The return on investment represented by the increase in an asset’s price, divided by its initial price, provides a crucial indicator of investment performance. This metric specifically isolates the gains derived solely from the appreciation of the asset’s value, excluding any income generated through dividends or interest. For example, an asset purchased for $100 that subsequently appreciates to $110 demonstrates a 10% return based purely on its price increase.
Understanding this return is vital for assessing the effectiveness of investment strategies, particularly in evaluating the success of growth-oriented assets. It allows investors to directly gauge the profitability of their investments based on market dynamics and the asset’s performance. Historically, this type of return has played a significant role in wealth creation and has been a focal point for investors seeking long-term capital appreciation.