• Home
  • -
  • Blog

Why flipping burgers at McDonald’s beats trading the markets practically all the time?

Burgers and trading

One of the biggest and most dangerous investing mistakes is a mistake, that most people will never understand.

I have seen many lives ruined because people didn’t know about it. And on top of it all, hardly anybody even talks about it in the investing world.

The investing metric you NEED do understand

You are probably familiar with the term Return on Investment (ROI). ROI is probably the most important metric in the investing world. In simple terms, ROI measures how much money was made on the investment as a percentage of the purchase price.

For example, let’s say that you invested $1,000 in the shares of ABC company. After a while, the price of the stock went up and you were able to sell the shares for $1,150.

What was your ROI in that case?

To calculate ROI, the return of your investment needs to be divided by your initial investment. After that, you just multiply the result by 100 to get a percentage.

ROI investing

So, in this case, $150 divided by $1,000 equals 0.15. And multiplied by 100 equals 15.

Your ROI, in this case, is 15%.

Simple and easy. No secrets there. Every investing book and website will tell you that.

But what if I told you that the ROI calculation is wrong and misleading?

You might think that I’ve gone nuts.

My embarrassing investing blunder

But give me a moment to explain what I mean. At one of the seminars I attended at the start of my investing career, one of the speakers was selling a stock-trading course. His claims about the ROI we would get with his trading system were bold, but he made it look so easy, so I started to believe him. And even though he charged almost $2,500 for the ticket, I bought it.

Now, I won’t tell you the embarrassing part of this story, where I lost a lot of money and almost had a nervous breakdown as a result of attending the course. To save myself the embarrassment, I will use an average Joe as an example.

When the average Joe attends this kind of course, the first thing he finds out is that you need to have special software in order to use the strategies covered in the course. Ok, that’s $450 per month, but who cares about that? Isn’t financial freedom worth $450 per month?

Now, the second thing Joe notices is that you need to analyze a lot of stocks with the software every day. So he ends up sitting in front of the computer screen for two hours a day, watching boring charts. But as you know, Joe’s goal is financial freedom and isn’t Joe’s financial freedom worth a couple of hours per day?

After a couple of years of learning and trying, Joe is an experienced trader. And even though he lost some money in the first two years, he has finally become profitable in the third year!

He started the year with $20,000 in his account and now he has $24,000. That’s 20% ROI and he is ecstatic. He jumps around the house; he tells all his friends about his achievements. Life couldn’t be better! But think again.

Don’t you have a strange feeling that we forgot about something when doing the ROI calculation?

Of course! You guessed it. There is his initial investment in the course and there is the monthly cost of the software.

You are right. But I think there is another cost that we didn’t account for, and it is much greater than the other two.

It’s Joe’s time.

And there you have it. ROI calculation is misleading and incomplete if you don’t account for the time you spend making and managing your investments.

The REAL ROI formula

If you spend 10 hours per week for investing, it is a cost. And from my experience, almost nobody accounts for that when they are calculating their ROI.

So what does the real ROI calculation look like?

Real ROI investment

And that makes investing a totally different ball game!

All of a sudden, you realize that if you spend a lot of time investing, your real ROI is much lower than you thought.

But to calculate the real ROI, we need to know what the value of Joe’s time is. You can calculate the value of your time by dividing your personal income by the number of hours worked per year. When you calculate this, you get the value of one hour of your time. Try it out for yourself!

value of time

Let’s say that Joe’s annual personal income is $50,000. And let’s assume that Joe works 1,800 hours per year (U.S. average according to OEDC).

If we divide $50,000 by 1,800 hours, we get the value of one hour of Joe’s time. In this case, it’s approximately $28 per hour.

If Joe spends 2 hours per day on investing, 200 days per year, that means that he spends 400 hours per year investing.

Let’s multiply that by the value of his time ($28 per hour) and we get $11,200. That is the value of the time Joe spent investing in one year.

Now, let’s put that into the real ROI equation. First, we need to deduct the value of the time Joe spent on investing from his return:

And now we can finalize the equation by dividing that negative number by $20,000.

That means that the real return is minus 36%.

Joe thought that he made a nice 20% return on investment – but, in reality, he lost 36%.

In the time Joe spent on investing, he could have made money working part-time or setting up a new business. Even flipping hamburgers at McDonald’s would have brought in more money than what he did trading!

That is why not accounting for the cost of time is one of the most dangerous mistakes I see in the investing world.

Don’t let it fool you.

FREE webinar: How to invest and grow your wealth in the age of excessive money printing?

The US central bank, the FED, made a historic shift in it’s inflation policy. A shift that will have a huge impact on ALL the currencies around the world.

The FED will no longer have an annual 2% inflation target. Instead of that they will aim for an average inflation target of 2% that serves to “make up” for previous periods of low inflation.

This means that they will continue with MASSIVE money printing operation that will produce higher inflation in the next years to compensate for the low inflation rate in the last years.

This of course doesn’t just concern the US citizens. What happens to the US dollar has a huge effect on the entire world and all the other currencies.

Our savings will be decimated.

Cash will start to lose it’s purchasing power faster than ever before.

If you want to be a financial winner in the next decade, you need to prepare NOW.

That is why I will host a FREE webinar where I will cover:

  • How to preserve your purchasing power in the age of excessive money printing and how to get above average returns?
  • Why is the traditional investment portfolio of stocks and bonds simply not fit for the next decade and what are the powerful additional ingredients that you need to have to survive and thrive in the next decade?
  • Which financial products to use and which ones to avoid at all cost?
  • What are my two new secret investment weapons that 99% of investors don’t have a clue about?
  • Plus, I will share with you my favorite topic – how the financial industry legally steals most of your invested money by charging high hidden fees and how to avoid this?

Click here and register right now!

The Million Dollar Decision: Download a FREE Chapter NOW!

92% of investors are losing large amounts of money when investing – without even being aware of it. And the main cause for that are The Six Dark Forces of Investing™. If you don’t learn what these forces are, you will never be able to invest profitably. Click here now to get to know them, and Darth Vader will seem like a good guy to you.