Foregone Earnings

Foregone earnings is a concept used in a number of different applications in the realm of finance. [Page 712]One meaning that is commonly intended in the sphere of investment is the difference between actual earnings and what could have been earned if not for the fees associated with the investment. For example, if an investment of $1,000 earned 10-percent interest but required the payment of a $50 fee, the foregone earnings would be the $50 of the fee plus the interest that $50 would have earned if it had not been used to pay fees—in this case $5—for a total of $55 in foregone earnings. Over the long term, and depending on the interest rate, foregone earnings can reach substantial amounts, particularly when the investment ...