WWII 032: Opportunity Cost in Investing, Return of Capital Taxation, Saving for Retirement, Donald Trump's Effect on Inflation
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In this episode, I shine the light on opportunity cost, the method that Warren Buffett and Charlie Munger use to run the portfolio at Berkshire Hathaway.
Main Topic: Opportunity Cost and its trade-offs
Opportunity cost refers to the value forgone in order to make one particular investment instead of another.
Explicit Opportunity Cost is investing money in a NEW position, a new idea. You don't already have a position in that investment
Implicit Opportunity Cost is allocating capital to positions that you already own. You find an opportunity to increase the position in a current holding.
Opportunity cost is all about the most basic of economic concepts: trade-offs. It's a notion inherent in almost every decision of daily life and of investing: if you make a choice, you forgo the other options for now. And what's been given up can sometimes turn out to have been the wiser choice, which is why opportunity cost is best measured in hindsight -- after all, it is impossible to know the end outcome of any investment.
Opportunity costs are a factor not only in consumer decisions, but in production decisions, capital allocation, time management, and lifestyle choices.
Click here for the extensive blog post I did on this subject of opportunity cost
Ask JB: Return of Capital Taxation, Saving for Retirement
submitted 2 months ago by quicksilver545
JB Says: Return of Capital is non-taxable regardless of what country it comes from. If you lend you friend $100 and he gives you $100 back, that was getting your principal back and is therefore non-taxable. If you charge him 10% interest, and he gives you another $10, that is taxable.
submitted 2 months ago by Surf904
JB Says: If I were in my twenties, I would have a 100% equity allocation. There is nothing inherently wrong with have similar allocations across accounts, especially it you are index investing.
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News: Inflation Under Donald Trump's Administration
JB Says: No-one knows what will happen with inflation under Donald Trump. The same talking heads that were wrong about the election now think they can forecast inflation. What a joke.
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