As from April 2013 my Journey in Investing is to create Retirement Income for Life till 85 years old in 2041 for two persons over market cycles of Bull and Bear.

Click to email CW8888 or Email ID : jacobng1@gmail.com



Welcome to Ministry of Wealth!

This blog is authored by an old multi-bagger blue chips stock picker uncle from HDB heartland!

"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder

"For the things we have to learn before we can do them, we learn by doing them." - Aristotle

It is here where I share with you how I did it! FREE Education in stock market wisdom.

Think Investing as Tug of War - Read more? Click and scroll down



Important Notice and Attention: If you are looking for such ideas; here is the wrong blog to visit.

Value Investing
Dividend/Income Investing
Technical Analysis and Charting
Stock Tips

Thursday, 16 June 2011

How do you measure Opportunity Cost?

We often hear people saying that there is opportunity cost for not cutting losses or pay off your debts too early. So how do we really measure opportunity? Anyone?


CAGR?


I have one bank account that is dedicated to all stock transactions including cash flow from stock dividends. In this sense, I know every dollar and cent in and out of this account. So it is either money in the bank or stocks in the market.

Then, what is my opportunity cost between cash in the bank and stocks in the market?

  1. When I sold the stock, the proceed of the sales will back go into the bank to earn low interests.
  2. When I bought stock, the money moves from bank to the stock market and its value goes up and down according to market conditions.
  3. When I receive stock dividend, it will earn low interests until I re-invest it back to the stock market.
I measure CAGR of my portfolio and plot its daily value as Line Graph. (Some may use XIRR ; but I use CAGR since I rarely add capital so CAGR works well for me)


So where is my opportunity cost? Does opportunity cost really exist?

Read? Other articles related to "Measuring"

1 comment:

  1. How about using a benchmark.
    If u r in SG market, the STI returns perhaps?
    That could act like an opportunity cost reference.

    ReplyDelete

Related Posts with Thumbnails