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Glossary entry · Money in motion
Real return
Definition
The return on an investment after adjusting for inflation. The headline (nominal) number often looks impressive but tells you little until you subtract the inflation drag. Real return is what your money is actually worth more of, in things you can buy.
Example
A 6% nominal return in a year with 4% inflation is only a 2% real return.
Related
Money in motion
Compound interest
Interest paid not just on what you put in, but on the interest you have already earned.
Read →Inflation
The rate at which the general price of things rises. Same money, less purchasing power.
Read →Interest rate
The percentage something pays — or costs — per year.
Read →Return
The gain (or loss) on an investment, usually expressed as a percentage per year.
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