Real vs Nominal Return
Nominal return is the raw percentage gain; real return is what is left after subtracting inflation.
The nominal return is the headline figure an investment or account advertises, while the real return adjusts it for inflation to show the true gain in purchasing power. A 5% nominal return with 3% inflation is only about a 2% real return, the part that actually makes you richer. Ignoring this gap is a common mistake, especially with cash savings that can lose real value even while the balance grows. Comparing real returns is the honest way to judge whether your money is truly growing. Assetli's inflation tools help you see returns in real, purchasing-power terms.
Example
A savings account paying 4% during 5% inflation has a negative real return of about minus 1%, so your money buys slightly less each year despite growing.
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Related terms
Inflation
The rate at which the general price level of goods and services rises over time, reducing the purchasing power of money.
Compound Interest
Interest earned on both the initial principal and the accumulated interest from previous periods, creating exponential growth over time.
ROI (Return on Investment)
A measure of profit relative to the amount invested, expressed as a percentage.
Interest Rate
The percentage charged on borrowed money or earned on deposited/invested money, expressed as an annual rate.
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ETF (Exchange-Traded Fund)
A fund that holds a basket of assets (stocks, bonds, or commodities) and trades on a stock exchange like an individual stock.
Dollar-Cost Averaging (DCA)
An investment strategy of regularly investing a fixed amount regardless of market price, reducing the impact of volatility over time.
FIRE (Financial Independence, Retire Early)
A financial movement focused on aggressive saving and investing (often 50–70% of income) to achieve financial independence and the option to retire decades earlier than traditional retirement age.
Net Worth
The total value of all your assets (cash, investments, property) minus all liabilities (loans, mortgages, credit card debt).
Asset Allocation
The strategy of dividing investments among different asset classes — stocks, bonds, real estate, cash — to balance risk and return according to your goals and risk tolerance.
Diversification
The practice of spreading investments across different assets, sectors, and geographies to reduce the impact of any single investment's poor performance.