Real Return
What your return is worth once inflation is taken out, why 5% with 2% inflation is 2.94% and not 3%, and why cash can lose value while its balance grows.
Key idea
The real return is your return after inflation: how much more your money can buy, not just how many more francs you have. It comes from dividing, not subtracting: (1 + return) ÷ (1 + inflation) − 1. A return below inflation loses purchasing power, however the balance looks.
What it is
A return is usually quoted in nominal terms: how many more francs you have than you started with. The real return is what's left once inflation is taken out: how much more your money can buy. If your savings grow 5% in a year in which prices rise 2%, you have 5% more francs, but they buy only about 3% more.
The exact figure comes from dividing, not subtracting: (1 + nominal return) ÷ (1 + inflation) − 1. For 5% and 2%, that's 1.05 ÷ 1.02 − 1 = 2.94%, a little less than the 3% you get by subtracting.
Same inflation, three returns
Here's what that means for three kinds of savings in a year with 2% inflation. The rates are examples, not forecasts:
Savings account at 0.5%
- Nominal return: 0.50%
- Inflation: 2.00%
- Real return: −1.47%
Bond fund at 3%
- Nominal return: 3.00%
- Inflation: 2.00%
- Real return: 0.98%
Stock fund at 7%
- Nominal return: 7.00%
- Inflation: 2.00%
- Real return: 4.90%
A savings account paying 0.50% has a real return of −1.47%: the balance grows, but what it buys shrinks. A bond fund returning 3.00% keeps a real return of 0.98%, and a stock fund returning 7.00% one of 4.90%. Inflation takes the same 2.00% from all three, which matters most where the return is smallest.
Swiss savings show the same today. In August 2026, the savings rates Swiss banks published averaged 0.07%, according to the Swiss National Bank, while prices were 0.8% higher than a year earlier, according to the Federal Statistical Office. That's a real return of 1.0007 ÷ 1.008 − 1 = −0.72%.
Over time the gap compounds. CHF 10,000 growing at 5% a year for 30 years becomes CHF 43,219.42. With 2% inflation, prices after 30 years are 1.81 times today's, so that sum buys what CHF 23,860.19 buys now: the result of growing at the real return of 2.94% a year.
The honest caveat
A real return is only known afterwards. When you invest you know at most the nominal rate, and inflation over the coming years is anyone's guess. Your own inflation also differs from the official index, depending on what you spend your money on.
And inflation isn't the only thing that comes off. Fees and taxes reduce the nominal return first, so the real return that grows your purchasing power is the one left after all three.
Swiss note
Swiss inflation has been low: consumer prices rose 0.2% on average in 2025 and 0.8% in the year to August 2026, according to the Federal Statistical Office. But savings rates are low too. The Swiss National Bank's policy rate has been 0% since June 2025, and the interest you do earn is taxed as income. Even when inflation is low, cash can lose purchasing power. Check your savings account's rate against the latest inflation figure.
Key takeaways
- —The real return is what your money gains in purchasing power, after inflation.
- —Divide rather than subtract: 5% with 2% inflation is 1.05 ÷ 1.02 − 1 = 2.94%.
- —A savings account at 0.5% with 2% inflation loses 1.47% of its purchasing power in a year.
- —Over 30 years at 5%, CHF 10,000 becomes 43,219.42, worth 23,860.19 in today's francs at 2% inflation.
Related concepts
Inflation
Why CHF 10,000 buys a little less as prices rise, and what to do about it.
Compound Interest
How interest on interest turns time into your biggest advantage.
Interest Rate
How the SNB's rate reaches your savings account and your mortgage.
Opportunity Cost
Every franc you place somewhere is a franc you can't place elsewhere.
Emergency Fund
The cash that keeps a bad month from becoming a forced sale.