc The Bottom Line dated November 06, 2011, ‘After steadying, home prices begin falling again’ has been taken into account which entails the scenario of the United States’ real estate industry. The author of the article tells about the falling prices of homes in the United States which were on a steady trend in the summer of 2011. He says that due to the imbalance between demand and supply, there are numerous houses unsold in many states of the US until the end of September 2011. This price fall is being observed by investors and analysts and they are waiting for these to be bottomed that is a rise is being expected after massive falls, though not in the short term. Considering the poor interest rates of US short term Treasury Bills; 0.005% for 3-months and 0.035% for 6-month bills as per the recent auction; this investment aspect has been kept on a farer side by many investors as the rate of return is minimal. Considering this point, other investment opportunities should be searched for. This shows that it is a nice time to buy some lower priced houses and benefit from the capital gains arising in the future, though not in the short term (Schoen, 2011). Taking control of finances is very crucial and an investor should read about some financial trends using mathematical concepts such as percentages and shares in different investments and then take calculated actions. This leads to the understanding of the compounding concept. Just as an investor determines the amount of investment he or she can do, he must take into account the related rate of return and use it to compound his or her future inflows from the investment over the concerned time period. The simple formula for it to be calculated is: Amount of investment * (1 +