<h2>Real Rate of Return</h2>

<p>The <strong>real rate of return</strong> is a financial metric that measures the actual profit or loss of an investment, adjusted for inflation. It provides a more accurate picture of an investment's performance by accounting for the decrease in purchasing power due to inflation.</p>

<h2>How It Works</h2>

<p>The real rate of return is calculated using the following formula:</p>

<table>
<tbody>
<tr>
<td><strong>Real Rate of Return</strong></td>
<td>=</td>
<td>(1 + Nominal Rate of Return) / (1 + Inflation Rate) - 1</td>
</tr>
</tbody>
</table>

<p>Where:</p>
<ul>
<li><strong>Nominal Rate of Return</strong> is the actual return on the investment before adjusting for inflation.</li>
<li><strong>Inflation Rate</strong> is the rate at which the general level of prices for goods and services is rising.</li>
</ul>

<p>For example, if an investment has a nominal rate of return of 10% and the inflation rate is 3%, the real rate of return would be:</p>

<table>
<tbody>
<tr>
<td>(1 + 0.10) / (1 + 0.03) - 1</td>
<td>=</td>
<td>0.0693 - 1</td>
<td>=</td>
<td>-0.0307</td>
</tr>
</tbody>
</table>

<p>This means the investment has a real rate of return of -3.07%, indicating that the investment did not keep up with inflation.</p>

<h2>Why It Matters for Traders</h2>

<p>Understanding the real rate of return is crucial for traders as it helps them:</p>
<ul>
<li>Make informed decisions about investments by providing a more accurate measure of performance.</li>
<li>Compare the returns of different investments, even if they have different risk profiles or time horizons.</li>
<li>Assess the impact of inflation on their trading strategies and adjust their expectations accordingly.</li>
</ul>

<p>On the <strong>MetaTrader 5</strong> platform provided by STB, traders can use the built-in economic calendar to stay updated on inflation rates and other key economic indicators, helping them to calculate and interpret real rates of return.</p>

<h2>Key Takeaways</h2>

<ul>
<li>The real rate of return adjusts the nominal rate of return for inflation to provide a more accurate measure of investment performance.</li>
<li>It is calculated using the formula: (1 + Nominal Rate of Return) / (1 + Inflation Rate) - 1.</li>
<li>Understanding the real rate of return helps traders make informed decisions, compare investments, and assess the impact of inflation on their strategies.</li>
</ul>