GlossaryIntermediate
Real Return
An investment return adjusted for inflation, reflecting actual change in purchasing power rather than the raw, nominal percentage gain.
Real return adjusts a nominal investment return (see Kaavon's "Nominal Return" glossary definition) for inflation over the same period, reflecting the actual change in purchasing power an investor experienced rather than just the raw percentage gain or loss.
A positive nominal return can still represent a negative real return if inflation over the period exceeded the nominal gain — a genuine loss of purchasing power despite the account balance having grown. See Kaavon's Inflation-Adjusted Return calculator for the full calculation.
Examples
- A 5% nominal return during a period of 7% inflation represents a negative real return, despite the account balance itself having grown.
- Real return is the more economically meaningful figure for assessing whether an investment actually grew an investor's purchasing power.