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Opportunity Cost

The value of the best alternative you give up by making a choice.

Opportunity cost is what you forgo when you choose one option over another. Putting $50,000 into a home down payment has an opportunity cost: the return that money could have earned if invested instead. Recognizing opportunity cost is what makes a rent-vs-buy comparison honest — the renter's invested down payment is a real benefit that simpler comparisons ignore.

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