What is one common measure of investment performance?

The investment's annualized return rate is a key performance measure because it provides a standardized way to evaluate the return on an investment over a specified period, usually expressed on an annual basis. This metric allows investors to understand how their investment has performed relative to its duration, making it easier to compare with other investments or benchmarks. The annualized return accounts for compounding, offering a more accurate picture of an investment's growth over time, which is critical for decision-making in investment strategies.

In comparison, the amount of tax paid on profits can vary significantly depending on an investor's location and situation, and does not directly reflect an investment's performance. The total amount invested at initial purchase provides some context for understanding an investment's size but fails to show how well the investment has performed over time. Likewise, the number of trades executed during a year relates more to the investor's activity level rather than the actual performance of the investments themselves. Thus, the annualized return rate stands out as the most relevant measure of performance.