Real Rate of Return Calculator
Your real return is what you actually earn after inflation eats into your gains. Convert a nominal return into its inflation-adjusted, purchasing-power equivalent.
Your details
- Nominal return
- 8.00%
- Inflation
- 3.00%
Formula
Real return = ((1 + nominal) ÷ (1 + inflation) − 1) — the Fisher equation. A quick approximation is simply nominal minus inflation, but this is exact.
How it works
A 8% return in a year of 3% inflation isn't really 5% — it's about 4.85% once you account for the compounding of prices. Judging investments in real terms is the only honest way to compare growth over time.
Frequently asked questions
What is the real rate of return?⌄
It's your investment return adjusted for inflation — the true increase in your purchasing power, rather than just the headline (nominal) percentage.
Why not just subtract inflation?⌄
Subtracting is a close approximation, but the exact figure divides the growth factors (the Fisher equation) because both returns and prices compound.
Can a real return be negative?⌄
Yes. If inflation is higher than your nominal return, your money loses purchasing power even though the balance grew in dollars.
Sources & methodology
Fisher equation: ((1 + nominal) ÷ (1 + inflation) − 1). Not investment advice.
- •Investor.gov — inflation — SEC
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