Do you know the difference between a real and nominal investment return?

You better!!  If you do not know what this means you will have no idea if you are actually making any money. Nominal returns are your returns before inflation is accounted for. Real returns account for inflation. You might say who cares? This is why understanding of this concept is vital


Example 1  Investment return 7% Nominal

Example 2 Investment Return 7%-3% inflation rate  4% Real

If you do not understand this concept you could be overestimated your stock returns by 50%!!


Worse for Bonds

Bond return 3% nominal

Bond return 3% nominal- 3% inflation  Real return 0%

Understand the meaning of this concept and you are on your way to creating REAL wealth.


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