How this calculator works
Divide the nominal growth factor by the increase in prices. Use nominal return and inflation over identical dates. This exact adjustment includes the interaction between inflation and real growth; simply subtracting inflation is only an approximation. Taxes and fees are included only if you already subtract them from the nominal return.
Formula
1 + real return = (1 + nominal return)/(1 + inflation). Nominal return = (1 + real return)(1 + inflation) - 1.
Worked example
A nominal return of 10% with inflation of 5% gives 1.10/1.05 - 1 = 4.7619% real growth. A 5% nominal return with 5% inflation gives 0% real growth.
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Frequently asked questions
Can real returns be negative?
Yes. An investment can gain money while losing purchasing power when inflation is higher.
Which inflation rate should I use?
Use the price change relevant to your spending over the same investment period.
Is nominal return the same as a quoted nominal interest rate?
Here nominal means before inflation. Convert a quoted rate to its effective holding-period return first.