Great point. Opportunity cost shows what we give up when choosing one option over another, but it doesn't consider risk. If one return is guaranteed and the other uncertain, the safer choice might be more reasonable, even if the return is lower. Thanks for highlighting that angle.
Nice piece this. A common non-financial opportunity cost that I find comes around buying a house. Sure, it may generate wealth in the long run but need to consider whether taking out debt comes at the cost of non-financial experiences for e.g. family holidays, building a business your passionate about or even just doing things with friends.
Thanks! 🙂 Very true. Renting is indeed often a good option - if good rental options are available where you live. Interesting enough many people think that buying is the only option, and do not really evaluate the alternatives although it is usually one of the biggest investments they ever make.
Risk is another factor affecting choice, whether offer has fixed or variable return is something that ought to be factored in to assessment.
Great point. Opportunity cost shows what we give up when choosing one option over another, but it doesn't consider risk. If one return is guaranteed and the other uncertain, the safer choice might be more reasonable, even if the return is lower. Thanks for highlighting that angle.
Nice piece this. A common non-financial opportunity cost that I find comes around buying a house. Sure, it may generate wealth in the long run but need to consider whether taking out debt comes at the cost of non-financial experiences for e.g. family holidays, building a business your passionate about or even just doing things with friends.
Thanks! 🙂 Very true. Renting is indeed often a good option - if good rental options are available where you live. Interesting enough many people think that buying is the only option, and do not really evaluate the alternatives although it is usually one of the biggest investments they ever make.