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Inflation-adjusted return

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Inflation-adjusted return. Inflation-adjusted return is what you earn on an investment after accounting for the impact of inflation.

For example, if you earn 7% on a bond during a period when the inflation rate averages 3%, your inflation-adjusted return is 4%.

Inflation-adjusted return is also known as real return.

Since inflation diminishes the buying power of your money, it's important that the rate of return on your overall investment portfolio be greater than the rate of inflation. That way, your money grows rather than shrinks in value over time.



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If it does, they'll get the inflation-adjusted return of principal.
But from his vantage point on Indian Hill in Claremont, investment adviser Don Gould has a different outlook: He wants to aim an arrow at real, inflation-adjusted returns of 7 percent a year.
The average inflation-adjusted return on pension accounts was 8% in 1998, with that return averaging 11% in the first half of this year.
 
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