How is real return calculated?

Using the Fisher equation: Real Return = ((1 + Nominal Return) / (1 + Inflation)) - 1. For example, 40% nominal return with 25% inflation = (1.40/1.25) - 1 = 12% real return.

Which instruments beat inflation?

Over the long term, stocks, gold, and real estate generally beat inflation. Deposits and bonds may break even with inflation. Cash and demand accounts always lose value.

What should I do during negative real return periods?

Diversify your portfolio, invest in inflation-indexed instruments (CPI-indexed bonds, gold, foreign currency). Keep cash positions at minimum and think long-term.

Real Return Calculator

This calculator is for informational purposes only. Results are estimates and may differ from actual values.

What Is Real Return?

Fisher Equation

Real Return = ((1 + Nominal Return) / (1 + Inflation)) - 1

Simple approximation: Real Return ≈ Nominal Return - Inflation

Why Is Real Return Important?

Nominal return is misleading. Even if your investment gains 40%, if inflation is 35%, you only achieved a 3.7% real return. Wealth building only occurs when real return is positive.

What Does Negative Real Return Mean?

If real return is negative, your purchasing power has decreased even though you nominally made money. This happens most with cash, low-interest deposits, and demand accounts.

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