Beware the cost of lost opportunity

Occasionally we are presented with opportunities that we know or believe would make a difference in our lives – and sometimes they are wrapped in less than ideal circumstances. For example we want to start investing but due to circumstances we acknowledge there’s going to be an additional cost to get started and we must weigh up the ‘cost of opportunity’ that we might miss.

The usual example is where we don’t quite have enough deposit for a property purchase. Our alternative may be to consider lenders mortgage insurance. Obviously this can be expensive but it could be a small cost for the opportunity presented. I can think of a recent example where clients were saving for their 20% deposit on a new home and in the same time frame home prices rose by over $100,000 on average. Not only were they chasing a moving goal post but they ended up paying far more for the home and a higher mortgage insurance premium when they did throw their hands up and buy. Obviously we don’t want to pay more than we have to but sometimes we should stand back and look at the overall proposition. In 20 years time will we look back and regret the small fee spent or will we be pleased with the home we secured and have enjoyed growth in?

And it doesn’t always happen this way either, in my own experience it was a choice between two options. A property which had water views in an exclusive neighbourhood or a regular suburban block – one of this was to be my new home. If I tell you I bought the regular suburban block which was cheaper than the other, and that in fact it was 33% cheaper than the second block you will agree with my decision. But if I tell you that the difference was actually $20,000 and 20 years later and the property on the river is worth double the other, do you start to understand the cost of opportunity?

By all means it must be affordable for you, but I guess my message is to weigh up your options and look for opportunity without fear of the cost if it makes longer term sense.

Western Weekender article

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