Concept
Inflation Adjusting Stock Returns
A strong-looking return can feel smaller once you account for changes in purchasing power over time. Here’s a simple way to think about nominal versus real returns and how to read them in the tool.
Published: December 26, 2025 · Updated: December 26, 2025 · By FinToolSuite Editorial
Disclaimer
- Educational purposes only, not financial advice.
- Examples are illustrative and simplified.
- Past performance is not a reliable indicator of future results.
- Market returns and inflation can be unpredictable.
- See the Privacy Policy for data handling details.
Open the Investment History Checker
Run your dates, view returns, and think about inflation when comparing long windows.
Quick answer
- Nominal return is the percent change on paper.
- Real return adjusts for inflation.
- Over decades, inflation can meaningfully change what gains feel like.
Nominal vs real returns
| Type | Meaning | Simple way to think |
|---|---|---|
| Nominal | Does not adjust for inflation | Headline percent |
| Real | Adjusts for inflation | Purchasing power change |
A simple real return formula
Approx real return ≈ (1 + nominal return) ÷ (1 + inflation rate) − 1This is a simplified approximation using an average inflation rate over the period.
Simple worked example
Nominal return: 50% over a period. Average inflation: 20% over the same period. Real return ≈ (1.50 ÷ 1.20) − 1 = 25%. That means the purchasing power gain is smaller than the headline number once you account for inflation.
Why inflation matters more over decades
- Compounding works for inflation too.
- Long windows magnify the difference between nominal and real.
- Comparing different decades without inflation context can mislead.
How to use this with the Investment History Checker
The tool reports historical price changes and metrics like total return and CAGR—these are nominal unless stated otherwise. When comparing long windows or different eras, consider how inflation could change the story of what those returns feel like in purchasing power terms.
For more on CAGR, see CAGR explained. Check scope notes in the Investment History Checker FAQ.
Cautions and limitations
- Inflation varies by country and category.
- Your personal spending basket may differ.
- Taxes, fees, and dividends can also change net outcomes.
- Do not treat a single inflation assumption as precise.
Quick checklist
- Check the time window length.
- Compare multiple windows.
- Consider real return if thinking in purchasing power.
- Do not assume future inflation.
FAQ preview
Is real return always lower than nominal?
Usually lower when inflation is positive; if inflation is negative, real return can be higher than nominal.
What inflation rate should I use?
Pick an average rate relevant to your window for a rough illustration; rates vary by country and basket.
Does the tool include inflation?
No, unless stated; the metrics are nominal.
Can inflation be negative?
Yes, during deflation; in that case real return can differ in the other direction.
Where can I learn more about what is included?
See the Investment History Checker FAQ.
Run your window
Compare two windows in the tool, then consider how inflation might change your view of the results.