What is Opportunity Cost?
Opportunity cost refers to the potential returns you miss out on when you choose one option over another. In investing, this can be significant. For example, if you invest your money in an asset that does not grow while another option in the market provides better returns, the additional money you could have earned represents your opportunity cost. Many people overlook this concept, but it is crucial for those looking to grow their wealth.
A Real Example: Paytm IPO
To illustrate this concept, let’s look at the Paytm IPO from 2021. Many investors chose to invest in Paytm, but the stock price continuously declined thereafter. Even as of 2025, it remains 45% below its initial listing price.
In contrast, the general market, as measured by the Nifty index, has increased by 38%. This example highlights how the money invested in Paytm lost value while the broader market was thriving.
The Cost of Missing Out
Consider this: if you invested ₹100 in Paytm in 2021, that investment would now be worth only ₹55. Meanwhile, had you invested the same ₹100 in a market index like Nifty, it would have grown to ₹138. This represents a substantial difference. The opportunity cost here is the amount of return you missed out on by not choosing the better option. Such a discrepancy can significantly impact your long-term wealth.
When to Take Action
After investing in any IPO or stock, it’s essential to compare your investment’s performance to the general market.
If your stock consistently declines or fails to perform well for one month, three months, or after reaching a certain percentage drop, it may be time to evaluate whether you could be pursuing more lucrative opportunities elsewhere. Avoid remaining invested just because you made an initial purchase.
Track and Improve Your Portfolio
Many investors acquire numerous stocks or mutual funds and then neglect to monitor them. Some might hold 50 to 100 stocks or 25 to 50 mutual funds without being aware of their portfolio’s performance. Are they outpacing inflation? Are they beating the market? If not, they risk losing valuable returns. Therefore, it’s important to regularly track your investments.
Are your investments beating the market? Are you tracking your opportunity cost regularly? Share your thoughts in the comments below! Thanks for reading, and if you found this blog helpful, don’t forget to SHARE it with your friends!
WeekendInvesting launches – The Momentum Podcast
This episode of The Momentum Podcast unpacks 15 years of investing experience!
We cover:
✅ Early investing mistakes and learnings
✅ Navigating market fluctuations (including the 2020 crash)
✅ The transition from direct stock picking to managed funds
✅ The role of momentum investing in long-term strategy
✅ Key takeaways for building a resilient investment portfolio.
Whether you’re new to investing or looking to refine your approach, this episode is packed with practical advice!
