1. What is Real Return?

Real return is the return on an investment after accounting for inflation. It shows the actual purchasing power gained from an investment, unlike nominal return which doesn't consider inflation.

2. How Does the Calculator Work?

The calculator uses the real return formula:

Where:

• Nominal Return — The stated return on investment (as decimal)
• Inflation — The inflation rate during the period (as decimal)

Explanation: The formula adjusts the nominal return by the inflation rate to show the true increase in purchasing power.

3. Importance of Real Return Calculation

Details: Calculating real return helps investors understand their actual wealth growth, make better investment decisions, and compare returns across different time periods with varying inflation rates.

4. Using the Calculator

Tips: Enter nominal return and inflation as decimals (e.g., 0.05 for 5%). Both values must be non-negative.

5. Frequently Asked Questions (FAQ)

Q1: Why calculate real return instead of using nominal return?
A: Nominal returns don't account for inflation, which can give a misleading picture of actual purchasing power gained.

Q2: What's a good real return for investments?
A: This varies by market conditions, but generally positive real returns indicate your investments are outpacing inflation.

Q3: How often should I calculate real return?
A: Monthly calculation is recommended for active investors, while long-term investors might calculate it quarterly or annually.

Q4: Can real return be negative?
A: Yes, if inflation is higher than your nominal return, your real return will be negative, meaning you've lost purchasing power.

Q5: Does this work for all types of investments?
A: Yes, the real return calculation applies to stocks, bonds, mutual funds, and other investments when you know the nominal return and inflation rate.