Real Return: What Did You Actually Earn?
Separate a bigger balance from a real increase in purchasing power.
What it does and when to use it
Nominal return shows how much an investment grew. Real return adjusts for inflation and shows whether purchasing power improved.
What information to enter
Enter nominal return and inflation for the same period, both as percentages.
How to understand the result
A positive result means purchasing power increased; a negative result means inflation outpaced the investment.
Formula at a glance
Real return = (1 + nominal return) ÷ (1 + inflation) − 1
Short example
A 7% return with 3% inflation produces about 3.88% real return, not exactly 4%.
Common mistakes
- Using simple subtraction when precision matters.
- Comparing annual return with inflation from a different period.
Questions fréquentes
Why not just subtract 3 from 7?
That is an approximation. The exact formula compares two growth factors.
Does this include tax and fees?
No. Deduct those from nominal return separately.