Investment Parameters

₹5.00 Lakh
₹
₹10,000₹1.00 Cr
12
130
6
115
10
140

Real Rate of Return

5.66%

Nominal 12% − Inflation 6% (Fisher equation)

Nominal Future Value

₹15,52,924

Gain: ₹10,52,924

Real Future Value

₹8,67,145

Real Gain: ₹3,67,145

🔥 Inflation Erosion: ₹6,85,779

This is how much purchasing power you lose over 10 years

Year-by-Year Comparison

YearNominal ValueReal ValueInflation Loss
1₹5,60,000₹5,28,302₹31,698
2₹6,27,200₹5,58,206₹68,994
3₹7,02,464₹5,89,802₹1,12,662
4₹7,86,760₹6,23,187₹1,63,572
5₹8,81,171₹6,58,462₹2,22,709
6₹9,86,911₹6,95,734₹2,91,178
7₹11,05,341₹7,35,115₹3,70,226
8₹12,37,982₹7,76,725₹4,61,257
9₹13,86,539₹8,20,691₹5,65,849
10₹15,52,924₹8,67,145₹6,85,779

Deep Dive & FAQ

Why Inflation-Adjusted Returns Matter

Earning 12% per year sounds great — until you realize inflation at 6% is silently eating half your gains. The Real Rate of Return tells you how much your wealth is actually growing in purchasing power terms.

The Fisher Equation

Real Rate = ((1 + Nominal) / (1 + Inflation)) − 1

Example: 12% nominal, 6% inflation → Real rate ≈ 5.66% (not 6%).

Key Takeaways

  • Beat Inflation First: If your return doesn't exceed inflation, you're losing money in real terms.
  • Equity Advantage: Historically, equities (12–15% CAGR) outpace inflation better than FDs (6–7%).
  • Long-Term Impact: Even a 1% real rate difference compounds into massive wealth gaps over 20+ years.

💡 Pro Tip: Always evaluate investment options by their real returns, not nominal. A Fixed Deposit at 7% with 6% inflation gives you only ~0.94% real growth.