What is Opportunity Cost vs Time Value of Money (pt 1)

Opportunity cost is the potential gain that is forgone by choosing one alternative over another. In the context of investing, opportunity cost refers to the potential returns that an investor could have received if they had invested their money in a different investment.

For example, if you decide to invest $1,000 in a particular stock, you are giving up the opportunity to invest that money in other stocks or other asset classes. The opportunity cost of investing in that particular stock is the return that you could have received if you had invested the money in a different investment.

Opportunity cost is an important concept in investing because it helps investors consider the trade-offs they are making when they make investment decisions. It is important for investors to consider the opportunity cost of their investments in order to make informed decisions about how to allocate their capital.

Opportunity cost and the time value of money are both important concepts in economics and finance.

The time value of money refers to the idea that money has a different value at different points in time. Specifically, the time value of money reflects the fact that a dollar received in the future is worth less than a dollar received today. This is because money can be invested and earn a return, so a dollar received today can be put to work and earn additional money over time.

Opportunity cost and the time value of money are related because they both involve trade-offs between different alternatives. For example, when deciding whether to invest your money now or wait until later, you must consider both the opportunity cost of waiting (the potential returns you could have earned by investing sooner) and the time value of money (the fact that money received in the future is worth less than money received today). By considering both of these factors, you can make informed decisions about how to allocate your capital.

Whenever investing your dollars consider not just the immediate return but all the benefits that come with the investment. Investing in real estate and specifically into your own RAL, can generate not only high returns, but a myriad of tax benefits, employment for others, opportunities for growth and expansion, but most importantly, safe, affordable, high quality care homes for vulnerable seniors as they age. An RAL is much more than just an ROI!