Investing term

What is Real return?

Your return after subtracting inflation. The true change in your purchasing power.

Real return is your investment gain after subtracting inflation — the honest measure of how much your purchasing power actually grew. The headline (nominal) number flatters you, because part of it just kept pace with rising prices. Building wealth means earning a positive real return; an investment that merely matches inflation has left you no better off.

For example

A 7% nominal return minus 3% inflation is a 4% real return — the only part that truly made you richer in what you can buy.

Real return is taught hands-on in Stage 1 — Money, Goals & Your Financial Foundation.

See the lesson →

Related terms

APRAnnual Percentage Rate. The yearly interest cost of a loan, including most fees.CompoundingWhen your returns earn returns of their own, so money grows faster the longer it's invested.Emergency fundCash reserved for unexpected expenses, usually 3–6 months of your usual spending.Employer matchFree money from an employer that matches part of what you contribute to a workplace retirement plan.
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