Opportunity Cost
What you give up when you choose one use of your money over another, why cash has a cost even while its balance grows, and why investing has one too.
Key idea
Opportunity cost is the value of the best option you didn't choose. Keeping money in a savings account gives up the growth it might have had invested; investing it gives up certainty and quick access. The cost grows with time, and it's only known afterwards.
What it is
Opportunity cost is what you give up by choosing one thing over another: the value of the best option you didn't take. A franc can only be in one place at a time. Keeping money in a savings account means not investing it, and investing it means not having it safe and at hand.
CHF 20,000, two paths
Take CHF 20,000 and two example rates: 0.5% a year in a savings account, and 5% a year invested. Neither is a forecast, and 0.5% is generous: in August 2026 the savings rates Swiss banks published averaged 0.07%, according to the Swiss National Bank. Move the slider to change the number of years:
- Savings account at 0.5% a year: CHF 22,097.91
- Invested at 5% a year: CHF 53,065.95
Difference if the 5% holds: CHF 30,968.04
After 20 years, the savings account holds CHF 22,097.91 and the invested money CHF 53,065.95. The difference, CHF 30,968.04, is what keeping the money in savings gave up, if the investment really grew 5% a year. The gap widens with every year, because the higher rate compounds.
It cuts both ways
Each choice has its own cost:
Saving gives up growth
A balance you can count on, at the price of the larger sum the money might have grown to.
Investing gives up certainty
A chance of more, at the price of falls that can last years, and of money that isn't always quick to reach at a good price.
Why the riskier path tends to pay more, and why it doesn't always, is the subject of risk and return. How quickly each kind of money turns back into cash is its liquidity.
Small costs that add up
Opportunity costs hide in everyday choices. A fund fee (the total expense ratio) takes money directly, but it also takes the growth that money would have earned. Cash left waiting for a better moment to invest gives up growth too (market timing). Some come with something in return. An emergency fund has an opportunity cost too: the growth it gives up is the price of having cash at hand.
The honest caveat
Opportunity cost is only known afterwards. The 5% is an assumption, and markets don't deliver it every year. From 1962 to 1981, Swiss savings accounts grew 3.47% a year, compounded, while Swiss shares grew 2.30%: over those 20 years, keeping the money in savings was the better choice. The savings figure compounds the average savings rates the Swiss National Bank publishes, and the share figure comes from Pictet's study of Swiss returns since 1900.
Swiss note
In August 2026 the savings rates Swiss banks published averaged 0.07%, while prices were 0.8% higher than a year earlier, according to the Federal Statistical Office, so savings lost buying power. Interest is also taxed as income. On an account that credits interest once a year, the 35% withholding tax applies once the interest passes CHF 200 in a calendar year, and then to all of it, not just the part above CHF 200. If you live in Switzerland, you get it back through your tax return if you declare the account and its interest. Before you invest, set aside the money you'll need in the next few years.
Key takeaways
- —Opportunity cost is the value of the best option you gave up.
- —At example rates of 0.5% and 5%, CHF 20,000 would grow to CHF 22,097.91 or CHF 53,065.95 in 20 years, a gap of CHF 30,968.04.
- —Investing has a cost too: it gives up certainty and quick access.
- —The cost is only known afterwards: from 1962 to 1981, Swiss savings beat Swiss shares.
Related concepts
Compound Interest
How interest on interest turns time into your biggest advantage.
Real Return
The return that counts is the one left after inflation.
Emergency Fund
The cash that keeps a bad month from becoming a forced sale.
Dollar Cost Averaging
Fixed amount, fixed schedule — the simplest way to keep investing.