What is a rate of return?

A rate of return (RoR) is a financial metric used to measure the profitability or performance of an investment over a specific period. It is typically expressed as a percentage, calculated by dividing the net profit or loss from the investment by the initial amount invested. RoR helps investors assess the efficiency of their investments and compare different opportunities. A higher rate of return indicates a more profitable investment, while a lower rate suggests less favorable performance.