The real rate of return is the annual percentage of profit earned on an investment, adjusted for inflation. Therefore, the real rate of return accurately indicates the actual purchasing power of a given amount of money over time.

Adjusting the nominal return to compensate for inflation allows the investor to determine how much of a nominal return is real return.

In addition to adjusting for inflation, investors also must consider the impact of other factors, such as taxes and investing fees, to calculate real returns on their money or to choose among various investing options.