Plain-English definitions, reviewed by an independent investor
Nominal vs Real Return
Nominal return is the raw percentage gain; real return subtracts inflation to show what your money actually buys.
Nominal return is the raw percentage gain; real return subtracts inflation to show what your money actually buys.
Real Return ≈ Nominal Return − Inflation Rate
Why it matters
It is the honest number for purchasing power.
Common confusion
A positive nominal return can be a negative real return in high inflation.
Frequently Asked Questions
Why does real return matter?
If you gain 5% but inflation is 6%, you are poorer in real terms.
Where do I see real returns?
TIPS and inflation reports quote them; stocks rarely do, so subtract inflation yourself.