💨 Real Return & Inflation

Nominal vs real returns and purchasing power.

What it does

Separates the nominal return into real growth and inflation using the Fisher equation, and shows the purchasing power of a future amount.

When to use it

Use it whenever a plan uses a return figure — a 10% number is worth a lot less once inflation takes its cut.

Assumptions
  • Nominal return and inflation are constant over the period.
  • Inflation compounds annually on the money value.
Inputs
%
%
years
Pro tip

Plan all long-term goals in real terms. If your investment returns 10% and inflation runs 6%, your real growth is about 3.8% — that is the number that buys tomorrow's goods, and it is why beating inflation is the first job of any portfolio.