Michael Wagner in U.S. News & World Report: How to Reduce Investment Opportunity Cost
Sometimes it feels as if there is nothing worse than missing out on a high-flying investment. However, if you ever are able to catch a big winner early, it may do more harm than good if you avoid to consider its opportunity cost, which represents the foregone benefits from not choosing the next best alternative investment option. Fortunately, there are some ways that investors can minimize opportunity cost in their portfolios. U.S. News & World Report turned to Michael Wagner, co-founder and chief operating officer of Omnia Family Wealth, to find out how.
“It’s more about time in the market than timing the market,” says Wagner. “To think that you can be in and out of something and outsmart Wall Street is not an informed position to take, and people shouldn’t be doing it.”
Additionally, many investors tend to “set and forget” their accounts, neglecting to monitor their holdings. This can cause investors to remain allocated towards stocks that have significantly decreased in value or to hold risky investments that are unsuitable for their current life stage. To avoid this trap, Wagner emphasizes the need for investors to monitor and rebalance portfolios as they age, or as their life situation changes.
“We all grow and mature and come to different points in our lives, so if you have an old 401(k) from your early 20s, it could be allocated in a very different way than you would be setting up a 401(k) today,” he tells the publication.