Real Returns Calculator: What Your Investments Earn After Inflation
Your 12% Mutual Fund Return Is Really 5–6%
Real return = nominal return minus inflation. India’s average CPI inflation has been 5–6% over the past decade. This means an investment returning 12% nominally delivers only 6–7% in real purchasing power growth. An FD at 7% with 6% inflation gives a mere 1% real return — your money barely beats inflation.
Real Returns Across Asset Classes
| Asset Class | Nominal Return | After Inflation (6%) | After Tax & Inflation |
|---|---|---|---|
| Savings Account | 3–4% | -2 to -3% | Losing money |
| Fixed Deposit | 6.5–7% | 0.5–1% | ~0% (break-even) |
| PPF | 7.1% | 1.1% | 1.1% (tax-free) |
| Gold | 10–11% | 4–5% | 3.5–4.5% |
| Equity Mutual Funds | 12–15% | 6–9% | 5–8% |
| Real Estate | 6–10% | 0–4% | Negative to 3% |
Why This Matters for Goal Planning
If you need ₹1 crore for retirement in 20 years, don’t assume ₹1 crore will be enough. At 6% inflation, you’ll need ₹3.2 crore to maintain the same purchasing power. Always plan with inflation-adjusted targets. Use the inflation calculator to adjust amounts, and the SIP calculator to find the monthly investment needed to reach inflated goals.
The Formula
Real Return = ((1 + Nominal Return) / (1 + Inflation Rate)) – 1
Example: 12% nominal, 6% inflation: (1.12 / 1.06) – 1 = 5.66% real return.