Have you ever thought that how an investment’s returns can be calculated? What tool is needed?
That’s absolutely a big concern of people who invests their money on literally anything! How will my money be returned?
In the crypto world, there’s an expression named “ROI” which makes you comprehend the whole concept of money returning easier.
Return On Investment abbreviated to ROI is a way to measure an investment’s performance. It’s also a great way to compare the gain over different investments. Mostly, an investment with a positive ROI is better than an investment with a negative one.
There are multiple ways to estimate the returns, and you need to be capable of measuring the gains or losses compared to the initial investment. That’s what ROI does. It approximately calculates the profitability of an investment in comparison with the original one. A positive ROI means profits, and a negative ROI means losses.
ROI calculation applies to any kind of business. For instance, If you plan to open or buy a restaurant, you should do some number crunching first. If it seems like the business would gain an enormous profit in the end, it may be worth taking the venture of getting it started.
So, how is this ROI useful in cryptocurrency?
You won’t be able to hide your failure from the world, so if you’re not progressing well and you have negative returns, something should be rethought in your strategy. Having said that, if you feel like you’re doing well but the numbers are not reflecting that, you’re probably a victim of your biases.
In addition, ROI can help appraise the results of transactions that already have been done. For example, you purchase land for $100,000. Then you keep it for two years and spend $70,000 on it. Now suppose that the land’s price increases on the market and you can sell it for $400,000.
The same thing can happen in other fields such as cryptocurrency. . .
However, whether you’re day trading, swing trading, or a long-term investor, you should always measure your performance. Otherwise, you won’t get to know if you’re doing well or not.
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