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Real return

Real return is the nominal return of an investment adjusted for inflation, showing the true change in purchasing power. Nominal return shows the increase in the amount of money; real return measures the change in how many goods and services that money can buy.
Contents
  1. 1.Key points
  2. 2.Formula / calculation
  3. 3.Interpretation
  4. 4.Pitfalls
  5. 5.Frequently asked questions

Key points

  • In a high-inflation environment investment success can only be judged by real return.
  • A positive real return means wealth has genuinely grown; a negative one means purchasing power was lost despite a nominal gain.
  • tax (withholding) lowers real return further, so use net return in the calculation.

Formula / calculation

Real return = (1 + Nominal return) / (1 + Inflation) − 1. The approximation Nominal − Inflation is common but the gap grows at high rates: with 50% nominal and 40% inflation the real return is 7.1%, not 10%.

Interpretation

A positive real return means wealth has genuinely grown; a negative one means purchasing power was lost despite a nominal gain. Deposit, fund and stock returns should be compared with the 12-month CPI on the Yatırımcı.AI inflation page.

Pitfalls

tax (withholding) lowers real return further, so use net return in the calculation. Expected real return is uncertain because future inflation is unknown. USD-based return and real return are different concepts.

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Frequently asked questions

Real return is the nominal return of an investment adjusted for inflation, showing the true change in purchasing power.

Real return = (1 + Nominal return) / (1 + Inflation) − 1. The approximation Nominal − Inflation is common but the gap grows at high rates: with 50% nominal and 40% inflation the real return is 7.1%, not 10%.

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