Inflation-adjusted return

Real Rate of Return

The rate of return on an investment after adjusting for inflation. It is calculated simply by taking the gross return and subtracting the inflation rate. For example, if the return on an investment is 7% and the inflation rate is 4%, the real rate of return is 3%.

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.

References in periodicals archive ?
dollars, investors reaped an average inflation-adjusted return of 6.77 percent per year.
According to the report the simplest way to de-construct a long-term bond yield is to split it into the expected inflation rate that is expected to prevail over the lifetime of the bond and the remaining 'real' yield that is real, inflation-adjusted return that bond holders demand.
* The real annual total equity returns of approximately 10% may be compared to the findings of Wharton Professor Jeremy Siegel--the stock market has generated an annual average, inflation-adjusted return of 6.8 % from 1802 through year-end 2006.
Using this strategy we find that Zimbabwe's stock market had the greatest nominal return while Kenya's had the lowest return; Botswana's stock market had the best inflation-adjusted return while the stock market of Kenya had the worst return; and Zimbabwe's stock market had the best U.S.
So her real inflation-adjusted return is only 7.69%.
Considerations such as current spending requirements, tax implications, and inflation-adjusted return may also be addressed through the asset-allocation process.
From Table 2, commercial real estate generated an average annual inflation-adjusted return of 3.1% over the time period.
The average inflation-adjusted return on pension accounts was 8% in 1998, with that return averaging 11% in the first half of this year.
"Since the bonds will have a higher inflation-adjusted return than regular bonds or money market funds have earned historically," he notes, "they may be used as a substitute for stocks when the equity market looks expensive."
Once these costs are factored in, the inflation-adjusted return becomes negative.
In addition to the constant dollar security we include inflation-adjusted return indices for five other financial asset classes: (1) U.S.
As developed market interest rates stall or fall and the inflation-adjusted returns on most sovereign debt drops to negative territory once again -- the global search for yield by institutional investors is as urgent as it has ever been.