Real, as in: inflation-adjusted.
Example:
In the last decade, your investment compounded at 7%. But inflation during that period afteraged 2% a year. The real rate of return then? About 5% a year.
Why the "about"? Well, inflation averaged 2%. But it may have been 5% early in the decade in year 2 and 3...and then 0 for 3 years. So the data might skew to the early years, and with the power of compounding, drift a bit one way or another. But since inflation is a very much guessed-at and somewhat relative number, most people don't do "precision math," and wiggle the numbers around. Econ is, after all, a back-of-the-envelope discipline.
Related or Semi-related Video
Finance: What Is a Real Return?67 Views
finance- a la shmoop. what is a real return? like is there a fake return? you
know like the news? well kinda .real return refers to an [man frowns talking to camera]
investment return mapped against inflation. so let's say you invest in a
bond that pays five percent a year for ten years and then pays you back your
principal .boring but nice- you know like a good doctor visit. your nominal return
over that period was 5% but since inflation was 3% a year during that
period on average your real return was only 2% a year- meaning that the
performance of your investment only eked out a 2% net gain against the price of [equation]
milk gas and you know knocked off iPhones. so don't be a chump who thinks
that they're making more money than they really are, and you know keep on keeping
it real. [man sitting in chair, talks to camera]
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