Nominal or real return?

Nominal Return: The percentage profit of an investment in euros – without considering inflation. Example: €1,000 becomes €1,050 → 5% nominal return.

Real Return: The nominal return minus the inflation rate. It shows the actual purchasing power development. Example: 5% nominal return minus 3% inflation → 2% real return.

The real return is crucial for determining whether wealth is preserved or increased.

Private investors often only see the nominal performance. When the nominal value rises, it creates the impression of profit. In reality, purchasing power can decrease if inflation is higher than the return.

Example: With a 2% nominal return and 4% inflation, the money loses real value – the investor becomes poorer, even though the account balance increases. Without considering the real return, long-term savings goals are at risk.

• Nominal ≠ Real: The difference is the inflation rate.
• Taxes further reduce the real return: Capital gains tax + solidarity surcharge + possibly church tax reduce the net yield.
• Long-term average: Historical inflation in Germany approx. 2–3% per year. Currently, the rate can deviate significantly.
• Asset classes: Savings accounts and bonds often offer nominally low returns, while stocks and real estate historically provide higher real returns (after inflation).
• Negative interest rate era: In periods with nominal zero or negative returns, the real return is necessarily negative.

• Always factor the expected inflation rate into your return expectations.
• Don’t just look at the nominal amount, but at the purchasing power development over the investment period.
• For fixed-income investments (e.g., bonds, fixed deposits), check the expected remaining term and inflation forecast.
• Consider taxes and fees as an additional real cost factor.
• Diversification into real asset investments (stocks, real estate, commodities) can help secure the real return.

The nominal return is only half the truth. What is crucial for preserving and building wealth is the real return – i.e., the profit after deducting inflation. Private investors should therefore adopt the purchasing power perspective for every investment decision and not rely solely on the nominal figure.