What is the term for the net gain or loss on an investment expressed as a percentage of the investment’s initial cost?

The term referring to the net gain or loss on an investment, expressed as a percentage of the investment's initial cost, is known as the rate of return. This concept quantifies how much money an investment has made or lost relative to its original purchase price, allowing investors to understand the profitability of their investments in a standardized way. The calculation typically involves taking the total gains or losses from the investment, subtracting the initial investment cost, and then dividing that result by the initial investment cost, subsequently multiplying by 100 to get a percentage.

The focus on a percentage makes it easier for investors to compare different investments, regardless of their absolute dollar amounts. Understanding the rate of return helps potential investors assess the effectiveness of their investment strategies and make informed decisions moving forward. This metric is vital for evaluating the performance of an investment over time.