Opportunity Cost
💡 In plain English: What you give up when you choose one option over another — the hidden cost of every financial decision.
Definition
The value of the best alternative foregone when making a decision — the cost of choosing one option instead of the next best option.
📌 Real-World Example
You repay a 9% home loan instead of investing. If equity returns 14%, your opportunity cost is 5%/year. The right choice depends on risk tolerance, not just rates.
Related Terms
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