Opportunity cost
Categories: Investing, Financial Theory, Ethics/Morals
Also known as a trade-off or "You can't have your cake and eat it, too." The opportunity cost is the value of what you could have had if you'd made a different decision.
Example
You call in to a radio show and win two Super Bowl tickets. You bring your best friend, natch, and while you're there, the guy in the row behind you asks (not so politely!), "How much did you pay for your tickets, punk?" You (very politely) reply, "They were free!"
Wrong.
They were not free.
Why not? Well, look at it this way: what if you'd turned around and sold those two Super Bowl tickets on Stub Hub? You might have made a few thousand dollars off the deal. So when that guy asks you how much your tickets cost, the correct answer is "They cost a few thousands bucks." Yep: you could have had $2,000, and instead you have $0. Those seats cost you $2,000.
That's opportunity cost.