What is Opportunity Cost?


Opportunity Cost is the value of the best alternative choice that you decide to forego.

Example 1

You are trying to decide whether or not to wake up early tomorrow to go for a run or to sleep in. Let’s say you decide to go for a run. The opportunity cost is sleeping in. By getting up to run you are giving up the opportunity of sleeping in.

Example 2

Now let’s say it is a situation with more than 2 choices. In addition to running and sleeping in, you have the option of going to a party. You don’t want to go, so you are very unlikely to. Going to the party is not your opportunity cost because you probably were not going to do that anyway. Opportunity cost only refers to the second best choice that you could have taken.

More Examples

If you buy stock A with $2000; you can’t use that $2000 to buy stock B. If you buy stock A with $2000; you can’t use that $2000 to renovate your house. Whatever choices you make in your life, you are giving up any alternative choices you could have made.

Fee Structure

Rate Assets Under Management
1.44% Below $125,000
1.00% Between $125,000 and $750,000
.85% Between $750,000 and $1,250,000
.80% Between $1,250,000 and $1,750,000
.75% Between $1,750,000 and $2,500,000
.70% Between $2,500,000 and $3,250,000
.65% Between $3,250,000 and $4,250,000
.60% Above $4,250,000

A single rate is applied to the entire account. So a person with a $750,000.01 account pays less than a person with a $750,000 account. I will waive personal tax return fees for accounts over $1 million. For accounts that are above $5,250,000, we’ll need to discuss a custom rate.

As I’m writing these to help my readers, I would be very appreciative of any input in regards to what I should write next. If you want me to write about a particular topic, please contact me. If you would like to submit a post to my blog, please contact me.

If anything that I mentioned above interests you, please consider downloading my free e-book. The book contains my thoughts on investment management and some information that I think everyone should know. You can also download it below.

E-Book Download

Questions for the comments

Did my explanation make sense? Do you agree or disagree with what I said?

Learn About My Business


Leave a Reply

Your email address will not be published. Required fields are marked *