Coca Cola, one of the bluest of the blue chips. This is a foundational pillar of any portfolio. Through good times and bad times, Coke pumps out profits and generates wealth for its owners. It’s an easy business to understand: sugar water. It is a fantastic business. There is nothing quite like it. The returns generated by the selling of sugar water is incredible – consistent return on equity in the 20% range, which means loosely that for every dollar of sugar water Coke sells, they are able to generate 20ish cents of pure profit. But I’m not here to give you an in-depth analysis of Coca Cola today. Instead, I wanted to expand on how using the earnings yield can help you think about opportunity costs. Remember that post on how to think about an asset? Quickly peruse that again as it will be a useful primer for what I am about to go over.
This post is for a friend who asked me to punch some numbers to figure out what makes more financial sense: accelerated mortgage payments or minimum mortgage payments supplemented with investing. Let’s explore what might make more financial sense.
We dreamed of a long honeymoon in Australia. We requested leave of absences from work. We were excited. We wanted to go. But then, we did an opportunity cost analysis. And we completely changed our minds.