What is Opportunity Cost?

Opportunity Cost

First Published Date: July 4, 2010 ADawnJournal.com

There are a lot of complicated concepts in economics, and while some are easier than others, all of them are important to understand. Economics is a diverse field with many things at play, and if you want to invest, or just save money, you should at least have a basic understanding. This brings us to opportunity cost, something that you may not have heard of, but which you deal with on a regular basis.

Opportunity cost is the cost that is associated with the next-best choice available to you based on two, or more mutually exclusive choices. It is a very important factor in economics and it helps blend the relationship between scarcity and choice together. Thanks to opportunity cost, resources that are scarce and difficult to obtain, are therefore used more efficiently. This also means that opportunity cost goes well beyond economies and financial costs, and into other areas including pleasure, lost time, utility and more.

First created by John Stuart Mill in the 19th century, opportunity cost has become a cornerstone of economics around the world, helping to shape the world we currently live in. Now, opportunity cost may seem rather foreign, and slightly difficult to comprehend, but to help you here are some examples that illustrate opportunity cost.

·   Someone takes $50,000 and puts it into a stock, while the person makes money if the stock goes up; they have lost the money that would have come from leaving the $50,000 within the bank, where they would have collected interest on it. Therefore, the opportunity cost to that person, who chose to invest in stocks than leave it in the bank, is the interest they would have received on their savings.

·   An individual walks into a store and must decide between spending $20 on a video game or on a new pair of jeans. If the person buys the jeans, the opportunity cost is the video game, while conversely if they buy the video game the opportunity cost is the jeans.

Opportunity cost is not just about material or monetary items; it is about what has more value to a person. For example, if a person can afford to go see one movie, and must choose between action and comedy, they must assess which will give them more enjoyment. If they choose the action movie, then the opportunity cost is the comedy, while if they choose the comedy, the opportunity cost is the action movie.

As you can see, the opportunity cost is something you use on a regular basis throughout your life. When you are choosing between what TV shows to watch, what book to buy, which turn to make on the street and more, you are using opportunity cost. Understanding opportunity cost, especially in finances, will then allow you to get the most out of your decisions and help you earn more money, or save it based on the decision you make. Opportunity cost is something you may not have heard of, but it is something you use every day of your life.

Canadian Popular ETFs

 Some Popular ETFs in Canada

First Published Date : July 10, 2010 ADawnJournal.com

Investing in exchange-traded funds is considered to be one of the better ways to invest in the stock market. Where usually you are trying to beat the stock market, with exchange-traded funds you are only mirroring the index itself. This means that there is a better chance for long-term rewards. Of course, conversely you will end up having lower reward because there is lower risk. However, with lower risk comes the long-term ability to slowly build your investment without worry that you will lose it all. In Canada, ETFs are a very popular because they are somewhat safer investment vehicle than others and here are the most popular ETFs within Canada.

·   iShares CDN Jantzi Social Index: if you want to be socially-responsible with your investments, then this is the ETF for you. All the stocks on this index are picked through an extensive process that must meet criteria in terms of environmental records, social records and governance. This index has consistently outperformed the TSX 60 Index, which it mirrors.

·   iShares CDN LargeCap 60 Index: The most popular ETF in Canada, it consistently does well, leading the list of the most active TSX stocks. More than any other ETF in Canada, this is the choice for most investors who want to invest securely and safely.

·   Claymore S&P/TSX Cdn Dividend: This ETF tracks the TSX Canadian Dividend Aristocrats Index, which has stocks and income trusts on it that have, for at least five straight years, continually raised their dividends on an annual basis. One of the biggest benefits here is that there is a high yield dividend, twice that of other ETFs, plus the fact that there is very little competition on the ETF when compared with other ETFs like iShares.

·   Horizons AlphaPro Managed TSX 60: One of the more unusual of ETFs, this one is actively traded, which is unusual for ETFs as most use simple index tracking, rather than having a broker populate a list of stocks. What the broker will do is take the index and play around with the stocks on it to find the best option. The one drawback is that the ETF has only been around for a year and a half, so there is very little history to go on.

·   Claymore Canadian Fundamental Index: This ETF uses a basic index approach in that it will look at various factors based on things like revenues and cash flow, which gives a better and higher rating to stocks that are undervalued. Each year in March, the stock is rebalanced to reflect any changes in the world of the stock market. This index routinely does better than others, making it very popular for ETF investors.

If you are investing in ETFs, then you are probably doing it because it provides you with long term rewards and lower risk. If you are in Canada, then these are some of the ETFs you can keep an eye on to meet your investment goals to give you consistent rewards well into the future.

Malaysia Travel Blog: The Kuala Lumpur Tower (KL Tower)

Kuala Lumpur Travel Blog: Part 8 | A Tower Inside a Forest

My last full day in Kuala Lumpur was Dec 19, 2019. I had a Half-Day Kuala Lumpur City Tour starting at 9:00 AM. My flight from Kuala Lumpur would leave the next day on Dec 20 at 10:25 AM.

My Half-Day Kuala Lumpur city tour lasted only 3 hours and I didn’t have any repeats from my Discover Amazing Kuala Lumpur City Tour, except the National Mosque.

This time, I had two female companions from the USA, so we were three people in one car.

We took some pictures in front of the Petronas Towers, which once used to be the tallest buildings in the world from 1998 to 2004.

We also visited Kuan Ti Temple, Sri Mahamariamman Temple, KLCC Park, The Kuala Lumpur Tower (KL Tower), and much more. The Kuala Lumpur Tower, at 421 meters tall, gave me an opportunity to experience aerial views of greater Malaysia.  KL Tower is located within the Bukit Nanas Forest Reserve, making it the only tower in the world located inside a forest.

After finishing the trip, I was back in my hotel by 2:00. I went to the mall in the same building for lunch and evening coffee. I spent some time taking pictures of the hotel (DoubleTree Hilton Hotel Kuala Lumpur) swimming pool, which was pretty nice.

DoubleTree Hilton Hotel was one of the best Hilton hotels I have stayed in, so I was happy to have free time to spend in the hotel vicinity and in my suite.

Tomorrow, I will be heading for Toronto. My flight will leave KUL in the morning and this all-business-class-trip will have 3 different flights. I will talk about all that in upcoming posts. 

India’s Solid GDP Growth

India Continues With Solid Economic Growth

First Published: July 14, 2010 ADawnJournal.com

The recession has been good and bad for India. With the recession, spending has gone down and the amazing growth in auto sales has slowed. In years past the industry grew by 30 percent per year, but this past year it grew by only 15 percent as more and more people in India began to hold back on spending. However, overall the economy of India has continued to grow even during the recession. The International Monetary Fund recently announced that in 2010, the forecast growth for the country is 9.5 percent. The reason for this is the high corporate profits, as well as the financial conditions that were very favourable.

Originally, India was expected to only have a growth of 8.8 percent, but that was raised as the country continued to do well as the world moved out of a recession. The growth of 9.5 percent is roughly two percent above the growth for last year in India, which stood at only 7.4 percent. This is better than the global economy growth which only stood at five percent in the first quarter of 2010. This shows that India is doing very well and continuing to grow while the recession has hurt other countries. Asia as a whole is doing very well, and that is helping India as its major trading partners are in Asia, as well as the United States, which outsources a great deal of work to the subcontinent.

However, if you are looking for a country to invest in, India does have its benefits but its growth is still lower than that of China, which has a growth of 10.5 percent right now. Japan in contrast is the second largest economy on Earth, but it only had a growth of 1.9 percent, which was well below that of India. This shows that India’s economy is stronger at the moment than some of the largest economies on the planet.  Throughout the recession, many investors worried about investing in India because the country had never gone through a huge recession such as the one in the last 2000s. However, after some initial hiccups, the economy of India began to grow once again, move past the rest of the world in terms of the speed of growth, only beaten by China.

This allowed investors to determine India is a country that is growing quickly and rapidly, and is still seeing huge growth while other countries are struggling. The recession has begun to fade and with it India is again moving forward.

This continues the process that began in the late-1990s when India began to implement major reforms for its economy. This allowed India to grow in economic power, which has helped its citizens have a better standard of living. More people buying in India helps the economy grow, and the better the economy grows, the more India can export cheaply to other countries like Canada, America and China.

If you are looking for a country to invest in, invest one of the few that actually did well during the recession

Tips for Saving For Retirement in Your Later Years

Later Years Retirement Saving Tips

First Published Date : July 18, 2010 ADawnJournal.com

In a perfect world, we would all save for retirement early but life has a way of getting into the mix and changing things around us. Sometimes it can be difficult to make sure you put the money away that you need to for your retirement years and it is not uncommon for an individual to save for their retirement but do so in their 40s and 50s.

If you are in your 40s and 50s and you do not have much in the way of retirement savings, you can follow these tips to start saving in your later years:

·    Look at how much you spend and live on right now and then determine how much you will need per year in your retirement. If you spend $60,000 per year on all your bills, mortgages, debts, etc, then when you retire you will probably spend around $30,000 since many of your debts will be paid off. That means on average from the age of 65 to 85, you will need at least $600,000 saved up. Now that you know how much you need, you can start saving.

·    Look at your retirement savings plan like the Canada Pension Plan and 401(k) and determine how much you can contribute per year to help you reach your goal.

·    Talk with your employer and see if they can contribute to your retirement plans as well, and find out what the pension from your employer is like.

·    Start looking at ways that you can save money with your life at this point. Maybe downsize the home you live in, sell one of your cars, start cutting back in any way that you can. The more money you save now, the more you will have to put away for retirement. If you are able to save $10,000 per year from the age of 40 to 65, you will have saved $250,000, which is an excellent sum and almost half what we calculated you would need at $30,000 per year post retirement.

·    Probably the most important thing you can do to save for your retirement in your later years is to get yourself out of debt. When you are in debt, you are paying money every month and it can amount to a lot of money. Therefore, work to pay off your debt in the next five years and you will find that the amount you can save will triple or even quadruple. Do you want to save $10,000 per year or $40,000 per year?

Retirement is something we all look forward to but not all of us save for it. When we are in our 20s, retirement is the last thing we are thinking about but as we get closer to our 50s, the looming retirement begins to come into our sights and we need to start thinking about saving for it. You can save enough money for your retirement in your 40s and 50s; it just takes a bit of work to do it.