What Is Real Return? Meaning & Example
Definition
Real return is your investment return after subtracting inflation. It shows how much your purchasing power actually grew.
Related terms
Inflation is the general rise in prices across an economy over time, which reduces what each unit of money can buy. Moderate inflation is normal, while high inflation erodes savings quickly.
Purchasing PowerPurchasing power is the amount of goods and services a unit of money can buy. Inflation reduces purchasing power over time.
Total ReturnTotal return combines price change with income such as dividends or interest. It gives a complete picture of how an investment performed.
What is Real Return?
Real return is your investment return after subtracting inflation. It shows how much your purchasing power actually grew.
Can you give an example of Real Return?
Earning 6% when inflation is 3% gives a real return of roughly 3%.