Index fund is a favorable tool for us to invest to beat inflation, but has inflation been taken into account in the rate of return we often say? What is the relationship between index funds and inflation? Here is a brief explanation for you, and I hope it will help you.
Many investors have such questions. Do we take currency into account when investing in index funds?
In fact, there are two kinds of return rates we usually talk about: nominal return rate and real return rate.
Nominal yield: The ratio of return to principal of financial instruments. For example, if the principal is 10000 yuan and the return is 1000 yuan, the nominal return rate is 10%, but this return rate does not take inflation into account. The purchasing power of 1000 yuan in a few years will be less than that of today.
Real rate of return:扣除通货膨胀之后的收益率，也就是说：实际收益率=名义收益率-通货膨胀率。
We usually discuss that the return rate we see is the nominal return rate, but for index funds, it is a kind of stock asset, which is anti inflation for a long time, and is much higher than inflation. So the real return rate of index funds is also positive. That is to say, investment in index funds can outperform inflation.
