Nominal return/real return?

Question

Are there any circumstances under which an investor might be more concerned about the nominal return on an investment than the real return?

Answer 1

Real returns are important on a personal level. They determine whether or not your investment is adequate to meet your needs over time. But investors should be concerned about nominal returns all of the time. For comparison purposes the only way numbers can be have the same meaning to everyone is if you use nominal returns. A couple of concrete examples:
Try filing a tax return with inflation adjusted profits. The IRS won't be impressed!
Cash vehicles (CDs, bonds, money market, loans, etc.) are quoted in nominal returns not inflation adjusted.
.

Answer 2

The only circumstance would be when the investor possesses specific contractual or tax liabilities stated in nominal returns, which must be met. Otherwise, only concerning oneself with the real return should matter.

Answer 3

In a zero inflation environment, or a deflationary environment, then real return and nominal return would be close to identical. At that point, it is nice to have SOME sort of nominal return. We all want growth on our money..and in a zero inflation environment then we would look to nominal returns to provide that growth. Remember, real return is a function of nominal return PLUS inflation.

Answer 4

Been investing 15 years and never really heard of nominal return ,
What is it ?
I make pretty good returns , Are those real ?

Sounds like a typical text book question ,
Mostly detached from real life . . .

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