Real rate of return

(redirected from Real Returns)

Real rate of return

The percentage return on some investments that has been adjusted for inflation.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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%.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

Real rate of return.

You find the real rate of return on an investment by subtracting the rate of inflation from the nominal, or named, rate of return.

For example, if you have a return of 6% on a bond in a period when inflation is averaging 2%, your real rate of return is 4%. But if inflation were 4%, your real rate of return would be only 2%.

Finding real rate of return is generally a calculation you have to do on your own. It isn't provided in annual reports, prospectuses, or other publications that report investment performance.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
Regression 1 has real returns of Ibovespa as dependent variable and, as explanatory variables, the median of CPI inflation forecasts and industrial production growth forecasts for the next 12 months.
What is far more significant is the finding of the authors that 'housing has enjoyed equity-like real returns with less risk.
The real returns on CPEC will not be accrued through building infrastructure but through improved connectivity to enhance trade and capitalising on China's expertise through industrial cooperation and technology transfer.
RISING living costs are making it even tougher to get real returns on savings.
The concept of seeking real returns is fairly new, so funds have relatively short track records; moreover, inflation has been quiet lately, so their portfolio designs have not faced a severe test.
Western European equity returns for the last 30 years also exceeded the 100-year and 50-year averages, while fixed-income investments, as measured by total real returns on government bonds, were also considerably higher in the U.S.
But investors often make the mistake of concentrating on nominal rather than real returns (that is ignoring the effects of inflation), and, if inflation is set to remain low, which seems to be so, shares yielding between three and four per cent with dividend growth as low as three per cent offer a potential total real return of four to five per cent, which is still pretty attractive.
So how to construct a portfolio at this stage with an offense that can generate meaningful real returns and a defense that can take the punishment of turbulent equity markets or rising rates?
Public defined benefit plans met their target returns, while endowments and foundations posted negative real returns, ISSG said.
Experts expressed concern that Government policies have driven some hard-pressed households to give up trying to save for a rainy day as they continue to grapple with high living costs and poor interest rates which fail to give them any real returns.
Real returns matter if you are genuine about truly funding a secure retirement, that future dream home, or a world cruise with your best friends.