Real return: stripping inflation out of the result
A nominal "+16% a year" tells you nothing about whether you actually got richer. Real return shows how much purchasing power your portfolio truly added after inflation is deducted.
Why real return matters
Inflation erodes money: if a portfolio grew by 16% while prices rose by 8%, your real gain in wealth is far more modest. Real return separates market growth from the genuine increase in capital and lets you fairly measure the result against the goal of "beating inflation".
The Fisher equation
Real return is linked to nominal return and inflation through the Fisher equation:
Worked example
A portfolio earned 16% nominally over a year, while inflation (CPI) came to 8%.
Approximately: 16% − 8% = "8%". Exactly, by Fisher:
7.41%, not 8% — that is how much the capital's purchasing power actually gained.
How Firewire calculates it
Every month Firewire imports and caches the Russian inflation series (CPI) and matches it against your portfolio's return, as well as comparing the result with market benchmarks. That way you see not only "how much it grew" but also "did we beat inflation". If the current CPI series is not loaded for some reason, a conservative default expected annual inflation value is used (around 8%), which you can override by uploading your own CPI series.