Glossary

The rate of return (RoR) is a financial metric that measures the profitability of an investment. It is expressed as a percentage and represents the ratio of the net profit or loss made on an investment to the original amount invested. 💹

A positive rate of return indicates a gain, while a negative rate of return indicates a loss. RoR is widely used by investors to compare the performance of different investments and make informed decisions.

For example, if you invested $1,000 in a stock and one year later your investment is worth $1,200, your rate of return would be 20% (($1,200 - $1,000) / $1,000).

Fun fact: The rate of return can vary significantly based on factors like investment type, time horizon, and market conditions. 🎢 Some investments, like stocks, may yield higher average returns over time, but they also come with higher volatility and risk. On the other hand, safer investments like government bonds typically offer lower average returns but are more stable.