What refers to the percentage of income that an investor receives back on their investment?

The concept referred to is the rate of return, which measures the percentage of income generated by an investment relative to its cost. This figure helps investors evaluate the performance of their investments over a specific period, allowing them to compare the attractiveness of different investment opportunities.

The rate of return is critical because it provides a clear perspective on how effectively the capital is being utilized and what kind of profits an investor can expect. It encompasses not only income generated through profit or rental payments but also considers fluctuations in the value of the investment itself over time.

Understanding the rate of return supports informed decision-making in investment strategies, as it helps investors gauge their investment effectiveness and adjust their portfolio as necessary to maximize their financial outcomes.