What is Inflation-Adjusted Return-banner-imageAcademy

What is Inflation-Adjusted Return

At the beginning of 2020, financial problems caused by covid-19 emerged all over the world. In this period when the supply-demand balance deteriorated, many central banks, especially the FED, increased the money supply. With the increase in the money supply, the high liquidity in the markets caused the prices of financial assets such as stocks and cryptocurrencies to rise. In late 2020, covid-19 caused disruptions in the supply chain. The problem of not being able to supply even basic food products in big economies caused the problem of high demand and low supply. As a result, inflation rose sharply all over the world in 2022. Inflation is defined as a continuous increase in the general level of prices.

Today, almost all countries of the world have to struggle with inflation. Even the world's largest economies such as the United States of America, England and Germany are experiencing inflation problems. While inflation is so high, the real value of the profits from investments should be calculated by deducting inflation. Returns that are not adjusted for inflation are called nominal returns.

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