RE: Catching UpHi LD...good description of these Board's...its not even the scum you have to worry about most though...that's usually easy to spot...remember that the best con artists are the one's who leave you thinking they did you a favour when then walk away with your moolah...this board does have some good posters so I'll continue to check it out since I dipped my toe in this particular pool.
"But as to that example Mr. M., I don’t know how you’d ever figure out what the money ‘could have’ done somewhere else had you not averaged down. What would the somewhere else have been and who says it wouldn’t have gone down too?"
True, its a hypothetical question at the outset of a decision, but in reality it gets answered every day. I'd say its the essential task of every reasonably sophisticated capital allocation decision process. The question is really meaningfully considered at two stages. The first and speculative stage is when a fincial/investment/captial (call it what you will) allocation model is created; the second and historically measurable point is at the end of some defined period of time appropriate to the original financial model.
All financial models rely on certain assumptions. Opportunity cost is not an absolute number, rather a presumed variable set by the precieved cost of capital to the particular decision maker and its individual target for a rate of retun on their invested capital. (For such reasons, its often referred to as an Internal Rate of Return (IRR)intead of discounted cost of capital).
So to answer you're question directly...you don't know the answers when you invest...what you should know then is a model that includes a defined portfolio rate of return inclusive of opportunity/IRR considerations....perhaps that number is 25% because you want to do twice as good as your 12% mutual fund....perhaps its 35% because its a company rather than an individual and it has alternate projects they are confident can generate returns of that magnitude...perhaps its the average of the 12 stocks you have in your portofolio....now after the assumptions are set, decisions are made, the strategy executed, and the time period being studied goes by...the unknowable manifests, the markets march to their own drum...and you end up with results....a set of historical data on which to test your actual performance to the model....like any startegy for any game, you don't know the results until the whistle blows.
"I hear it time and time again out of the guests on Market Call, they all do it when they like a stock and they are the professionals. (<-Gagged when I typed that…lol)."
I wonder if the fact that they or their firms are often the ones manipulating the share price contributed to the nausea?
Enjoy your posts as well...no need to apologize to me...let your inner devil run free...
Cheers;
P.S. This global warming thing has winters on the east coast just about perfect now...exxxxcelent...good time to switch to nuclear....man the shovels ESO!