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Return On Investment ("ROI") - YouTube
Channel: ClayTrader
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return-on-investment maybe you've heard
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it maybe you haven't perhaps you've
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heard of ROI
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what is it why would you use it I'm clay
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let me explain ROI let's just first
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start at the core why would you even
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care about ROI return on investment
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because it's going to tell you did you
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make a good choice did you make a kind
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of choice
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or maybe you just oh that was not a good
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choice at all maybe okay that wasn't a
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terrible choice but it could definitely
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be more efficient it is a way of just
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helping you gauge whether or not you're
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on the right pathway to obtaining
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whatever goal that you may have so that
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it's you know that's the essence of it
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is it's just telling you it's kind of
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holding yourself accountable are you
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making good decisions are you making bad
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decisions could you be making maybe even
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better decisions so what actually goes
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into ROI the ROI is calculated and don't
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worry when I said calculate it if you
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can do division a little subtraction
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you'll be just fine
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Owen yeah you gotta be able to multiply
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by 100 hopefully you can handle that but
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ROI it's very very straightforward and
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an all revolves around this portion
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right here you know so we'll put in our
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division sign but the first thing that
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you need to cut up and this is the way I
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envision it you're not gonna see this in
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a textbook but because I have the mind
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of a child this is how I have to
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envision it but the down here you have
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something that you put in and this is
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your risk now in the vast majority of
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situations what you put in is going to
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be money and your money is at risk
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meaning just because you put it in it
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doesn't mean that you're ever gonna I
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mean the money could just go poof if
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it's a really bad decision so there is
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risk associated with what you put in it
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could also be time so maybe you don't
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put in any money but you're gonna be
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spending a lot of your time doing
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whatever and in that situation what's
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that risk is well just you totally
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wasting your time but that is at the
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core what is going on in this part of
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the equation
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it's just what is being put in up here
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you have let's just call it again
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meaning what do you get you put a bunch
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of stuff in and what does that get you
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and this will make a little bit more
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sense as we
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go on so that is the entire core of
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what's going on at the our ni roi you're
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putting something in you're taking a
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risk and then what is that risk actually
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getting you so let's go through an
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example here and you'll see how it all
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works so let's just say that you are
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wanting to get involved in the stock
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market and you're saying okay I want to
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put something into the stock market now
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what we're did I just use put what would
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you put in the stock market well you put
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money into the stock market so in this
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situation just cuz I'm not smart let's
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keep the math super easy let's say that
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you put in $100 they've ever seen the
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disclaimers you know about the stock
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market
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you know there's past performance is not
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a guarantee of anything that's just
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saying hey listen if you put in $100
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that money is at risk you may not get
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$100 back out so that is what is being
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put in so let's just say that you
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actually get after one year $900 is not
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all the sudden worth $130 well now we
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need to figure out okay well that's
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great but we need to figure out how much
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profit did you actually make so very
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easy and here's this subtraction here
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you just take what you got so you got
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130 but that doesn't mean you actually
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made 130 remember because you had to put
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in 100 so that means that you actually
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got when all of a sudden done $30 right
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you put in 100 you got 130 but you still
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got to subtract out the rest portion
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which leaves you with $30 so in all
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actuality this is $30 right there that
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would be known in kind of business
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jargon as a $30 profit you profited $30
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you generated 130 but you had $100 in
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expenses which gives you $30 profit so
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you put that right up there because at
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the end of the day that's what you've
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got right you risk the hundred dollars
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and you got $30 in profit
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this is where it gets really complicated
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so you divide those out and then you
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multiply that well not by a hundred
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percent you just multiply it by 100 I
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realize the irony there I said it wasn't
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complicated and I screwed it up that's
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okay so you multiply that by 100 and
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that's going to give you what colors for
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you for this here we go
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30% now this is where things get a
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little wishy-washy with ROI because ROI
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you know is 30% good well it depends it
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depends on the business you're in it
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depends on what you're trying to
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accomplish it depends on a whole lot of
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things so in some ways in this situation
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with the stock 30% in one year that's a
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really good ROI that's fantastic in
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other situations though looking at 30%
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might just be like oh that's you know
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compared to the industry standard that's
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kind of that that's rough but think
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about it well at least you know you know
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it's rough so you know that you need to
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improve or maybe you just fly don't know
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that okay that was a bad choice if I'm
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only getting that ROI in some situations
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it could be a negative ROI meaning what
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you put in it didn't get you anything in
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fact it costs you money so a negative
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ROI is certainly what you want to avoid
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but that is what an ROI you know isn't
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how it's being calculated in some
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situations you know you could have let's
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just say 3% now compared to that that
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looks really bad but in some industry a
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3% oh wow that's not bad at all
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especially when you consider that if
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that 3% is that mean time after time
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after time then you factor in
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compounding interest and all that good
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stuff which may back into another video
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on that's some very powerful stuff at
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the core though this is how you
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calculate it what is being the rest what
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are you getting from that risk are you
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getting a profit again profit
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calculation very very straightforward
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and then you're figuring out okay well
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what is actually you know taking place
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here so in this situation yeah you made
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a really good choice with that hundred
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dollars if you're able to generate a 30%
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ROI in just one year other places not so
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much so that is how it all works no
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nothing complicated nothing easy but at
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the end of the day if you need to figure
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this out just you know if you're taking
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like a test question or something
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just figure out okay what numbers aren't
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contributing to being put in okay all
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those numbers all those cost that's
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what's being put in that belongs in the
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bottom portion of the equation what did
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all those numbers generate okay that
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generated a certain number and then
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figure out the profit which again it's
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just subtraction divide it multiply it
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by 100 and that's gonna give you your
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ROI very straightforward if you are out
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there trading alone currently and maybe
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are in the market looking for a
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community to join to assist you in your
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trading or to just help you you don't
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give you another set of eyeballs that I
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do have a private trading community
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where you can trade alongside me and
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other experienced traders so what you
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see popping up on the screen right now
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is both an information link so if you
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click on the inner circle one that is
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going to take you to the page where I
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explain all the details of what exactly
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come with the community both the
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chatroom and the newsletter and then the
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other image that has popped up is a
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behind-the-scenes tour where you can see
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exactly what is going to you know be
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contained within the community I take
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you through like I said a
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behind-the-scenes tour of everything and
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that way you'll know precisely what you
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are getting you know when you join so
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definitely check that stuff out if you
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are interested and thinking about you
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don't want it to join a community and
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let me know if you have any questions
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