🧠 NOMINAL RETURNS LOOK GOOD. REAL RETURNS TELL THE TRUTH.

 

Introduction

You finally start investing—FDs, mutual funds, maybe even a little crypto. But here’s the kicker: if your returns aren’t beating inflation, your money’s actually losing value.

It’s like running on a treadmill—you’re moving, but not going anywhere.

In this blog, we’ll break down how inflation impacts your investments, compare FD vs mutual funds with real numbers, and show you how to actually grow your wealth (not just watch it look bigger on paper).

Let’s keep it real—and profitable.

 

Example

📊 5-Year Investment Comparison (₹10 Lakhs)

Assumptions:

• FD return: 6% per annum
• Equity mutual fund return: 20% per annum
• Inflation: 6% per annum

---

💰 Nominal Value After 5 Years

Investment Type	Return	Value After 5 Years
Fixed Deposit	6%	₹13,38,225
Equity Mutual Fund	20%	₹24,88,320

(Formula: ₹10,00,000 × (1 + rate)^5)

---

📉 Real Value (Adjusted for 6% Inflation)

Inflation factor over 5 years = (1.06)^5 = 1.3382

Investment Type		After Adjusting Inflation
Fixed Deposit	₹13,38,225 ÷ 1.3382	₹10,00,000
Equity Mutual Fund	₹24,88,320 ÷ 1.3382	₹18,59,263

 

 

---

🧠 Interpretation

• FD just preserves your purchasing power—no real gains.
• Equity mutual fund with 20% CAGR gives you a real gain of ₹8.59 lakhs in today’s money.
• That’s an 85.9% increase in purchasing power over just 5 years.

 

Conclusion

Nominal returns can be deceiving. A 6% FD just keeps up with inflation—you’re not really growing your money. But equity mutual funds? They actually increase your purchasing power.