Allard LTD. CPA & Financial Services

(952) 895-0895

Investment Read Time: 1 min

Inflation and the Real Rate of Return

The real rate of return is an important personal finance concept to understand.

It’s the rate of return on your investments after inflation. The real rate of return indicates whether you are gaining or losing purchasing power with your money.

So if inflation checks in at a rate of 6%, does that mean any investment with less than a 6% rate of return is losing purchasing power?

That’s where it gets a little complicated.

In theory, any investment with less than a 6% rate of return may lose purchasing power. But there are other factors you want to consider as well. For example, are inflation rates likely to continue their current trend, or are they transitory effects of broader market changes?

In the end, the real rate of return is only one factor to consider when building a portfolio. Your time horizon, risk tolerance, and goals are the primary drivers.

A financial professional can help you better understand market conditions and build an investment strategy that manages the potential loss of the purchasing power of your money.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Share |
 

Related Content

Social Security: The Elephant in the Room

Social Security: The Elephant in the Room

Some people wonder if Social Security will remain financially sound enough to pay the benefits they are owed.

Counteracting Capital Gains with Tax-Loss Harvesting

Counteracting Capital Gains with Tax-Loss Harvesting

You may have heard the phrase "tax-loss harvesting." A financial professional may be able to provide some guidance.

A Taxing Story: Capital Gains and Losses

A Taxing Story: Capital Gains and Losses

Understanding how capital gains are taxed may help you refine your investment strategies.

 

Have A Question About This Topic?







Thank you! Oops!

Test Your Life Insurance Knowledge

How much do you know about one of the most important tools you have to help protect your and your family’s financial future?

Key Money Moments: 4 Times You Should Talk to a Pro

Life happens fast, and your finances can take a backseat if you’re not careful. Is it time to check in with a financial professional? This infographic will help you examine your own financial situation and decide if it’s time to step up your financial game.

Good Health is Good Business

Good employee health can be great for the company’s bottom line.

View all articles

Lifetime of Earnings

Estimate how much you have the potential to earn during your working years.

Should I Pay Off Debt or Invest?

This calculator will help determine whether you should invest funds or pay down debt.

Social Security Taxes

Estimate how much of your Social Security benefit may be considered taxable.

View all calculators

Principles of Preserving Wealth

How federal estate taxes work, plus estate management documents and tactics.

Investment Strategies for Retirement

Investment tools and strategies that can enable you to pursue your retirement goals.

5 Smart Investing Principles

Principles that can help create a portfolio designed to pursue investment goals.

View all presentations

Choosing a Mortgage

Selecting a mortgage isn't an easy process. Get a better understanding of how professionals make the right decisions.

Exit Strategies of the Rich and Famous

Estate conservation is too important to put off. Do you have a smart exit strategy?

It Was the Best of Times, It Was the Worst of Times

All about how missing the best market days (or the worst!) might affect your portfolio.

View all videos