ROI-calculating accurately
Below is a MRR and PLR article in category Business -> subcategory Other.
Calculating ROI Accurately
Understanding ROI
The term "return on investment" (ROI) is often used, but do you truly understand its meaning and how to calculate it effectively? Here's a clearer look at ROI and different calculation methods.
Methods to Calculate ROI
1. Cash-on-Cash Return: If you invest $20,000 and it grows by $10,000, that's a 50% cash-on-cash return. This method is excellent for assessing wealth-building potential.
2. Total Investment Amount: When you make a $20,000 down payment on a $200,000 mortgage, the growth is based on the total $200,000, not just your initial investment. While this can provide a broader perspective, the return on your original investment is often more insightful.
3. Lost Opportunity Cost: If you're looking to secure investments from others, highlight their potential losses if they don't invest with you. For example, if your investment offers a 20% return and their current investment only provides 5%, show them the difference in potential earnings.
Insights from the Wealthy
The wealthy often excel in a specific wealth-building niche, achieving significant returns through real estate, stock investments, or their businesses. Despite these high returns, they typically invest in bonds or funds that provide a modest 3% to 5% return to protect their principal. They take calculated risks only in areas where they have expertise and can anticipate safe returns.
By understanding these ROI calculation methods and adopting strategies used by the wealthy, you can enhance your investment approach and build lasting wealth.
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