GlossaryBeginner
Nominal Return
An investment's raw, unadjusted percentage return, before accounting for the effect of inflation on purchasing power.
Nominal return is an investment's raw, unadjusted percentage return over a period — simply the change in value, expressed as a percentage, without any adjustment for inflation's effect on purchasing power.
Nominal return is what's typically reported by default; converting it to a real return (see Kaavon's "Real Return" glossary definition) requires a separate, explicit adjustment for inflation over the same period.
Examples
- A nominal return of 10% in a year with 3% inflation corresponds to a real return of roughly 7%, not the full 10%.
- Nominal return is the figure most commonly quoted by default; real return requires a separate, explicit inflation adjustment.