Losing Opportunity Cost is Much Worse than Losing Money

We think that when we lose money it is the worst thing which can happen to us, but we don't know that losing opportunity cost is much worse than losing money. Now the problem is people actually don't know what is all about losing the opportunity cost, so in this post we will know all about opportunity cost, money lost and how to minimize the opportunity cost.

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What is Opportunity Cost

In simple terms opportunity cost means that you miss out on possible gains when choosing one alternative over the another. I am not saying that opportunity cost means day dreaming about the trade you have not taken. We all are humans and we can make wrong decisions. The real meaning of opportunity cost is that if you have taken a wrong trade, have taken wrong instruments, it's better to come out of that as early ad possible rather than hoping that your decision will be fruitful.

Example of Opportunity Cost

For example, I have taken a share named Heranba Industries which given me negative 50% returns and now I am hoping that this share will give me some returns than I will come out. Now since I am holding this share, I cannot invest in any other instrument which could have made that return for me. So Heranba has to give 100% returns so that I can be break even. But instead if I invest in any other coin which has given good returns in the past, I could have easily recovered the lost amount.

Losing Money

Now in yhe above trade I have lost 50% of my money and thus I am waiting for it to be recovered so that I can take back my trade and invest in any other share. But since I have waited for long, I could have booked the loss and invest in any other stocks so that I can recover the loss as soon as possible. So the loss could have been minimized, if I have used the stop loss.

Why Losing Opportunity Cost is Much Worse than Losing Money

When you cut off your losses, you have the capital which can be deployed to some of the great stocks out there which can give you the profit. Now if you take 10 trades or positions, it is not that all 10 will give you profit. Half of them can give you loss, if yes then cut off that loss and redeploy to other 5 where 2 can be your profitable trade. In this way you are continously trying to find that opportunity for profit and you are not worried about losing the money in the process.

That's why Losing Opportunity Cost is Much Worse than Losing Money.

Posted Using InLeo Alpha