Introduction
The next important topic for discussion is the idea of “opportunity costs”. This is a fundamental concept in the world of finance and can significantly impact your investment decisions. Opportunity cost refers to the potential benefits or gains (opportunity) that you forego (cost) when choosing one option over another.
Opportunity cost is not just an essential concept in economics but is in every aspect of life when you need to make a choice! For instance, when we decide to pick up an extra overtime shift on Saturday, we forego the time we may be able to spend with our family. Opportunity cost therefore revolves around the idea that every decision has an associated cost. When you choose one option, you automatically forgo the potential benefits that could have been obtained by selecting an alternative. In simpler terms, opportunity cost is the value of the next best alternative that you give up when making a choice.
However, opportunity cost is uniquely different and speci...
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