GLOSSARY TERM
Opportunity Cost
Opportunity cost means what you give up by choosing one use of money instead of another.
What does this mean in practice?
If money stays in cash for a long time, the opportunity cost may be the growth you missed by not investing it. This does not mean all cash is a mistake, because cash can be important for short-term needs and safety. But over long periods, avoiding investing altogether can also carry a real cost.
Example
You keep €10,000 in cash for five years even though you could have invested it for long-term growth. The money stays safe, but the growth you missed during that time is the opportunity cost.
Why it matters
It helps you see that doing nothing also has consequences. Waiting too long, staying fully in cash or avoiding investing completely can reduce long-term wealth, especially when inflation and missed compounding are involved.
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