Money word, in plain English ← Back to all terms
Real return
Your return after subtracting inflation. What your money can actually buy, not what it says.
Example. Earn 7% while inflation runs 6% and your real return is roughly 1%.
The nominal return is the headline number an investment advertises. The real return is what survives inflation, and it is the only one that decides whether your buying power grew. An option paying 6% while inflation runs 6% left you exactly where you started. It gets sharper after tax, because tax is charged on the nominal gain, so you can pay tax on a return that made you no better off.
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