Calculating ROI with precision
Calculating ROI with precision
The term "return on investment" (ROI) is often used, but do you understand what it means and how to calculate it?
Three methods for calculating ROI
Cash-on-cash If $20,000 is invested and it increases by $10,000, the cash-on-cash rate of return is 50%, which is excellent for wealth accumulation.
Total amount invested If you put $20,000 down on a $200,000 mortgage, the growth is based on the $200,000, not the $20,000 you initially put down. This is perhaps less significant since the amount produced on what was first put in is more vital and beneficial.
Cost of missed opportunities When trying to raise funds using another person's money, you must explain the damage he may suffer if he does not invest. If you have a 20 percent interest-paying investment and the lender has money in a 5 percent-paying investment, you must demonstrate him how much money he would lose if he passes up your chance.
What the wealthy do that we do not
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The wealthy carve out a wealth-creation niche that enables them to earn enormous rates of return on what they do—real estate, market investment, and your day-to-day business. When they earn money, the richest of the affluent always invest it in bonds, key bills, or some other sort of fund that gives a three to five percent return. They want to safeguard their philosophy. They only gamble in areas of competence where they may anticipate a good return.
If you want further support, you may benefit from my 30-minute wealth-building session. We'll speak about your financial goals, go through your current plan, and answer any questions in the following 30 minutes. This training will be educational and will help you design a better plan.
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Citrone