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 ?
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.
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In addition to the constant dollar security we include inflation-adjusted return indices for five other financial asset classes: (1) U.
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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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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.
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Once these costs are factored in, the inflation-adjusted return becomes negative.
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Real return: The inflation-adjusted returns of an investment.
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The first of these concerned the UK equity markets and returns to shareholders: the annual inflation-adjusted returns on British pension funds in 2000-09 averaged only 1.
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Using these inflation-adjusted returns, we find that there is still substantial evidence of excess return predictability in liquidity-adjusted inflation-indexed bond returns as well as in breakeven inflation returns in both the US and the UK, which we interpret as evidence of a time-varying real interest risk premium and a time-varying inflation risk premium.
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He said going back to 1960, the first 7 months of the third year of a presidential cycle (like 2011) produced inflation-adjusted returns of 20 percent for the 48-month presidential cycles.
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