How to use it
- Use the formula below with your own figures.
The formula
Real return ≈ nominal − inflation.
Worked example
A 7% return with 3% inflation is about 4% real.
Frequently asked questions
Why does it matter?
Real return is your true gain in buying power.
Exact formula?
(1+nominal)/(1+inflation) − 1.
Tips
- Compare money across years in real terms.
- Hold assets that grow at or above inflation.
- Cash quietly loses value when prices rise.
Key terms
- CPI
- A price index for a basket of goods.
- Real return
- Return after inflation.
- Purchasing power
- What a sum can actually buy.