Here at FinancialLogs, my goal is to explain the concept of logarithms and show the benefits of incorporating them into your financial models. While this will take some investment of time up front to both understand and implement these concepts, I hope to convey many of the benefits of doing so.
I provide a list of common topic areas below that each use the benefits of logarithms. Click on a specific topic that catches your interest, or read through them all
- Compound interest- as simple as A*B
- Rule of 72 – why it works and how to create similar ‘rules’ of returns
- Arithmetic vs Geometric averages – how they differ and when to use each type
- Average return – quickly calculate for any period without high-order roots
- APR vs APY and how logarithms avoid this confusion altogether
- Loan points – when are they worth buying
- Gains vs Losses – common fallacies and how to avoid them
- Taxes – why timing doesn’t matter, only the rate
If these benefits sound interesting to you, then please read on. Start at the beginning if you are new to logarithms, or feel free to jump around if you have one particular interest or are already familiar with certain concepts.