What "opportunity cost" means in finance

Opportunity cost refers to the potential benefit or value that is foregone when choosing one option over another. It is the cost of an alternative that must be given up in order to pursue a certain action. In other words, it is the cost of not doing something else. It is an essential concept in investment and financial decision-making, as it helps investors understand the benefits and drawbacks of choosing a particular investment option over other potential options. Opportunity cost is often used to evaluate the potential gains or losses associated with different investment opportunities.