Real Return vs Nominal Return Visual Comparison Tool
"See how inflation affects your investment growth, compare real and nominal returns over time."
Most investors focus only on nominal returns, the percentage their investments grow before inflation. But what really matters is your real return, or how much your money's purchasing power actually increases after inflation. This visual comparison tool helps you understand the difference between real and nominal growth, so you can make smarter investment decisions and protect your wealth from inflation.
What's the Difference?
Nominal return = Investment growth before inflation
Real return = Actual purchasing power increase after inflation
Why Real Returns Matter
Inflation reduces buying power of earnings. A 7% nominal gain may only be 4% real gain at 3% inflation.
Example Calculation
$50,000 for 15 years at 6% nominal return with 2.5% inflation:
• Nominal Value: $120,579
• Real Value: $85,623
• Purchasing Power Loss: 29.0%
How to Improve Real Returns
- • Invest in inflation-hedged portfolios
- • Rebalance regularly
- • Seek assets with long-term inflation resilience
- • Consider TIPS and real estate
Historical Context
US inflation has averaged 2-3% annually over the long term.
Rule of Thumb
Target real returns above 3% for meaningful wealth building.
Power of Visualization
Seeing the gap between nominal and real returns helps guide better investment decisions.