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.
